From every vantage point, the state of the nation address in 2021 was the most difficult for any modern-day SA president given the unusual challenges.
As a starting point, last week’s address was a step in the right direction with its focus on four overriding priorities: overcoming Covid-19; accelerating the economic recovery; accelerating reforms to drive inclusive growth; and the fight against corruption.
With SA’s credit ratings having fallen into subinvestment grade, or the rather blunt description of junk status, the path to dragging the country out of this crisis is by focusing all our energy on these priorities. There are no sweeping winds of growth from the global economy that will paper over the cracks in the SA economic story. Within its limited fiscal space, the government will need to create an environment in which business and other social partners are encouraged to contribute in a meaningful manner.
As we draw closer to winter, the likelihood of yet another wave of infections is there. In response, the country can ill afford the full set of crippling lockdown measures that were introduced during the first and second waves.
As business, we are responsible for our employees and stand ready to assist in the rollout of vaccines. We welcome the president’s specifics on procurement but would like more detail on the logistical plans and timing for the different phases of the rollout meant to reach about 40-million South Africans.
While we plead for more details, I must applaud the planning that has been done in the first phase, despite the pause in the vaccine programme. Through Business for SA (B4SA), the private sector has been working on uploading all phase 1 health-care worker beneficiaries and vaccination sites in collaboration with the government. It’s a collaboration that we should build on. Business is ready to assist further.
The vaccine programme is a weapon against the pandemic and while it is rightfully the most immediate focus, we have to continue working to sustainably lift economic growth. An effective, successful and long-lasting health response to the pandemic is also dependent on boosting the fiscus through higher revenue collection.
As such, we agree with President Cyril Ramaphosa that infrastructure is a critical plank in the recovery. Given our weak fiscal standing and debt-ridden state-owned enterprises (SOEs), infrastructure spending will need to be driven by the private sector. It’s a reality that we hope is accepted.
There has been a continued decline in infrastructure spending across the public sector, even before the pandemic. SOEs today spend 30% less as a percentage of GDP than five years ago, while general government spending on infrastructure has fallen 18%.
Reforming regulations that will govern easier participation by the private sector is necessary if we are to ever unlock its promise. Unfortunately, Ramaphosa made no mention of reforms to the legislation and regulations that now govern infrastructure procurement, such as the Public Finance Management Act and related regulations, including the framework for public-private partnerships.
Localisation was a strong theme of his speech, which Business Leadership SA supports. It is important that this is done in a manner that increases local productivity and competition but without forcing businesses in an already depressed economy to source goods that are more expensive, even if they are local. Localisation that merely increases costs in supply chains and reduces our international competitiveness is unsustainable and damaging to the economy.
Furthermore, the drive to buy locally manufactured products must be carefully matched with on-the-ground capacity. While the president said green economy products could be manufactured locally, unfortunately many manufacturers of solar panels and other renewable energy products which started up in the early rounds of SA’s renewable energy programme had to close down because of the long delay in selecting the fourth-round bid winners.
SA now has manufacturing capacity of 300MW of photovoltaic equipment a year. Rebuilding that manufacturing capacity will take time and a reliable outlook of steady demand will help. But insisting on localisation targets vastly above that capacity in the short run merely delays projects while increasing their costs, which does more harm to the economy.
Overall, we welcome Ramaphosa’s speech in the context we find ourselves in, and his priorities in the main match ours, but implementation is the main issue now. As business we stand ready to help with the rollout of vaccines and the infrastructure projects that will be central to rebuilding the economy.
This column was written by Busi Mavuso and was first published in Business Day.
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