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Ramaphosa’s State of the Nation Address underwhelms
June 25, 2019, 7:05 pm

Ramaphosa sets five goals to be achieved in next decade

Ramaphosa announced that R230 billion in fiscal support would be directed to debt-laden power utility Eskom over the coming ten years [GCIS]

South African President Cyril Ramaphosa’s State of the Nation Address was lofty in terms of dreams, but failed to show how these dreams would be implemented and consequently underwhelmed most commentators.

“Let us agree, as a nation and as a people united in our aspirations, that within the next 10 years we will have made progress in tackling poverty, inequality and unemployment, where: No person in South Africa will go hungry. Our economy will grow at a much faster rate than our population. Two million more young people will be in employment. Our schools will have better educational outcomes and every 10 year old will be able to read for meaning. Violent crime will be halved,” Ramaphosa said.

The Organisation Undoing Tax Abuse (OUTA) said although SONA 2019 was filled with good intentions, it was lackluster in terms of implementation.

“We’ve heard about Government’s desire to create millions of jobs in the past, of plans for economic growth and less red tape for businesses, but seen little concrete progress. It does not help to say what we want to do, but rather how we will do this,” Wayne Duvenage, OUTA CEO, said.

OUTA acknowledged that while SONA might not be the place to offer detailed plans, OUTA would like to have heard the President inform the nation of a new focus and energy in Government’s implementation strategies with meaningful targets and timelines.

Dawie Roodt, the chief economist at Efficient Group said the purpose of SONA was not to present a detailed blueprint, but rather to present a vision.

“I think the President did set a vision of a prosperous South Africa that embraces the Fourth Industrial Revolution. The details will be spelt out by the responsible ministers, who have accountability for implementation,” Roodt told The BRICS Post.

The President has appointed a Commission for the Fourth Industrial Revolution that will guide government policy. The first meeting of the commission is due in August.

Nelson Mandela University Business School economist Professor Chris Adendorff, who is a member of the commission, said the President deserved more credit for setting out his vision.

“The speech was very encouraging, but unfortunately some people do not see the vision contained in it,” he told The BRICS Post.

Ramaphosa said it was time South Africa built a new ‘smart city’ with bullet trains and smart ways of doing things to coincide with the fourth industrial revolution.

Smart cities and bullet trains however require a reliable power supply, so a fair amount of SONA was devoted to energy.

Ramaphosa announced that R230 billion in fiscal support would be directed to debt-laden power utility Eskom over the coming ten years. It would be structured in such a way that a significant portion would be provided in the early years.

A Special Appropriation Bill would be tabled in Parliament on an urgent basis to facilitate such front-end loading.

Stanford Mazhindu, the spokesperson for trade union UASA told The BRICS Post that the SONA did nothing to ease the fears of workers and jobseekers.

“There was nothing new to indicate a move away from talk and promises towards the real and decisive action the country needs,” he said.

Lucie Villa, Moody’s Vice President and lead Sovereign analyst for South Africa said the SONA came in the context of the government’s limited fiscal flexibility amid a challenging economic environment.

“The recent first quarter GDP results indicating the sharpest quarterly contraction in the past 10 years and the February budget pointing to weaker fiscal metrics and a higher government debt burden under the strain of support for Eskom underscore the credit challenges the country faces,” Villa said.

North West University Business School economist Professor Raymond Parsons said the crucial test of SONA would be implementation.

“President Cyril Ramaphosa projected in the latest SONA on the need for job-rich growth, expanding job opportunities for unemployed youth, ensuring good governance, and addressing the Eskom crisis strongly resonates with the well-known concerns of business and the markets. President Ramaphosa rightly wants to see a much higher growth rate than the current population growth if South Africa is to successfully combat unemployment, poverty, and inequality,” Parsons wrote in his reaction piece.

He said two risk factors arising from the SONA are implications of the low growth rate for the Medium-Term Budget Policy Statement in October and the fiscal consequences of another bailout for Eskom.

“Some tough decisions still need to be taken to reconcile expectations with affordability in South Africa’s public finances. The Medium Term Budget Policy Statement in Octo0ber will probably need to reflect a revised fiscal plan to manage shifting economic realities if SA is to protect and rebuild its investment rating. The implementation of pro-growth reform policies and projects will therefore remain essential if the SONA’s growth and employment targets and financial stability goals are to be reached over the next decade,” he concluded.

By Helmo Preuss for The BRICS Post

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