As South Africa approaches the eagerly awaited State of the Nation Address (Sona) by President Cyril Ramaphosa, anticipation is running high among economists and citizens alike.
With pressing issues such as economic recovery, unemployment, and the energy crises front and centre, analysts are hoping that Ramaphosa's address will provide crucial insights into the government's strategies aimed at revitalising the nation.
Investec chief economist Annabel Bishop said that investors will be focusing on the various crisis gripping the country such as weak growth, freight constraints, poor governance at a number of state entities, particularly municipalities and the need to fight crime and corruption.
"The water and sanitation crisis, still high unemployment (poverty and weak growth) and GBV (gender-based violence) will also be in focus, while South Africa has seen greatly improved electricity supply stability which will be noted in particular. A quicker turnaround on the water crises and at Transnet, particularly better enabling public private partnerships is a key theme investors are focused on, along with a sharp reduction in red tape, reduction in the regulatory burden,“ Bishop said
“The Sona’s typical blandness supports unchanged medium-term Budget direction, but greater fiscal consolidation is needed to return SA to investment grade and inspire business and investor confidence,” she added.
On inflation targeting, Bishop said that during the Medium-Term Budget Parliamentary Speech, National Treasury stated more work needs to be done in this regard, and some update is expected in the Budget later this month.
“While National Treasury sets the inflation target, and the Reserve Bank is tasked with achieving the target, the Reserve Bank has stated it believes there is a need to lower the inflation target. National Treasury has worried about negative effects that could ensue on the economy and households, while the SA Reserve Bank has already published research on the positive implications from lowering the target,” she said.
“Overall, for the Budget, state finances are not strong, and this weakness, combined with better-than-expected inflation but lower than expected gross domestic product outcomes, means further fiscal slippage remains a risk,” Bishop further added.
Frank Blackmore, the lead economist at KPMG, told Business Report that the Sona should be an honest account of what the state of the nation actually is.
“We know that in recent years, the Sona’s focus has leaned more towards well-dressed politicians who occupy both seats of privilege and power, applauding patronising declarations that no one will be left behind, while the human disaster, engineered through persistent government failures, is dragging scores of South Africans into destitution, surviving on social and distress relief grants that do not cover the most basic services,” Blackmore said.
He wants Sona to acknowledge the issues facing the country, and some kind of plans to get South Africa on a higher economic growth course.
“A good recent example has been the Minister of Electricity’s ability to secure supply for a relatively long period of time leading up to the brief load shedding declaration of January. These types of improvements are important as well as to hear what key strategies are in place for higher or costlier government interventions such as the National Health Insurance, among other initiatives,” Blackmore added.
“I think the most important is to have a plan to grow the economy, and at the same time, look after the people with in it, ‘What is that plan?’ We have been speaking about it for quite a number of years now and the output has been low, slow growth for an extended period of time and that’s not the way one is going to absorb labour into the market, increase economic inclusion in the economy and better the lives of most South Africans,” Blackmore said.
Meanwhile, Cosatu said, “The challenges facing South Africa and in particular the working class are immense. A bold, decisive and progressive set of interventions are needed. A business-as-usual approach will simply not do given our many crises, in particular our 41.9% unemployment rate, entrenched poverty and inequality, endemic crime and corruption, struggling public and municipal services, embattled state-owned enterprises and meagre economic growth.”
“It is critical that the Sona provide a sense of accountability to society and acknowledge the frustrations of millions and their simple hope for a better life. Government needs to report back on how far it has moved since the last Sona, including both the successes and their responses to setbacks,” Cosatu said.
BUSINESS REPORT