MEDIA STATEMENT: Progress rightly recognised but focus needs to be on eliminating the core challenges facing the country

POSTED ON: February 8, 2024 IN by Admin

By Busisiwe Mavuso

Business wanted clear indications of how blockages will be overcome to improve confidence that reform momentum will be maintained.

President Cyril Ramaphosa was right to emphasise economic reforms in his State of the Nation speech. These are critical to turning around a dire economic performance the President rightly blamed for high unemployment and many other ills we face as a country.

It was also appropriate for him to celebrate progress made in electricity reforms and to point to the importance of the logistics roadmap that is key to dealing with the country’s logistics crisis.

But on both the energy and transport fronts, much more could have been done. As he knows well, resistance from some in his own government currently frustrates progress. Business wanted clear indications of how blockages will be overcome to improve confidence that reform momentum will be maintained.

“I am pleased that the President emphasised the importance of economic growth,” says BLSA CEO Busisiwe Mavuso. “However, reforms such as the concessioning of ports and rail infrastructure have not worked smoothly. We needed to hear how things will change to overcome such blockages.”

The President acknowledged the role of business in supporting the National Electricity Crisis Committee and the Logistics Crisis Committees, but this received passing attention. The joint work that business and government have done through these structures is critical to building investor confidence that we are making progress.

The President praised the partnership with business that has enabled the creation of a digital forensic capability to support the National Prosecuting Authority, and the work done to comply with the requirements of the Financial Action Task Force. Yet the support of business goes far further, including several initiatives that are underway through a partnership between business and government to create capacity in the criminal justice system.

“Corruption is not a problem of the past – it is a clear and present danger to the economy,” says Mavuso. “Investment cannot happen without confidence in the criminal justice system, which is why business is eager to continue helping to build capacity in the system.”

Infrastructure has long been a big theme in the SONA speech and this year was no exception. The President’s emphasis on new financing mechanisms is important and these must be followed through in the budget speech in two weeks with long-promised reforms of regulations regarding public/private partnerships. These can unleash significant investment if an enabling environment is created. The reality for many years is that government spending on infrastructure has been shrinking. Reforms, particularly in electricity, have enabled the private sector to invest, and much more will come with further reforms. That includes the 14,000km of new transmission lines to accommodate renewable energy that would be built “over the coming years”. The President promised to fast-track that process and “enable private investment in transmission infrastructure through a variety of innovative investment models”. This is a clear and welcome indication that electricity reforms will enable grid investment by the private sector.

There was also welcome new emphasis on the potential of the green economy, and a commitment to stimulate mining exploration with the creation of a new fund.

“I was pleased that the President is clearly concerned about the lack of mining exploration that is happening now,” says Mavuso. “A fund is welcome, but really we need to deal with policy uncertainty that has hung over the industry for well over a decade. That would do much more to promote investment and new exploration.”

The green economy has great potential, including hydrogen development. These are new opportunities that given our natural endowments, including abundant renewable energy, position us well as a country. Business is enthusiastic to work with government to ensure these opportunities become a reality.

The President highlighted the gazetting this week of the amended visa regulations and promised further momentum on visa reform to ease the ability of business to hire skilled foreigners to fill the huge skills shortage domestically. This needs to happen faster – the trusted employer scheme, for example, is running behind schedule.

“What the President did not say was also important,” says Mavuso. “There were no populist promises on the social relief distress grant that would come at the cost of government’s fiscal discipline. There are obvious political pressures to make unsustainable commitments to spending, but the President stopped short of major new promises. That is an implicit endorsement of National Treasury’s fiscal discipline, which is key to business confidence.”

The clear exception to fiscal constraint is the National Health Insurance bill which the President recommitted to signing. This is completely unimplementable as it stands with no feasible funding plan. Business has made some focused suggestions on how it could be turned around into something that really makes a positive difference for all South Africans, but these seem to fall on deaf ears.

The speech regularly placed the blame for the dire economic performance on State Capture. As he put it: “Billions of rands that were meant to meet the needs of ordinary South Africans were stolen. Confidence in our country was badly eroded. Public institutions were severely weakened. The effects of state capture continue to be felt across society, from the shortage of freight locomotives to crumbling public services, from the poor performance of our power stations to failed development projects.”

“Yet,” says Mavuso, “there are still too many people in his current administration who were responsible for state capture so it is not just a previous administration issue. Certainly, five years into this administration, more could have been done to hold those responsible to account.”

She says the state of the nation speech is always an opportunity to recognise progress and determine our current priorities. “I think the President got these right – we need to drive investment and deal with the constraints on the economy. My concern, though, is that we must honestly confront what is holding back reforms, the challenges of dealing with corruption and the constraints on investment. Business will continue to work with government to overcome these challenges,” concludes Mavuso.

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