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A workmanlike SONA – and it’s just what SA needs


Nazmeera Moola is Head of SA Investments at Ninety One.

President Cyril Ramaphosa delivered a rather workmanlike State of the Nation address this week – aside from the brief diversion into a futuristic city. This is exactly what South Africa needs right now. Soaring rhetoric and beautiful words were appropriate for February 2018 – when Ramaphosa’s first State of the Nation address (coupled with the sheer relief of Jacob Zuma finally leaving the Union Buildings) delivered a brief euphoric high to the country.

South Africa does not need soaring rhetoric at this point. As President Ramaphosa identified, the solution to many of South Africa’s ills is growth. South Africa does not need another growth plan right now. Improved business and consumer confidence are required for growth – and those will only be forthcoming by visible progress in a number of key areas.

The State of Nation Address committed to this tangible progress. I would divide the SONA into three key parts.

First, there is the unavoidable and very expensive rescue of Eskom. The President has pledged to front-load the funds to the utility – and to implement an operational restructuring. After the disastrous 3.2% annualised contraction in the GDP in the first quarter of 2019, there is broad agreement that load shedding is deeply damaging to the economy.

The SONA promised that the Chief Restructuring Officer, who was first tabled in Finance Minister Tito Mboweni’s February 2019 Budget, will soon be appointed. This person will be “expected to reposition Eskom financially with careful attention to the mix between revenue, debt and cost structure of the company”. No small ask there!

Second, there were several commitments on much talked-about reform initiatives. These included:

  • A “world class visa regime” with a significant focus on Chinese and Indian tourists;

  • The infrastructure fund, housed in the Development Bank of South Africa, that would support private-public partnerships for future infrastructure provision in South Africa, and

  • The plan for the Minister of Communications to “issue the policy direction to ICASA to commence the spectrum licensing process” to bring down the cost of data.

There was also a very welcome, though more vague, commitment to implement reforms to improve the ease of doing business in South Africa. From a record low of 32nd in the world in 2008, South Africa’s ranking is currently at 82. This is another less-talked-about result of the Zuma presidency – an increasingly ineffective bureaucracy that implements ill-thought-out regulations and creates an incentive system where public servants are rewarded for not making decisions.

The regulations hamper business – and nothing gets done. Changing this mindset requires reforms to address the high cost of doing business and a complicated and lengthy regulatory process, and also a mindset change.

Third, SONA sought to address the two Zuma-faction poison pills from Nasrec that have done so much to damage confidence. The president unequivocally committed to the SA Reserve Bank’s current mandate of “protecting the value of our currency in the interests of balanced and sustainable growth”.

This is good news – especially as Moody’s cites the independence of key institutions such as the SARB as one of South Africa’s three core credit strengths.

The consistency of the message in SONA with the views of the outspoken SARB Governor Lesetja Kganyago should be reassuring to financial markets, the credit rating agencies, investors in the real economy and every consumer who wants to avoid a surge in inflation spurred by Venezuela or Zimbabwe-style economics.

The other confidence killer – land expropriation without compensation – was dealt with smartly. The President noted that government would look to identify and release public land that “is suitable for urban settlements and farming”.

The government owns large tracts of land in cities – this has to be the first step to solving the land hunger in the country.

The most positive takeaway was less about the contents of President Ramaphosa’s SONA and more from the unequivocal support for these positions that the President received from ANC Top Six member Paul Mashatile.

South Africa needs coherent policymaking that is implemented. It does not need more wasted years of ANC infighting and policy paralysis. In 2015, the status quo was sustainable. In 2019, the status quo results in a contracting economy and an ultimately unsustainable debt burden.

A situation where policymaking is continually undermined by those within the ANC that are seeking to protect themselves will not lead to policy certainty, improved confidence or higher growth – it will do the opposite. DM


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