African Construction Expo: 23 – 25 August 2021 – Free Digital Expo
The African Construction & Totally Concrete Expo is a significant contributor to the economic growth, recovery and transformation within Southern Africa’s construction industry and places a special focus on buyer and seller engagements.Continue reading View more
Roaring or meowing twenties?
By Old Mutual Wealth Investment Strategists Izak Odendaal and Dave Mohr
The world is experiencing a phase of rapid economic expansion as the vaccine-aided reopening of economies is supported by substantial fiscal and monetary support, particularly in the US and other rich nations.
If the 6% global growth forecast of the International Monetary Fund (IMF) is realised, it will be the best year in decades. This partly reflects the rubber band effect: it was stretched too far in 2020 and is now snapping back in the other direction in 2021. However, there is also strong underlying momentum that should carry over into next year. But what lies further ahead?
Chart 1: Past and forecast economic growth, %
Source: International Monetary Fund
Some have argued that we face a new decade of plenty, akin to the Roaring Twenties that followed the last deadly global pandemic a century ago. The theory is that having been through the distress of recession, lockdowns and social distancing, people will want to let loose.
The 1920s, following the horror of World War I and the devastation of the 1918/19 flu epidemic, was famously the era of jazz and glitzy nightclubs. It was the age of Jay Gatsby and the Flappers. It was also the age of rapid technological change. Cars gave freedom of movement, while telephones and radios connected people like never before. The thrilling possibilities of commercial aviation became apparent when Lindbergh crossed the Atlantic in 1927.
Of course, the era also saw an epic stock market rally in the US, partly because new technologies made the stock market accessible to ordinary people for the first time. They jumped in with abandon. President John F Kennedy’s father Joseph famously realised the market was out of control and sold out near the peak after a shoe-shine boy gave him stock tips.
And of course, it all ended in tears eventually. The market crashed in 1929, and as the Great Depression unfolded and spread around the world, it kept falling.
Some of this already feels very contemporary. The urge to escape the confines of lockdowns is real. Technological progress has been rapid, and the pandemic accelerated the pace of adoption. Grannies now use Zoom, while entire businesses have permanently vacated their offices as people work remotely. And once again, the stock market is being democratised, this time through social media forums, free trading apps like Robinhood, and frenzied buying of crypto-assets. Over the last few weeks, Dogecoin, created in 2013 as a joke alternative to Bitcoin, briefly surged to a larger market value than established multinational corporations like Ford.
Blockchain may be overhyped as a world-changing technology, but there have been genuine technological breakthroughs, most notably the development of mRNA vaccines. The decline in the cost of solar and wind energy is providing hope in the battle against climate change, as does the increased sale of electric vehicles. There is also a greater focus on social justice and equality issues, as there was in the years after World War 1, when women were allowed to vote for the first time in several countries (UK in 1918, Sweden and the Netherlands in 1919, the US in 1920 and Ireland in 1922).
But historical parallels only take you so far. There are several issues to consider before concluding that the current boom will last.
Firstly, will households really go on a spending spree? Moody’s estimates that households in the rich world (again, particularly the US) have boosted savings by $5.4-trillion from 2019 levels. How much of this will be spent and over what timeframe? Or will the memory of the pandemic prompt households to maintain healthy rainy day funds?
Part of the answer depends on the distribution of these savings. The more affluent you are, the less likely you are to spend each additional dollar you earn. If you are poor, however, you have to spend every dollar just to stay alive, and saving is a luxury. The rising level of inequality in the developed world is probably one of the reasons behind the slow recovery from the 2008 financial crisis.
The post-crisis, pre-Covid era was characterised by interest rates and inflation persistently lower than expected, while GDP growth in the major countries was below long-term averages.
Chart 2: Real government bond yields, %
Source: Refinitiv Datastream
The overhang of private debt meant there was little appetite to borrow even at record low interest rates, while tightened banking regulations meant that the supply of credit was tight even where there was demand. It was a world of excess capacity, excess savings and sluggish growth, what some termed ‘secular stagnation’ or ‘Japanification’.
Moreover, even before former US president Donald Trump’s trade wars, it appeared that global trade was slowing relative to underlying economic growth. Perhaps the world had reached a natural saturation point beyond which it does not make much sense to stretch supply chains. Post-pandemic, supply chains are increasingly being redirected closer to home with a greater focus on reliability than efficiency.
Developed market outperformance?
The IMF’s forecast is that developed countries will rebound strongly and make up for lost ground relatively quickly. The US is even expected to end up somewhat better than in a no-pandemic scenario. This is of course thanks to its tremendous fiscal firepower and its pushing to the front of the vaccine queue. Developing countries will take longer to recover due to slower vaccine roll-outs and less fiscal support.
This is a reversal of the post-2008 experience when developing countries recovered quickly and strongly, at least initially. And while developing countries will benefit from stronger growth in the rich world, their central banks could be forced to hike interest rates sooner than they would want to if their peers in the developed countries, specifically the US Federal Reserve, decides it’s time to raise rates from near zero levels.
China is expected to grow 8% to 9% this year, but its growth rate will drift back down towards 5% to 6% in the coming years, perhaps even lower. The economy is so large already that such rapid growth rates cannot be sustained without adding more and more debt every year.
The Chinese government specifically wants to move away from reliance on debt-fuelled real estate and infrastructure spending and focus more on services and high-tech manufacturing. It no longer wants to be the world’s factory for cheap junk. It also wants greater reliance on internal demand, as part of President Xi’s ‘dual circulation’ theory. China also faces a unique problem among emerging markets (if we can still call it that) of a declining work force due to its previous one-child policy. All this implies slower growth in the years ahead. Meanwhile the risk of a conflict with the US over Taiwan and other issues remains the biggest geopolitical threat.
Demographics is also at the heart of slower economic growth in the developed countries. Older populations spend less. Labour force growth is now driven almost entirely by immigration, and immigration has become a huge political hot potato.
Policy will be crucial. The Great Depression need not have become ‘Great’. It would have been a run-of-the-mill recession had it not been for a series of policy blunders across the world. Certainly, the Depression was not caused by the stock market collapse.
The post-2008 Great Recession was also characterised by a number of policy mistakes. The European Central Bank (ECB) hiked rates very prematurely in 2011, mistaking a higher oil price for sustained inflation. Another epic mistake was the turn to fiscal austerity in the US, UK and Eurozone around the same time.
By 2016, these mistakes had contributed to a shift to political populism, which led to a new round of policy headwinds (notably Brexit and Trump’s trade battles).
Today policy is extremely loose and supportive. Interest rates are low, central banks are buying bonds, and governments are spending. The IMF reckons there will be $16 trillion in fiscal spending in the wake of the pandemic, mostly borrowed. This is a giant experiment and we don’t know yet how it will play out. The key metric is not debt-to-GDP ratios, but debt service ratios, the portion of national income that is spent on interest payments.
Apart from expansionary countercyclical fiscal policy (providing money to fill the hole left by Covid), there is also a renewed sense that governments can and should lead the way to “build back better”. The US Biden administration has been at the forefront with an ambitious social, infrastructure and climate change agenda. If implemented and replicated by other countries, it could boost global expansion and wellbeing.
Finally, productivity growth is key. Productivity is what allows growth without inflation. Growth without productivity means the prices of resources (workers, raw materials, and equipment) are pushed up. Productivity means doing more with less inputs.
It remains a puzzle why all the technological progress of the past few years has not really boosted productivity growth, which is measured as output per worker, and which has only grown by about 1% per year in the rich world over the past decade, half the previous decade.
There are several plausible theories. One is that companies, faced with uncertainty and sluggish demand, have not invested enough in new technology and equipment. Another is simply that it can take time to work out how best to implement new technology to make a difference. For instance, the personal computer is a product of the 1980s, but only in the 1990s did it really change the nature of work. Commercial aviation, as mentioned earlier, only became widespread several decades after the Wright Brothers first took off at Kitty Hawk in 1903.
Chart 3: Productivity growth for the developed countries, %
Source: Refinitiv Datastream
To summarise, a Roaring Twenties scenario would require sustained productivity growth, policy tailwinds (or at least the absence of headwinds) and rising confidence. One would also expect somewhat higher, but not runaway, inflation which in turn implies higher interest rates.
From an investment point of view, a Roaring Twenties scenario sounds great for equity investors locally and globally as growth boosts corporate revenues, and productivity gains keep cost pressures in check and margins healthy.
But as in the 1920s, investors will need to be careful to avoid bubbles and be wary of using debt to gear up returns. This scenario sounds bad for bond investors. Even modestly higher inflation will erode developed market bond and cash returns given how low yields still are. South African bonds would be at some risk from upward pressure on global yields, but high starting yields provide a cushion, while stronger economic growth should allow the government to reduce borrowing.
The opposite scenario of a continuation of the secular stagnation symptoms – let’s call it the Meowing Twenties – should place persistent downward pressure on bond yields as excess savings look for a safe home. The 10-year US Treasury at 1.6% currently might be a good buy. It certainly was a good buy when the Japanese yield was at that level 15 years ago.
How this impacts the equity market is not straightforward. The previous decade showed how low bond yields benefited equities, but only those companies with an in-built growth momentum, specifically large technology platform shares in the US and China. Outside the US equity returns were nothing to write home about. Certainly South Africans should prefer the Roaring to Meowing Twenties. Another decade of sluggish growth should push government debt levels into even more worryingly high levels, though it should also continue to grind both inflation and short-term interest rates lower.
These are all big questions that lack clear answers. While some of these trends seem distant compared to the closer and noisier local politics, they ultimately matter more for longer-term investment returns. That said, one thing to remember is that equity markets are always changing anyway. The ten biggest listed companies in the world today are all technology companies (broadly speaking) apart from JPMorgan, the bank.
This is very different to the era before the financial crisis (when it was commodities and banks that dominated), or the 1980s (Japanese stocks), or the 1970s (industrials). Going all the way back to the early 1900s, the railway industry was by far the biggest global sector. Locally, our market is now also dominated by tech (Naspers), while gold mining is small. The top performing economic sectors tend to naturally find their way into equity indices, and it has usually paid to have broad long-term exposure.
While it is important to ponder how the world will change (or not) over the next few years, we need to accept that the future is inherently unpredictable. However, this should not put investors who need long-term growth off from investing in equities. It is quite possible that we will see elements of both Roaring and Meowing in the years ahead, and as always it will be diversification that ensures portfolios can benefit either way.View more
Towards gender equality in the SA agriculture sector
Standard Bank and United Nations (UN) Women are providing financial literacy training to thousands of women farmers in African markets including Malawi and South Africa.
In October 2019, in an Economic Empowerment of Women in Africa through Climate Smart Agriculture (CSA) agreement, Standard Bank and UN Women launched a partnership aimed at empowering women through modern farming technologies that increase productivity and income potential while reducing greenhouse gas emissions.
UN Women is executing the programme under its ‘HeForShe’ campaign as part of championing the advancement of gender equality. Standard Bank is a global champion of ‘HeForShe’. The CSA programme is aligned with the UN Sustainable Development Goals in the pursuit of gender equality, decent work and economic growth.
Standard Bank has committed US$3 million over a three-year period to end-2021 for the project, which is targeting 50 000 women. “Through this three-year CSA initiative, we aim to contribute to the economic empowerment of women across Malawi through climate smart agriculture and practical business skills,” says Graham Chipande, Head of Relationship Banking at Standard Bank Malawi.
In addition to critical farming skills and tools, the beneficiaries receive training for key technical skills including financial literacy. This is an important component of the project in that it will help to ensure the long-term success of the farmers.
While Covid-19 and social distancing requirements have posed challenges, significant progress has been made since CSA’s launch. In the first half of 2020, 40 business clusters were formed in Malawi to provide basic business management skills. These skills include record keeping, gross margin analysis, price discovery, and the development of business plans, among other skills. The business groups have more than 4 000 smallholder farmer members between them – three-quarters of whom are women.
By the end of 2020, 5 000 women farmers in the country are expected to have received financial literacy training. The beneficiaries farm primarily groundnuts, which are processed into oil, flour, and peanut butter. “Through the project’s holistic and comprehensive approach to empowering women farmers, we are helping to improve their functional skills as well as financial skills so they can manage and grow their farming businesses,” Chipande said.
In South Africa, approximately 950 women farmers have received training in business management and digital and financial literacy in the first half of 2020. The UN Women’s office in the country has continued to work throughout the national lockdown. Standard Bank has remained fully operational as a designated essential services provider.
Besides business skills, the CSA programme is designed to increase productivity, facilitate access to higher value markets and supply chains, and yield high quality produce.
“By the end of the programme, we want to ensure that women farmers are well equipped to thrive in a changing climate,” said Keneilwe Nailana, senior manager Agri Business, Standard Bank South Africa. “They will also be better placed to move up the value chain and access new markets and finance, and ultimately to grow their businesses.”
President Ramaphosa | South Africa’s Economic Reconstruction and Recovery Plan
15 October 2020
Speaker of the National Assembly, Ms Thandi Modise,
Chairperson of the National Council of Provinces, Mr Amos Masondo,
Deputy President David Mabuza,
Ministers and Deputy Ministers,
Honourable Members of the National Assembly and the NCOP,
Fellow South Africans,
I have requested this sitting of the Joint Houses of Parliament to present the plan for the reconstruction and recovery of our economy and our country.
In contrast to the State of the Nation Address, where we address the broad programme of government for the year, today I want to focus on the extraordinary measures we must take to restore our economy to inclusive growth following the devastation caused by Covid-19 to our people’s lives and our country’s economy.
This is a plan through which all of us as South Africans should work together to build a new economy.
The objectives of the plan are clear:
– To create jobs, primarily through aggressive infrastructure investment and mass employment programmes;
– To reindustrialise our economy, focusing on growing small businesses;
– To accelerate economic reforms to unlock investment and growth;
– To fight crime and corruption; and,
– To improve the capability of the state.
All these objectives are linked to the vision of our country set out in the National Development Plan.
Chairperson of the NCOP,
On this day seven months ago, we declared a national state of disaster to confront the greatest health emergency that the world has known in more than a century.
Since then, the coronavirus has infected more than 38 million people across the world and is responsible for more than a million deaths.
The reality that we must confront is that the pandemic will not be over soon.
Globally, the number of new Covid cases per day is currently at its highest level since the start of the pandemic.
This has far-reaching implications in every area of human development, from education to health, from food security to poverty alleviation, from the empowerment of women to social stability.
The pandemic continues to cause severe damage to the global economy, affecting trade, investment, production, international travel and global supply and demand.
No country has been spared. No economy has been unaffected.
This is also the case on our own continent.
In South Africa, the pandemic has caused great hardship and suffering.
In the 220 days since our first recorded case, more than 18,000 people are confirmed to have died from Covid-19.
The loss of these lives is not only devastating to the families who have lost loved ones but to the nation as well.
South Africa has over 700 000 confirmed cases.
At present, 90% of those infected have recovered.
As a result of the measures we took to delay transmission and to prepare our health facilities, we were able to withstand the massive surge of infections in the middle of July. At that time, new cases were being detected at an average rate of 500 an hour.
While the national lockdown in April had a significant impact on economic activity, the economic consequences of an uncontrolled surge would have been far worse.
Due to the dedication and sacrifices of millions of South Africans, we were able to limit the impact of the pandemic on lives and livelihoods.
For the last month and a half, even as we have significantly eased restrictions on movement and social and economic activity, the average number of daily cases has remained relatively stable at less than 2 000 cases.
But it is far too soon to declare victory.
The World Health Organisation warns that many countries have had a significant resurgence of infections following 4 to 8 weeks of low transmission.
It has also advised us that South Africa is now entering a phase that requires high vigilance and heightened readiness to respond.
Rather than easing our prevention efforts – including social distancing and observing health protocols – we must intensify them further to reduce new cases to less than 1 000 a day.
Coronavirus will remain part of our lives for some time to come, and we need to adjust to this new reality and a new normal in all areas of life.
Our health system must remain adequately staffed, equipped and financed to ensure we save lives.
We must rebuild, repair and restore our country not after Covid, but in the midst of Covid.
Our country had immense challenges for a number of years before coronavirus.
The coronavirus pandemic has worsened these challenges.
Poverty and inequality have deepened, threatening many South Africans with hunger and a sudden loss of income.
Our economy, like other economies, has contracted sharply, businesses have closed and jobs have been lost.
Notwithstanding these challenges, we were duty-bound to respond as a government and the nation to this pandemic in a way that demonstrated our care for the lives and livelihoods of our people.
Our response to the pandemic was therefore three-pronged – firstly, a robust health response, secondly, social and economic relief and now economic recovery.
As we anticipated the impact of the pandemic on the livelihoods of the people, we responded by implementing a massive social and economic relief package to support companies, workers, households and individuals in distress.
We announced a relief package which, with a total value of R500 billion or around 10% of GDP, is the biggest on the African continent and compares favourably with other countries in the G20.
Relative to the size of our economy, our social and economic relief response to Covid-19 is roughly on par with countries like Canada, Spain, the United States and Australia.
Through the special Covid-19 grants and the top-up of existing grants, close to R40 billion in additional support has been provided directly to more than 17 million people from poor households.
Studies have shown that these grants were vital in reducing the impact of the pandemic on levels of poverty and hunger.
The evidence suggests that the expansion of social protection has kept more than 5 million people above the food poverty line during the past six months.
The Special Covid-19 Grant in particular represents a significant achievement, reaching more than 6 million unemployed people in a short space of time.
More than 960 000 companies have benefited through the UIF wage support scheme and through the grants and loans provided by various government departments and public entities.
More than 4 million workers have received R49 billion in wage support, helping to protect these jobs even while companies were not able to operate.
In addition to those businesses that have received direct support, many more companies have benefited from tax relief measures worth in the region of R40 billion.
The South African Reserve Bank acted swiftly to support the economy and protect the financial system, reducing interest rates to their lowest level in more than 50 years.
With a view to protecting jobs and saving companies that employ our people from bankruptcy, we introduced another important intervention in the form of a R200 billion Loan Guarantee Scheme.
This scheme has thus far provided R16 billion in low-interest loans to almost 12 000 businesses.
Banks have together provided an additional R34 billion in debt relief to individuals and businesses.
Nonetheless, this is far short of what is needed and what is possible.
We are therefore working with the banks to ensure that more companies are able to access this assistance as they resume their operations, and that the full potential of this scheme can be realised.
The combined effect of the measures taken by government and its social partners has been to preserve our country’s economic capacity and lay the foundation for a more rapid recovery.
Despite these vital interventions, however, the damage caused by the pandemic to an already weak economy, to employment, to livelihoods, to public finances and to state-owned companies has been colossal.
More than 2 million people lost their jobs in the second quarter of this year.
Our economy contracted by 16.4% when compared to the previous quarter.
National Treasury expects a significant shortfall in revenue collection.
This economic shock is unprecedented in our country, and it will take an extraordinary effort to recover from it.
As even the darkest of clouds has a silver lining, we need to see this moment as a rupture with the past and an opportunity to drive fundamental and lasting change.
It is an opportunity not only to recover the ground that we have lost over the course of the pandemic, but to place the economy on a new path to growth.
We are therefore presenting before this joint sitting of Parliament and the country a reconstruction and recovery plan to drive growth that is inclusive and transformative.
The South African Economic Reconstruction and Recovery Plan builds on the common ground established by the social partners – government, labour, business and community organisations – through intensive and detailed consultations over the last few months.
It is informed by the work of Cabinet’s Economic Cluster working together with government departments and Cabinet itself and draws on the contributions of the leading economists who make up the Presidential Economic Advisory Council.
I wish to applaud the remarkable efforts, particularly from our social partners in NEDLAC, in reaching consensus on the actions required to rebuild our economy, and the firm actions that all social partners have committed to contribute to the country’s recovery.
We know from the examples of several other countries that social compacts are essential to effective and sustainable growth and development.
As we implement this plan, government remains committed to the agreements reached through the NEDLAC process.
The work that we have embarked upon to rebuild our economy after the devastation of coronavirus is guided by the vision to 2030 of the National Development Plan and the programme that was outlined at the beginning of the 6th democratic administration, where we set out the key priorities to drive change and transformation in our country.
The depth of the crisis caused by the pandemic has sharpened our focus and our determination to address the challenges that face us.
The creation of jobs is at the centre of the Reconstruction and Recovery Plan.
We must get our people back into the jobs they lost in the pandemic.
We are determined to create more employment opportunities for those who were unemployed before the pandemic or who had given up looking for work.
This means unleashing the potential of our economy by, among others, implementing necessary reforms, removing regulatory barriers that increase costs and create inefficiencies in the economy, securing our energy supply, and freeing up digital infrastructure.
This plan directly responds to the immediate economic impact of Covid-19 by driving job creation and expanding support for vulnerable households. We aim to do this primarily through a major infrastructure programme and a large-scale employment stimulus, coupled with an intensive localisation drive and industrial expansion.
The interventions outlined in this plan will:
– achieve sufficient, secure and reliable energy supply within two years;
– create and support over 800 000 work opportunities in the immediate term to respond to job losses;
– unlock more than R1 trillion in infrastructure investment over the next 4 years;
– reduce data costs for every South African and expand broadband access to low-income households;
– reverse the decline of the local manufacturing sector and promote reindustrialisation through deeper levels of localisation and exports;
– resuscitate vulnerable sectors such as tourism, which have been hard hit by the pandemic.
According to the modelling done by National Treasury, the implementation of this plan will raise growth to around 3% on average over the next 10 years.
Our recovery will be propelled by swift reforms to unleash the potential of the economy, and supported by an efficient state that is committed to clean governance.
It will be transformative.
It will be inclusive.
It will be digital, green and sustainable, and it will invest in our human capital to lay the foundations for the future.
The economic reconstruction and recovery plan recognises that to support a rapid economic rebound, South Africa needs to focus on a few high-impact interventions and ensure they are executed swiftly and effectively.
The reconstruction and recovery plan has four priority interventions:
Firstly, we are embarking on a massive rollout of infrastructure throughout the country.
Infrastructure has immense potential for stimulate investment and growth, to develop other economic sectors and create sustainable employment both directly and indirectly.
We have developed a robust pipeline of projects that will completely transform the landscape of our cities, towns and rural areas.
By the end of June 2020, we had 276 catalytic projects with an investment value of R2.3 trillion.
Moreover, a list of 50 strategic integrated projects and 12 special projects was gazetted in July 2020.
These catalytic projects have been prioritised for immediate implementation with all regulatory processes fast-tracked – enabling over R340 billion in new investment.
These projects are at various stages of the project life cycle.
Those that are already in construction will see the future phases brought earlier for implementation, including some human settlements projects, which have already received bulk financing to unlock them.
We are exploring the use of credit enhancing instruments to unlock bulk water infrastructure and national roads improvement projects.
Our infrastructure build programme will focus on social infrastructure such as schools, water, sanitation and housing for the benefit of our people.
We will focus on critical network infrastructure such as ports, roads and rail that are key to our economy’s competitiveness.
We have taken steps to remove the constraints that have hampered infrastructure delivery in the past.
To ensure that there is active implementation of our infrastructure built programme, we have established Infrastructure SA and the Infrastructure Fund with the capacity to prepare and package projects.
This approach is already encouraging private investors to help us build capability for infrastructure delivery within the state and to develop blended financing models.
The Infrastructure Fund will provide R100 billion in catalytic finance over the next decade, leveraging as much as R1 trillion in new investment for strategic infrastructure projects.
Several projects are already in construction.
These include human settlements projects such as Matlosana N2 in North West, Lufhereng in Gauteng, Greater Cornubia in KwaZulu-Natal and Vista Park in Free State.
Together these represent an investment value of R44.5 billion.
In total, we have gazetted 18 housing projects to the value of R130 billion, which together will produce more than 190 000 housing units.
Transport projects currently under construction include the N1 Polokwane and N1 Musina with a total value of R1.3 billion.
Within the next six months, we will:
– Embark on the modernisation and refurbishment the commuter rail network, include the Mabopane Line in Tshwane and the Central Line in Cape Town;
– Expand the national rural and municipal road rehabilitation and maintenance programme using labour intensive methods; and
– Fast-track the implementation of gazetted strategic infrastructure projects through the approval of credit enhancing instruments, provision of bulk infrastructure, and speedy processing of water use licenses, environmental impact assessments and township establishment; and
– Adapt the infrastructure procurement framework to enable public-private partnerships and unlock new funding.
Our second priority intervention is to rapidly expand energy generation capacity.
We are accelerating the implementation of the Integrated Resource Plan to provide a substantial increase in the contribution of renewable energy sources, battery storage and gas technology.
This should bring around 11 800 MW of new generation capacity into the system by 2022. More than half of this energy will be generated from renewable sources.
In the immediate term, agreements will be finalised with Independent Power Producers to connect over 2 000 MW of additional capacity from existing projects by June 2021.
The Risk Mitigation Power Procurement Programme will unlock a further 2,000 MW of emergency supply within twelve months.
The process to implement bid window 5 of the renewable energy programme has begun.
We are taking further steps to enable power generation for own-use.
The current regulatory framework will be adapted to facilitate new generation projects while protecting the integrity of the national grid. Applications for own-use generation projects are being urgently fast-tracked.
The work of restructuring Eskom into separate entities for generation, transmission and distribution continues and will enhance competition and ensure the sustainability of independent power producers going forward.
To achieve this, a long-term solution to Eskom’s debt burden will be finalised, building on the Social Compact on Energy Security recently agreed to by social partners.
Through these measures, we aim to achieve sufficient, secure and reliable energy supply within two years.
Our third key intervention is an employment stimulus to create jobs and support livelihoods.
Large-scale job interventions driven by the state and social partners have proven effective in many countries that have faced devastation from wars and other crises.
We have committed R100 billion over the next three years to create jobs through public and social employment as the labour market recovers.
This starts now, with over 800 000 employment opportunities created in the months ahead.
The employment stimulus is focused on those interventions that can be rolled out most quickly and have the greatest impact on economic recovery.
At the heart of the employment stimulus is a new, innovative approach to public employment which harnesses the energies and capabilities of the wider society.
It uses the considerable creativity, initiative and institutional resources that exist in our society to respond to local community priorities.
These activities will be locally driven, allowing participants to earn an income while contributing to their community.
Traditional forms of public employment are being scaled up and new forms of public employment created to meet the immediate need.
We are going to expand our natural resource management programmes such as Working on Fire and Working for Water.
We are going to create 300 000 opportunities for young people to be engaged as education and school assistants at schools throughout the country, to help teachers with basic and routine work so that more time is spent on teaching and enabling learners to catch up from time lost because of Covid.
More than 60 000 jobs will be created for labour-intensive maintenance and construction of municipal infrastructure and rural roads.
To support our healthcare system an additional 6 000 community health workers and nursing assistants will be deployed as we proceed with the implementation of National Health Insurance.
Public employment will be expanded at the provincial and city level, contributing to cleaner, greener and safer public spaces and improved maintenance of facilities.
In all of these programmes, we will ensure that recruitment is fair, open and transparent, and that opportunities are advertised widely.
To assist young people who are unemployed to access these and other opportunities, we will soon launch the national Pathway Management Network as a platform for recruitment and other forms of support.
Finally, the employment stimulus includes direct support for livelihoods and the protection of jobs in vulnerable sectors.
Support is being provided to more than 100 000 early childhood development practitioners and to 75 000 small-scale farmers whose production was disrupted by the pandemic.
Grant-making programmes are being expanded in the creative, cultural and sports sector, and funding has been allocated to protect jobs in cultural institutions such as museums and theatres.
More than 40 000 vulnerable teaching posts are being secured in schools which have lost income from fees.
The implementation of the employment stimulus has already commenced. Each of these work opportunities is fully funded and ready for implementation.
The speed and urgency with which we are expanding employment programmes demonstrates our commitment to support those who are without work.
As these and other recovery measures are being rolled out, we need to do everything in our means to provide support to those in society who continue to face hunger and distress.
We will therefore be extending the Special Covid-19 Grant by a further 3 months.
This will maintain a temporary expansion of social protection and allow the labour market sufficient time to recover.
Our fourth key intervention is a drive for industrial growth.
This is in the context of a steady decline of our manufacturing base over many years.
To place our economy on a new trajectory, we are going to support a massive growth in local production and make South African exports much more competitive.
We will build on the work that was being done in several areas before the pandemic struck.
Through the first two South African Investment Conferences, we managed to secure pledges of around R664 billion in new investment.
To date, just under R170 billion of capital expenditure committed during those investment conferences has been invested in projects for construction and buying equipment is essential to mining, manufacturing, telecommunications and agriculture.
Last year, South Africa recorded its first trade surplus with the European Union, driven by record exports of manufactured goods.
Our country produced and exported more motor vehicles last year than in any previous year.
Our agricultural sector has continued to grow, with a bumper maize harvest and the expansion of many high-value crops.
We have positioned South Africa as one of the most attractive destinations in the world for global business services.
Despite the weaknesses in our economy, despite the devastation caused by the coronavirus, these are some of the strengths on which we can build.
There are huge opportunities that we can seize through effective partnerships, targeted deployment of resources and the right policies.
South Africa currently imports around R1.1 trillion of goods, excluding oil, each year.
If we were to manufacture just 10% of these goods locally, it is estimated that we could add 2 percentage points to our annual GDP.
The rest of Africa currently imports R2.9 trillion worth of manufactured goods from outside the continent each year.
If South Africa were to supply just 2% of those goods, it would add 1.2 percentage points to our annual GDP.
And if we succeed in reaching our target of R1.2 trillion in new investment by 2023, it could add around 2.5% to our annual GDP.
It is to realise this huge potential that the social partners have agreed to prioritise a range of consumer and industrial products for local procurement.
Together with business and labour, we will soon be publishing localisation targets for goods in areas like agro-processing, health care, basic consumer goods, industrial equipment, construction materials and transport rolling stock.
We will enforce government policies to ensure that all public infrastructure projects use locally-made materials, including steel products, cement, bricks and other components.
We will support the efforts by organised business, we are planning to establish supplier development programmes for large companies and in key sectors.
We welcome the commitment by trade unions to ensure their investment companies increasingly invest in companies that buy from local manufacturers.
The NEDLAC agreement commits all companies and government entities to publicly disclose in their annual reports the value of procurement from local producers and on steps to be taken to improve localisation.
The social partners have also agreed to support a massive ‘buy local’ campaign for this festive season, with a particular call to support women-owned enterprises, small businesses and township enterprises.
We call on every South African to contribute to our recovery effort by choosing to buy local goods and support local businesses.
This is one way that each and every one of us can contribute to building a new economy.
A vital part of growing our industrialisation effort are the sectoral masterplans, which bring all partners together to agree on specific measures to improve productivity, investment and competitiveness.
There are currently masterplans in the automotive, clothing and textile, poultry and sugar sectors.
We are now working to finalise masterplans in the digital economy, forestry, agriculture and agro-processing, creative industries, aerospace and defence, renewable energy, steel and metal fabrication and furniture.
A central pillar of this work is the transformation of our economy, creating space for new black and women entrants and take deliberate steps to change ownership and production patterns.
In promoting localisation and industrialisation, we will be focusing in particular on the development of small, medium and micro enterprises.
This will take place alongside the development of rural and township economies,
There are between 2.4 million and 3.5 million SMMEs in the country, with the largest number in the informal and micro sectors.
They offer the greatest untapped potential for growth, employment and fundamental economic transformation.
Through a focused support programme, we will support SMME participation in the manufacturing value chain.
This will include the targeting specific products for manufacture by SMMEs for both the domestic market and for export.
It will also include the provision of business infrastructure support, financial assistance through loans and blended funding, facilitating routes to market, and assistance with technical skills, product certification, testing and quality assurance.
Economic growth cannot be realised without the inclusion and active participation of women.
Among the other measures we have outlined, we will be working with women-empowered companies to progressively reach our target of directing at least 40% of procurement spend to such enterprises.
This is also a vital part of our programme to end gender-based violence and femicide, which is fuelled by gender inequality, particularly economic disparities between men and women and gender-non conforming persons.
In addition to these priority interventions, we will create enabling conditions for a competitive, inclusive and fast-growing economy.
We are fast-tracking reforms to reduce the cost of doing business and lower barriers to entry.
The current timeframes for mining, prospecting, water and environmental licenses will be reduced by at least 50% to facilitate new investment.
The Petroleum Resources Development Bill will be finalised to unlock our country’s enormous untapped potential in upstream oil and gas reserves.
Although international tourist travel is likely only to recover in the medium term, our efforts are now focused on implementing an efficient e-visa system and extending visa waivers to new tourism markets.
To support tourism over this peak tourism season, we will shortly be publishing an expanded list of countries from where resumption of international travel will be permitted, which will be supported by targeted marketing in partnership with the private sector.
We urge South African to continue to explore their country in support of the tourism recovery as one of the hard hit sectors by the Covid-19 pandemic.
We will shortly publish the revised list of critical skills, occupations in high demand and priority occupations to enable highly skilled individuals to be speedily recruited, and expedite the issuing of special skills visas to support local firms.
We are promoting greater private sector participation in rail, including through granting third-party access to the core rail network and the revitalisation of branch lines.
We will establish a single economic regulator in transport as a matter of urgency to promote competition and efficiency.
Work is underway to improve the efficiency and capacity of the ports of Durban, East London, Ngqura and Cape Town.
The release of high-frequency spectrum by March 2021 and the completion of digital migration will reduce data costs for firms and households.
This process is being managed by ICASA and will promote transformation, reduce costs and increase access.
We are developing innovative new models to provide low-income households with access to affordable, high-speed internet through connection subsidies for broadband and support for public WiFi hotspots.
Decisive action against crime and corruption is essential to inclusive growth.
Criminal elements in our country have taken to the illegal occupation of construction sites and soliciting protection money from businesses.
To combat these practices, a Joint Rapid Response Team at a national and provincial level will respond to the problem of violent disruptions at construction sites and other business activities.
A well-functioning revenue service is central to our economic recovery programme.
The turnaround at the South African Revenue Service has begun in earnest, and significant areas of tax evasion and tax fraud have already been identified.
SARS is rebuilding its capacity to reverse the decline, improve compliance and recover lost tax revenue.
We are working to clamp down on the illegal economy and illicit financial flows, including transfer pricing abuse, profit shifting, VAT and customs duty fraud, under-invoicing of manufactured imports, corruption and other illegal schemes.
The decisive action we have taken to prevent, detect and act against Covid-19-related corruption will strengthen the broader fight against crime.
The Special Investigating Unit has made significant progress in probing allegations of criminal conduct in all public entities during the national state of disaster.
The work of the SIU continues and the outcomes of the investigations will be made public once all the due process have been completed.
Law enforcement agencies are being strengthened and provided with adequate resources to enable the identification and swift prosecution of corruption and fraud.
We wish to assure all South African that there will be no political interference with the work of law enforcement agencies.
We will strengthen the framework to ensure that political office-bearers at all spheres of government do not do business with the state and we welcome the agreement at NEDLAC that all social partners will act decisively against corruption and fraud in their ranks.
The Public Procurement Bill will be fast-tracked and transversal contracts put in place for large-volume items.
We will soon finalise and begin implementation of the new National Anti-Corruption Strategy, which will improve transparency, monitoring and accountability in government and across society.
Through these actions, we will ensure that every Rand of public expenditure is spent productively to benefit our people and support our recovery effort.
All of these actions will be taken within a supportive macroeconomic framework, which balances the need to restore fiscal sustainability with economic growth.
A critical pillar of this plan is the fiscal framework that will be outlined by the Minister of Finance in the Medium Term Budget Policy Statement.
Among other things, this framework will provide a path of fiscal consolidation, debt reduction and reprioritisation that is supportive of growth and recovery.
We cannot sustain the current levels of debt, particularly as increasing borrowing costs are diverting resources that should be going to economic and social development.
That is why we are urgently implementing the economic reforms that we have agreed with our social partners at NEDLAC to unlock investment, stimulate economic activity and generate revenue for the fiscus.
In reducing government expenditure, we are ensuring that funds are reprioritised towards poverty alleviation, infrastructure investment, support for economic development and fighting crime and corruption.
We are also reducing the reliance of SOEs on the fiscus by intensifying efforts to stabilise strategic companies, accelerating the rationalisation of SOEs and, where appropriate, identifying strategic partners.
It is clear that implementation is going to be the key in giving effect to this recovery and reconstruction plan.
This requires a more effective and efficient state, with greater coordination and integration between national, provincial and local government.
Through the District Development Model, we are beginning to see progress in the alignment of the work of the different spheres.
To ensure focused and urgent implementation of the Plan, dedicated capacity is being created in the Presidency to drive progress and support departments and agencies in the implementation of their mandate.
To fast-track the delivery of economic reforms, Operation Vulindlela will be implemented as a joint initiative of the Presidency and National Treasury reporting directly to the President on a regular basis.
It will work closely with Cabinet’s Economic Cluster to ensure that the priority interventions and key enabling reforms are implemented rapidly and effectively and that those responsible for their implementation are held accountable.
A National Economic Recovery Council comprising relevant members of Cabinet will provide political oversight and enable rapid decision-making.
The Department of Planning, Monitoring and Evaluation remains the backbone of government reporting on the five-year Medium Term Strategic Framework.
This will take place alongside the implementation arrangements which have been agreed among the social partners at NEDLAC.
We will be releasing the Nedlac Social Partner Economic Recovery Action Plan and the Social Compact for Energy Security. These contain very significant measures that we will be working with social partners to implement.
A Presidential Working Committee, chaired by the President, will meet regularly to receive reports from each social partner on the extent to which it has implemented its commitments.
It will be supported by an Economic Recovery Leadership Team and working groups on particular areas of the recovery action plan.
Fellow South Africans,
In the aftermath of a fire, green shoots begin to emerge.
The ashes enrich the soil, and new life takes root to replace what was lost.
Our country is emerging from one of the most difficult periods in living memory.
South Africans have suffered and have made great sacrifices, sharing in this hardship with people all over the world.
But as South Africans, we have a deep reservoir of resilience to draw upon.
We have endured much, and have always emerged stronger and more united.
We stand together at a crucial turning point in the history of our country.
Our ability to reignite our economy rests on the decisions we take in this moment, and the urgency with which we address this crisis.
We shall not rest until we have fulfilled the potential of our country.
We shall not rest until we have built a new economy based on fairness, justice and equality.
This is the task of our generation: to renew, to repair, to rebuild.
We dare not take a moment to pause.
Together, we will build a new economy.
The time is now. Ke nako.
I thank you.View more
When business-as-usual no longer is an option: water security is at risk
With increasing pressure from population growth and the need for water to support economic growth, South Africa’s water security is at risk. Additional threats are posed by climate change, land-use changes, declining water quality, and catchment degradation.
“Not only is it vital that South Africa continues to invest in the development of its physical water infrastructure systems, but we must also invest in the people who manage these systems and maintain our critical ecological infrastructure such as wetlands, catchments, groundwater aquifers, and river systems,” Aurecon Technical Director James Cullis attests.
South Africa has always been a water-stressed country and has developed a complex and highly integrated bulk water distribution system. Johannesburg is the only global city to be located on a continental divide, while South Africa has one of the highest numbers of large dams per capita globally. Therefore, the country’s water-resource expertise and legislation are respected globally.
“Investing in technical and institutional capacity, improved operations, water-use efficiency, and the development of decision support systems is particularly important as we become increasingly dependent on these more complex and stressed water-supply systems. We also need to balance the trade-off between competing demands for an increasingly scarce resource. Financial constraints and a lack of capacity and accountability for the management of our water resources is a constraint requiring innovative solutions, particularly in Africa,” Cullis elaborates.
There are still significant opportunities for improved water-use efficiency through replacing old pipes, reducing leaks, and by implementing new technologies such as low-flush toilets, improved irrigation systems, and pressure-management devices. Smart technologies, improved monitoring, and operational decision support systems are also critical to reduce wastage.
The future will see a transition to more diverse and alternative water-supply options. In particular, the potential for increased reuse of wastewater for both direct and indirect purposes has many advantages. This is increasingly recognised as an important water-supply option for the future, particularly for landlocked countries or regions, including Gauteng. Demand management will, however, continue to be an important component for managing the variability of water supply.
“It is clear that the private sector will have an increasing role in coming up with long-term water solutions,” Cullis adds. Trends include a general move towards more decentralised water supply and treatment solutions, like what is happening for energy, but the private sector will also be critical in terms of providing the financing as part of Public Private Partnerships (PPPs) for water.
“We have undertaken water resource planning and feasibility studies for alternative water-supply options, including deep groundwater aquifers, desalination, and direct and in-direct potable re-use. We are assisting municipalities in terms of access to financing, development
of their digital transformation strategy, and the development of decision support systems to improve operational efficiencies and reduce losses,” Cullis concludes.
“Aurecon undertakes advisory, planning and engineering design for water infrastructure, as well as hydrology, water-resource planning and feasibility studies across Africa. It provides water engineering services to other sectors, including stormwater and flood modeling support for disaster relief, the built environment and transportation sectors, mine-water balances, treatment and bulk water conveyance for the mining sector,“
Aurecon is currently in the process of rebranding as Zutari, after officially announcing the separation of the African business from the Aurecon Group, effective from 1 January 2020.
Urban Water Management
The uninterrupted availability for clean water for many industries and companies is a prerequisite for operations. To what extent are companies in South Africa at risk of interruptions in the supply of water, or the supply of quality water of the required standard? Benjamin Biggs, the civil engineer from JG Afrika, considers alternative supply and onsite treatment.
Cape Town’s Drought of the Century forever changed the City’s urban water management landscape. Declared as disaster area in May 2017, the City of Cape Town faced severe level 6b water restrictions – up to 50 liters per person per day. Residents and businesses alike experienced considerable water tariff increases. The possibility of Day Zero threatened business continuity and precipitated a necessary discussion on water security and the value of water as a resource.
Cape Town’s water comes almost entirely from surface water resources (i.e. rainfall run-off into dams), which is captured and stored in six major reservoirs around the city. Supply dependence on surface water resources can reduce supply resilience to climatic shocks, such as drought.
Considering tariff increases and supply stresses; reducing domestic and commercial water demand; as well as associated water costs has become important for industries, homeowners and businesses. Consumption in toilets, taps, showers and irrigation typically comprise 60-80% of potable use in domestic and commercial areas and targeting these water uses became the focus for demand reduction strategies.
Interestingly, business continuity, rather than savings on utility bills, became a primary motivation for de-centralised alternative supply.
Water Sensitive Design (WSD)
WSD is a widely accepted concept internationally that addresses limitations of conventional urban water management. It integrates all aspects of the water cycle with urban design to provide economic, environmental and social (sustainability) benefits. These principles form a framework through which sustainable water management can be achieved.
‘Fit-for-purpose’ use is important when selecting a suitable alternative supply for a local site. Not all water supply needs to be a potable (drinking) standard. The application, available quantities and associated risk should determine the level of treatment incorporated. Non-potable use within buildings often necessitates altering plumbing networks – a process that is the easiest to incorporate during the design stage.
Source diversification provides resilience against climatic shocks, such as drought. This requires identifying and matching suitable alternative sources with appropriate application(s).
CASE STUDY: STELLENBOSCH UNIVERSITY GREYWATER SYSTEM
These principles were applied in the design and operation of a greywater system at Stellenbosch University (SUN). One of the largest of its kind in Africa and a Water Category winner at the 2019 South African Institution of Civil Engineering (SAICE) Western Cape Regional Awards, the system was designed to provide fit-for-purpose water for SUN.
Once both installation phases have been completed, the network will flush over 1 300 toilets used by about 25 000 university students to meet a significant portion of campus water supply and supplement campus irrigation. During term time, up to 75 m3/day of greywater can be treated and reused (Phase 1). This capacity could be increased to between 150 and 200 m3/day after Phase 2.
Eight representative buildings on campus were assessed and modelled. Water characteristics from each type were then extrapolated across campus to other similar buildings and calibrated against utility data to develop a comprehensive campus water balance. Interventions focused on the top 40 users, comprising 80% of total water demand and the WSD principles were then applied according to the Water-Management Hierarchy. Notably, campus interventions introduced as part of the first “reduce” stage of the Water-Management Hierarchy decreased potable water use during the drought by more than 50%.
Alternative water supplies were then investigated. The Water Masterplan identified treated greywater reuse on campus as a viable alternative supply. JG Afrika was appointed to implement a campus-wide greywater reuse system for toilet flushing and irrigation.
In this system, shower greywater from selected residences is isolated from blackwater and redirected into the collection system via sumps, manholes and grit traps and distributed to a treatment plant.
The treatment plant on site is able to treat, store and distribute up to 100 m³ of greywater a day at a peak supply of 6 l/s. Treatment steps include primary sedimentation, aeration, solids removal/physical filtration and disinfection/sterilisation by means of hydrogen peroxide dosing. The treated water is stored in tanks at the treatment plant for daily use and in future (Phase 2), excess greywater will be boosted into the existing irrigation network.
Treated greywater is pumped to a header tank with a booster system situated on the roof of a residence to pressurise the non-potable network, which includes a municipal potable supply backup. Plumbed directly into the toilets, this network plans to be expanded to supply and collect from additional campus buildings during the second phase of the project.
CASE STUDY: JG AFRIKA’S RAINWATER SYSTEM
During drought conditions in the Western Cape, JG Afrika’s Cape Town office decided to install a rainwater-harvesting system to provide an alternative source of water should municipal supply cease to be readily available.
Implemented as early as 2011, JG Afrika’s own demand-side management at its office had already recorded a 73% saving in water use. Retrofitted old water fixtures with water-saving items began in 2013 through a series of water saving interventions, including reduced irrigation time and waterless urinals.
Further measures, such as hold-flush toilets, low-flow taps and showers were undertaken in 2016 and 2017. Educational information on effects of the drought and responsibilities of the consumer was distributed to staff and engagement on the suitability of installed fixtures was facilitated regularly with employees. Water efficient retrofits kept office water use below level 6b water restriction targets and reduced utility bills considerably.
Once demand had been reduced, a rainwater harvesting system – comprising 30 kl of storage, activated carbon filtration and UV-sterilisation and a booster system, was installed for flushing toilets and irrigation. This system enabled “off grid” use for between six and eight months of the year and increased municipal saving to 83% from the baseline year.
The combined savings realised by the rainwater harvesting system and efficient fixtures under drought tariffs enable a payback of three to four years for all water optimisation measures. With an alternative supply available, the risk of closing the office should “Day Zero” arrive was also eradicated and business continuity guaranteed.
The Water Management Hierarchy
WSD principles can be implemented through this JG Afrika strategy comprising three stages.
- After a mandatory baseline assessment is undertaken to develop a site water balance that provides an understanding of water use on site, JG Afrika first focuses on reducing demand. This can be done by, inter alia, installing efficient fittings; addressing leaks; educating staff/users and encouraging behavioural change; as well as managing system pressures. Importantly, reducing demand is emphasised before implementing alternative supply solutions.
This step is critical in decreasing quantities of alternative supply required and, in so doing, reducing installation, operation and maintenance costs, as well as utility bills, while also facilitating good stewarding of precious water resources. Many projects have saved over 50% in water use after implementing these measures.
- The second stage entails reusing greywater and rainwater in “fit-for-purpose” applications, such as toilet flushing and irrigation
- Alternative supply from more conventional sources, such as borehole abstraction in conjunction with sustainable drainage systems managed aquafer recharge, river abstraction and treated wastewater reuse, are assessed in the final stage as a last resort.
CONCLUSIONS: CASE STUDIES
WSUD principles, applied to the Stellenbosch University Campus using ‘The Water Management Hierarchy,’ improved the campus water sustainability. The SUN greywater was designed to improve campus supply resilience and provide ‘fit-for-purpose’ water.
JG Afrika demonstrated that demand reduction measures – regardless of implementation scale – can be simple, cost-effective and result in better than expected savings. Installation of efficient fixtures typically do not require behaviour change and only minor maintenance. These measures can be implemented by a local plumbing team and do not usually depend upon additional technical assistance.
Furthermore, rainwater harvesting when used alongside efficient fittings can be highly effective in maintaining business continuity during a drought and reducing utility bills.
Implementing similar measures to these two case studies on a larger scale could considerably alleviate pressures on regional and national water supply and enable water savings in other offices, homes and campuses.
Biggs is a civil engineer in JG Afrika’s Municipal Infrastructure and Sustainability divisions
“Interestingly, business continuity, rather than savings on utility bills, became a primary motivation for de-centralized alternative supply.”View more