South Africa Plans Building Boom to Spur Virus Recovery
South Africa’s government laid out an economic recovery plan focusing heavily on infrastructure development.
In a presentation to business and labor leaders on Thursday, the government said it will focus on infrastructure initiatives ranging from inviting investment in natural gas-to-power plants, to preparing for a nuclear power-build program and issuing green infrastructure bonds. In a separate presentation, labor leaders expressed skepticism that much of it will happen.
“When South Africa was hit by the Covid-19 health crisis, it was already in the midst of a deep economic crisis,” the government said in the presentation seen by Bloomberg. “The Economic Reconstruction, Recovery and Growth Plan has two aims: to deal with immediate actions towards economic recovery amid Covid-19 and to rebuild and grow the economy.”
South Africa’s economy was in recession when the first case of the coronavirus was confirmed in the country in March and had also lost the last investment-grade rating on its debt. A strict lockdown to try and prevent the virus from spreading has slashed tax revenue and led to businesses shutting down. The finance ministry forecasts a 7.2% economic contraction this year, the biggest decline in almost nine decades.
While South Africa has the world’s fifth-biggest coronavirus outbreak, with 568,919 infections, its death toll, at 11,010, is considerably lower than many countries with similar numbers of infections.
The government presented ambitious plans to support hard-hit industries, such as tourism, and invest in everything from broadband to roads.
But the country has a history of announcing plans and doing little to implement them. And when it does, such as the construction of two of the world’s biggest coal-fired power plants - Eskom Holdings SOC Ltd.’s Medupi and Kusile, they have been beset by corruption allegations.
“We must equally question if government actually has any capacity to implement its many plans,” the country’s three major labor union federations said in a joint presentation. “The disasters at Medupi and Kusile do not give us any confidence that government can run successful projects. We all know how the looting at Medupi and Kusile cost Eskom billions in debt.”
©2020 Bloomberg L.P.