Behind closed doors with Cyril Ramaphosa

Behind closed doors with Cyril Ramaphosa

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Article highlights

  • There was no plausible way to get ahead of the vaccine market maker countries in the vaccine queue
  • The president realised this was going to be a global challenge, so global instruments were created to ensure the distribution of vaccines, such as the Covax facility
  • As always, it will be a balance between lives and livelihoods and trying to secure both
  • We have had implementation challenges, but we are not complacent and there have been some successes relating to the economic reconstruction and recovery plan
  • Government has taken a realistic view to stabilise the debt to GDP ratio over a 5- year period

Citizens around the world have looked to their governments for an appropriate policy response to arrest the invisible enemy that has threatened lives and livelihoods. Cyril Ramaphosa, together with his team, has tried to navigate these unchartered waters for South Africa. Trudi Makhaya, Economic Adviser to the President, provides an update on the status of the government’s implementation plans to tackle the economy in a post-COVID world.

Click here to watch the recording of the conversation.

Cyril Ramaphosa started with very ambitious targets for the economy. R1.2 trillion in new investment over 5 years, economic growth to outpace population growth and the eradication of hunger. The pandemic could, however, not be ignored and we had to think about how we’d survive and what the future would look like. Our challenges with economic growth, unemployment and inequality remain, and it’s just become tougher to ensure we come out of this in better shape. The pandemic has forced government to work differently and I think we will emerge stronger for it. We have to recalibrate and make sure we don’t go back a generation – that is our worst fear.

Was our vaccine strategy flawed or did the Presidency underestimate the speed at which rollouts would have to happen?
The vaccine rollout has always been top of mind. We need to distinguish between two types of countries – those that were market makers for vaccines and the rest of us. The market makers funded the R&D and IP development from the public purse in their country, made commitments and created the market in terms of placing orders and giving certainty to manufacturers. There was no plausible way to get ahead of these countries in the vaccine queue. Early on, the president realised this was going to be a global challenge, so global instruments were created to ensure the distribution of vaccines, such as the Covax facility under the WHO, which he chairs. South Africa and other developed countries put resources into Covax. Through the AU, he fought hard for the continent to get access to vaccines and created a vaccine acquisition task team. We did not think we had a chance with bilateral engagements where supply had already been tied down. We tried several avenues to get access to vaccines, but it has been difficult. This was compounded by the mutation, which required us to give up one of the AstraZeneca batches we had secured. We then accessed the J&J vaccine for health workers. It hasn’t been perfect, but in terms of fighting the good fight to access vaccines for countries like ours, we couldn’t have done more based on the various platforms we leveraged. We need to speed up the rollout in order to secure our economic recovery. The health sector is very cautious. We’ve had drug resistant problem in other areas, which is why they took a strong stance in ruling out AstraZeneca with the variant as they didn’t want to risk rolling out something that may not work. Research has now shown that AstraZeneca may be effective against the SA variant. This is good news as it has many attractive features from pricing to distribution logistics, etc. In the medium term, there is reason to be hopeful. While we criticize those countries that are holding supplies, they created the market and ensured we had speedy development of the vaccine. While we want fair global distribution, we must acknowledge that different countries have played different roles.

Is SA better placed to handle a third wave?
In other parts of the world, we’ve seen the reality of a third wave. The lessons are important in terms of enforcing non-pharmaceutical interventions, such as mask compliance, safe behaviour, limiting the size of social gatherings, etc. We are watching the figures for indications of a third wave. As always, it will be a balance between lives and livelihoods and trying to secure both. A lot of businesses have learned how to function safely within Covid protocols and we hope this will stand us in good stead so regulations don’t have to be too onerous. The President has been very engaged with community, business and interfaith leaders to get their understanding. When the circumstances change, there will be a change in some of the regulations in order to stay ahead of the curve.

SA’s implementation risk is high – why?
We have had implementation challenges. When the president announced the economic reconstruction and recovery plan in October 2020, he outlined various initiatives around public employment to deal with the sting of the pandemic and other measures to build the rest of the economy, such as energy security, developing sectoral master plans, etc. If you look at the budget review and SONA, you will see an update on many of these and there has already been implementation. Public employment has been rolled out efficiently. Programmes like teacher support aides in schools are in place; and more than 500 000 people have been placed in public employment over a short period of time. Energy security has been a longstanding issue. Eskom has been working very hard to improve its operational performance and its reorganization is well underway at a functional level. The Minister announced that the emergency procurement round has been adjudicated. For the sake of certainty, he has also announced a schedule for future rounds of IRP procurement. In terms of infrastructure development, some projects have been launched. The infrastructure fund at the DBSA has been set up as a blended finance vehicle to ensure the private and public sector can co-finance infrastructure where it’s appropriate. Various strategic investment projects have been presented to the financing community through round tables. We are seeing action, but we’re not complacent. Operation Vulindlela has had some early successes, including some of the unlocking of energy reform. Operation Vulindlela focuses on accelerating priority structural reforms to revive the country’s economy working with government departments and supporting ministers to ensure that implementation happens and highlighting and interrogating when it doesn’t. It is focusing on energy, rail, water, ports and on skills migration and has identified many action points. There is a spotlight on implementation. Since October 2020, there has been movement in terms of the key areas. Sectoral master plans have been developed and concluded with private sector involvement for sugar, poultry, textiles and steel. We also need to look at the newer sectors with work underway with renewables and pharmaceutical.

How seriously is South Africa’s dire fiscal situation being taken?
Government has taken a realistic view to stabilise the debt to GDP ratio over a 5- year period, which is credible. At the same time, we can’t engage in policies that undermine economic recovery. Government has to continue spending where it makes a difference. Changing the composition of spending away from recurring, consumption-driven spending to more sustainable spending is key. The bulk of public sector workers are policewomen and men, teachers and nurses, so there’s a fine balance to strike between maintaining high quality service delivery and ensuring that wage increases are responsible. In previous years, increases have been generous, so we need an understanding that this can’t continue, but that consolidation must happen. We mustn’t fall into the trap of the language of austerity and a slash and burn approach. The IMF talks about growth-friendly, fiscal consolidation and that’s what we’re aiming to do. We need to get our borrowing costs down in terms of the yield that we pay and that’s a function of how credible our consolidation story is going to be. Treasury is very aligned to these issues as seen in the budget. Everyone recognises that there has to be consolidation of the fiscus. While across the world, everyone is spending like crazy, we can’t afford to do the same. But, we also can’t throttle our economic recovery. Even as we are cautious, we won’t engage in a counter cyclical approach that is out of sync with what the rest of the world is doing and what a strong recovery requires.

What have been your experiences as a woman at the forefront of advising the president?
We’ve come a long way in terms of the role of women in our society, but have a long way to go still. The number of women in leadership is still lacking and overall the leadership culture is still defined by men. There are still expectations that women in leadership positions will be subservient and defer to others. This will take a few generations to be worked out of the system. With the pandemic, there’s been a disproportionate burden placed on women in terms of care. A lot of women have had to drop out of the labour force as they were earning less. This just perpetuates the cycle of women not having economic independence. The president takes this very seriously and talks about the full spectrum of issues that face women and has tried hard to ensure that every government department has an understanding of how their work interfaces with women. We keep fighting the good fight and ensure that we represent forces of progress and keep society moving.