South Africa’s President Cyril Ramaphosa unveiled on Friday a 50bn rand ($3.5bn) stimulus programme to revive the country’s ailing economy.
The funds will be used to boost job creation and infrastructure development. The package comes after South Africa has slipped into a technical recession, and consumer and business confidence is weak. South Africa’s economy contracted by 0.7% in the second quarter of 2018. The poor performance was much worse than the 0.6% growth that was expected by economists. The main driver for the poor economic result was weak agricultural output and consumer spending.
The stimulus will not come from an increase in spending or borrowing, but will instead come from“reprioritized expenditure and new project-level funding”. “Infrastructure expansion and maintenance has the potential to create jobs on a large scale, attract investment and lay a foundation for sustainable economic expansion,” Ramaphosa said.
As part of the package, a South African Infrastructure Fund will be launched which will include 400bn rand contribution from the national budget over the coming three years of the medium-term expenditure framework. This will be used to leverage additional resources from development finance institutions, multilateral development banks, and private lenders and investors the president said. The fund is intended to reduce the current fragmentation of spending on infrastructure, and will ensure more efficient and effective use of resources. Ramaphosa suggested the Brics New Development Bank (NDB) would be a likely contributor to the fund. The news comes a day after the central bank resisted political pressure to cut interest rates, leaving them at 6.5%.