Kevin Lings; chief economist
President Cyril Ramaphosa delivered his third State of the Nation Address (SONA) last night, since taking office on 15 February 2018. As expected, the event received a fair amount of media speculation and suggestions around what the President should be focusing on, including the lack of economic growth, high unemployment, and the ongoing difficulties with the key State Owned Companies – especially Eskom, the need for land reform, and better education outcomes. The President addressed all of these issues and many others.
The President indicated that the new government administration will focus on the following seven priorities:
- Economic transformation and job creation
- Education, skills and health
- Consolidating the social wage through reliable and quality basic services
- Spatial integration, human settlements and local government
- Social cohesion and safe communities
- A capable, ethical and developmental state
- A better Africa and world
The President listed a further five fundamental goals for the next decade to ensure that:
- No person in South Africa will go hungry
- The economy will grow at a much faster rate than the population
- Two million more young people will be in employment
- Schools will have better educational outcomes and every 10 year old will be able to read for meaning
- Violent crime will be halved
These priorities are somewhat different in focus and tone from the “five urgent tasks” the President highlighted during his February 2019 SONA. While the President discussed some of the details associated with the seven priorities and five goals it is clear that the breadth of the priorities undermines their likely achievement given the country’s limited resources.
Furthermore, most of the goals lacked a clear course of action. It is, however, encouraging that the President indicated that “we must restore the National Development Plan (which was launched in 2012) to its place at the centre of our national effort”.
President Ramaphosa also confirmed that the second South African Investment Conference will be held on 5 to 7 November this year and highlighted that Eskom will receive additional funding. More specifically, government will urgently table a Special Appropriation Bill in order to allocate a significant portion of the R230 billion fiscal support that Eskom was allocated over the next ten years within a shorter time frame. The details surrounding how the additional financial support will be funded and allocated was not discussed. Government still aims to appoint a Chief Restructuring Officer for Eskom, although the President provided no further detail on its unbundling.
The independence of the South African Reserve Bank (SARB) was also re-affirmed with the President highlighting that the SARB must pursue its constitutional mandate independently, without fear, favour or prejudice.
The issue of land expropriation without compensation was discussed but with no further clarification.
In terms of economic growth, the SONA focused on a wide range of issues including infrastructural development, private/public partnership, growth in tourism, improving the ease of doing business, encouraging small medium business, increased foreign trade, the need for land reform, financing emerging farmers, a stable supply of electricity, development of selected industries such as agro-processing, clothing and textiles, gas, chemicals, plastics, steel and metal fabrication, beneficiation of mineral products, advancing the spectrum licensing process, reducing the cost of data and better education outcomes, among other factors. Unfortunately, as many analysts highlighted ahead of the SONA, the list of growth initiatives are not new but continue to lack a detailed implementation schedule with specific action points.
Overall, the June 2019 SONA was a little disappointing. The President was unable to show any meaningful progress in any key area of economic activity since the February 2019 SONA. The highlighted priorities remain overly ambitious for a country that at the end of 2018, recorded its lowest level of domestic savings ever.
In that regard, the speech can be criticised for simply announcing another list of ambitious tasks and initiatives without fully understanding or explaining why all the previous plans have not been fulfilled. That is not to say that the goals are not crucial, they are, but at this stage the focus should be more fully on implementation in a post-election environment.
What is clear, however, if that without an urgent and sustained pick-up in economic growth, the fiscal authorities are going to find it increasingly difficult to meet their current budget projections and the country will continue to face the risk of additional credit rating downgrades, rising unemployment and further social tension