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SONA 2019, Take Two, coming under a dark cloud of econo...

South Africa


SONA 2019, Take Two, coming under a dark cloud of economic nonperformance and ANC factional fractures

The red carpet is swept before the 7 February 2019 State of the Nation Address. Take Two, on 20 June 2019, will see Ramaphosa under more pressure, where nice words will need concrete action and implementation that are not scuppered by ANC factional intrigue and politicking. (Photo: Leila Dougan)

President Cyril Ramaphosa on Thursday delivers his second State of the Nation Address in just over four months with an election in between. Since his February address, economic data has been dreadful, state-owned entities such as Eskom and SAA haemorrhaged billions, and the governing ANC spats over the South African Reserve Bank and broader economic policy have unsettled the rand, investors and governance. Thursday’s address is a tough test.

President Cyril Ramaphosa has maintained there is a plan since delivering his first State of the Nation Address on 16 February 2018. And that plan is unfolding at some levels, mostly in government and its institutions, and in a series of commissions of inquiry and panels of experts which the president is empowered in law to establish.

Over the past 16 months, institutions that had been hollowed out have new bosses, be that the National Prosecuting Authority (NPA), the South African Revenue Service (SARS) or the Hawks and the police’s Crime Intelligence. The Zondo State Capture commission is publicly hearing testimony on corruption and politically motivated dodgy dealings, as is the inquiry into the Public Investment Corporation (PIC), the government-owned asset manager of R2-trillion of workers’ social savings and pensions.

Crucial, but potentially divisive issues such as the compromised intelligence services and land justice beyond expropriation without compensation have been referred to panels of experts. While the land report is being kept under wraps — despite the recent televised photo opportunity for its handover — with the reason given that Cabinet still has to approve it, the State Security Agency report recommending restructuring and legislative interventions was published after the information lobby group Right2Know Campaign filed a Promotion of Access to Information request.

Where Ramaphosa’s New Dawn/Thuma Mina isn’t working is in the economy and the governing ANC, whose factional fractures belie the much-touted unity and renewal mantra of the 2017 Nasrec ANC national conference.

With two days to go to the State of the Nation Address on 20 June 2019, the ANC has failed to announce its committee chairpersons at Parliament — key positions as they direct MPs’ legislative and oversight work — amid backroom horse trading as the radical economic transformation (RET) grouping is determined to clinch key chairpersons’ posts.

Last week, Thursday’s ANC parliamentary caucus on 13 June was cancelled at the last minute even though, according to three insiders, MPs had been told to expect the announcement of committee chairpersons. By Monday it appeared the special caucus called for Tuesday also was unlikely to happen as was the special ANC National Executive Committee (NEC) meeting. And ANC Chief Whip Pemmy Majodina cancelled a meeting with journalists for what the invitation had described as an announcement of “the persons the ANC intends to nominate as committee chairpersons”.

The fact was the list of ANC committee chairpersons had not been finalised amid the factional politicking. Never before has the ANC cut it this fine. But these highly unusual delays at Parliament come in the wake of the unprecedented three-day delay in the appointment of Cabinet, largely over political dickering.

The Ramaphosa presidency is left with taking steps that can be taken without Luthuli House, like announcing “the reconfiguration of old departments or the establishment of new departments to align them with the ministries”, according to a presidency statement on Friday.

Communications Minister Stella Ndabeni-Abrahams is now heading a newly named Department of Communications and Digital Technologies, having lost BrandSA, the Media Development and Diversity Agency (MDDA) and Government Communication and Information System (GCIS), crucial for an official spin, to Minister in the Presidency Jackson Mthembu. And the infrastructure development management system is moved from National Treasury to the Public Works and Infrastructure ministry.

The State of the Nation Address is meant to chart government priorities for the next five years in the broader socio-economic and political context — and within a broader vision for the kind of society South Africa should become. It’s always going to be a tight juggling act, given the factional pressures within the governing ANC, but also against the dire economic outlook and a strained public purse.

Official data by Statistics South Africa showed an unexpectedly steep 3.2% contraction in the economy in the first quarter of 2019, just a short while after the already stubbornly high unemployment rate went up further to 27.6%, and 38% on the wider definition that includes those simply too disheartened to even try look for jobs.

ANC policies over the past 25 years have struggled to restructure the economic fundamentals and to lay the foundations such as quality basic education for a new, inclusive and equitable economy. The highest economic growth rates achieved, albeit without related job creation, were during the Thabo Mbeki presidency under the Growth, Employment and Redistribution (Gear). That policy was slated by the ANC alliance partners, labour federation Cosatu and the South African Communist Party (SACP), which also targeted National Treasury with sustained criticism.

As recently as the ANC NEC lekgotla earlier in June, the ANC’s RET factional grouping associated with former president Jacob Zuma, and in the current ANC leadership with secretary-general Ace Magashule, again argued changing the Reserve Bank mandate would resolve many if not all these structural challenges.

It was reminiscent of the 2017 ANC policy conference where this first emerged. And again, ANC economic policy honcho Enoch Godongwana, backed by fellow ANC NEC member and Finance Minister Tito Mboweni, moved quickly to dismiss any idea that the Reserve Bank mandate would be changed, as no such discussions were held at the ANC NEC lekgotla.

But the damage was done: The rand plummeted and investors, again, raised questions about policy certainty and stability. A subsequent meeting of the Top Six on 6 June led to a statement by Ramaphosa, as ANC president, that described the public spats as “unhelpful” and that in the current economic climate it was “not prudent” to pursue a publicly owned Reserve Bank, even if that was the ultimate intention. The statement referred to an agreement on “all viable, legal and other policy instruments” that should be used to get the economy growing and create jobs by implementing “the apex programmes of our manifesto”.

The 2019 ANC election manifesto says the governing party “believes that the South African Reserve Bank must pursue a flexible monetary policy regime, aligned with the objectives of the second phase of transition. Without sacrificing price stability, monetary policy must take into account other objectives such as employment creation and economic growth”.

And that’s the wider mandate pushed for most recently by the RET factional grouping, with support of the SACP and others. In contrast, the Constitution in Section 224 outlines the Reserve Bank mandate to act independently without fear or favour and in consultation with the relevant minister as:

The primary object of the South African Reserve Bank is to protect the value of the currency in the interest of balance and sustainable economic growth in the Republic…”

At Thursday’s State of the Nation Address, Ramaphosa will not only have to deal with the shake-out of this Reserve Bank debacle, but also with the unravelling of his vision on Eskom, outlined in the February State of the Nation Address. And then there is the prickly issue of another R3.5-billion needed to keep perennial trouble child SAA in the air, now without a chief financial officer after Vuyani Jarana’s resignation.

Eskom is in crisis and the risks it poses to South Africa are great. It could severely damage our economic and social development ambitions. We need to take bold decisions and decisive action,” said Ramaphosa in his February address. The subsequent budget provided the rands and cents to the political vision — R23-billion a year, which would amount over the next 10 years to an amortised R150-billion — and the unbundling into three parts, with the appointment of a chief reconfiguration officer. According to budget documentation, at least the independent generation company should have been established by mid-2019.

Those processes appear to have stalled. Instead, Eskom needed more money quicker — it could not meet its liabilities in late March and government had to guarantee a commercial bridging loan before releasing emergency billions from the national coffers — and then came the resignation of its chief financial officer Phakamani Hadebe. Meanwhile, what appears to a policy disjuncture over the coalescence of coal and green energy in the presidential task team on Eskom’s sustainability also played out publicly over a proposed R200-billion green fund.

But in a presidency at pains to control the optics, and given there’s little positive on the economic front, it might be that progress has been made, but held back for an official presidential announcement at Thursday’s State of the Nation Address.

When Ramaphosa delivered his State of the Nation Address in 2018 it galvanised the New Dawn/Thuma Mina:

We should put behind us the era of diminishing trust in public institutions and weakened confidence in leaders. We should put all the negativity that has dogged our country behind us, because a new dawn is upon us.”

The shine’s come off somewhat since. And Ramaphosa is under pressure. For the State of the Nation Address not to be a stale set-piece, its nice words need concrete action and implementation that are not scuppered by ANC factional intrigue and power politicking. DM


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