Reaction to Zuma's economic plan

Friday, August 7, 2009

Pretoria - Economists and analysts have reacted to President Jacob Zuma's economic recovery plan, announced this week. 

President Zuma has outlined a series of measures to assist companies who have been affected by the global economic crisis saying these will include an introduction of a training lay-off scheme to cost government R2.4 billion while a further R6 billion will be made available to the Industrial Development Corporation. 

The job fund, as President Zuma said, is to assist in the training of workers affected by the recession by temporarily suspending their work for training purposes. They will get a training allowance, pegged at 50% of the basic salary, to a maximum of R6 239 a month. 

While the plan should be welcomed as a positive step by struggling companies; they need to be reminded that this was not a direct bail out, said Econometrix's Tony Twine.

"There is no doubt that this represents a relief for employers in terms of remuneration burden and that it will also provide some income for those employees who may have lost their jobs.

"But this will only help the supply side of the economy and low demand will remain there," Mr Twine said. 

The slow down of the economy will only get better when people regain their confidence to spend and when banks are willing to lend money again, he said.

The question one should ask, according to Twine, is whether these skills would be able to assist employees in the long run. 

"The training is something that government is offering which is good. But, if you look at government's expenditure this year, R2.4 billion might be lot," added Mr Twine. 

Senior researcher at the Centre for Policy Studies Aubrey Matshiqi said the style of intervention applied by other countries like the US's decision to directly bail out companies, could not have worked in South Africa. 

"There was a choice here, but I suspect the government realised that South Africa is a small country and maybe we could not have afforded to bail out companies directly." Mr Matshiqi commented. 

"Government has taken a view that the private sector is better placed to deal with this crisis, hence a decision to place resources there," added Mr Matshiqi. 

According to him, it was vital for the government to ensure that the skills provided were viable and can help workers in the long run. 

"It must be done in such a way that workers are able to be absorbed in other sectors of the economy".

The reality is, he said, South Africa will not be in a recession forever. "We need to accept that maybe skills is what the employees need, we have to think beyond the recession".

Trade Union Federation Cosatu has also welcomed the plan but caution companies against abuse of the initiative. 
"We sincerely hope the frame work will be rapidly implemented and hopefully mark the beginning of the end of effects of recession," said Cosatu spokesperson Patrick Craven. 

"If it works well, as it should, we hope workers will be able to get employment even long after the economy has recovered," added Mr Craven.