By Busi Mavuso
There’s a lot riding on this year’s State of the Nation address, something I am sure you’ve heard one time too many over the last few years in a country with an economy struggling to grow. But with confidence waning after his emergence as both party and country president, Cyril Ramaphosa’s centrepiece speech for the year carries as much as weight as Nelson Mandela’s first in 1994.
Now as a man that has publicly hailed the country’s founding president as his leadership role model, it is up to our current president to reinvigorate and inspire confidence in South Africans from all walks of life. Last June, in his first address after elections a month earlier, he reminded us of the fact that we are getting close to the final 10 years to meet the National Development Plan (NDP) targets we set as far back as 2012.
Well, this year we are into the final decade of the plan of what the country should look like in 2030 that was adopted across the political spectrum. At the first Cabinet briefing of the year this week, one hopes this deadline is used to focus attention and energies.
A lot has happened in the intervening years in our body politic and in our economy to push the NDP off the radar since its launch. A long winter for the mining sector in both confidence and profitability eventually spilled over into the rest of the South African economy that has underperformed for much of the past decade.
With the South African economy forecast to have grown under 1% last year because of load-shedding and falling domestic consumption, the goal I’ve cherry picked out of many – to meet the NDP’s targets – seems unimaginable. The Reserve Bank sees growth for this year at 1.2% compared with the 1.4% it foresaw in November. Some economists are pencilling in another year of below 1% growth levels.
Our average economic growth rate has been 1.5% over the past decade compared with over 4% in other emerging economies. This is the longest economic downturn since the end of World War II.
Confidence levels in both business and the general public is at multi-decade lows as corruption and the capture of the state has dogged what was once a “positive” South African and emerging market story after the last global recession. There’s much cynicism in the voices of everyday South Africans when speaking of both the country and their personal prospects.
Along with the NDP masterplan that in his former life as deputy president he was central to crafting, Ramaphosa also has Finance Minister Tito Mboweni’s economic policy proposals that were released towards the end of last year to lay the groundwork for a turnaround of the country’s prospects.
The business sector has been consistent over the past two years in reiterating that we need to come together in the pursuit of economic growth and investment. That is an essential precondition if we are to address the crises we face of unemployment, social growth and development, the fiscal deficit as well as the budget deficit.
It’s an urgent task because of the threat posed by Moody’s Investor Services with a possible ratings downgrade at the end of March. It’s a move that would send us into full blown “junk” status.
While markets may have already priced in this eventuality, the longer-term effects are worrying. They will make any drive towards those 2030 goals all the more difficult as the cost of debt rises even further for the state – limiting its ability to deal with impediments to a higher growth trajectory.
In the weeks to come and starting with the State of the Nation address, we hope the state takes urgent steps to avoid the downgrade but also pronounces on measures to mitigate a downgrade in the likely event of this happening. Urgent steps need to be taken to stabilise government debt levels and ensure a more sustainable fiscal trajectory.
The unsustainable levels of public costs must be reduced.
Government must continue strengthening the capacity of the board of all strategic state-owned enterprises through the appointment of independent, capable, credible and strong directors and chairpersons. These boards must then be afforded the space and independence to work in the interests of the company without the levels of political interference we’ve seen over the past decade.
It’s long overdue that government identifies the SOEs that are of critical strategic importance and structure those to become viable. Restructuring options must be clearly articulated to include public-private partnerships through private equity partnerships, among other considerations.
For those SOEs that do not meet strategic objectives, government should take a pragmatic approach in deciding whether to sell or close them.
In speaking of our enterprises, the most critical and in need of immediate and urgent attention is Eskom. Its board along with its recently appointed CEO in Andre De Ruyter must be tasked with implementing the proposals of the President’s Technical Advisory Task Team and engage funders to restructure funding and ensure maintenance of plants.
The state simply cannot leave the electricity supplier to continue operating with a debt nearing the half a trillion-rand mark. Eskom needs some R230bn in fiscal support over the next decade: the path that Treasury chooses to support the almost 100-year old parastatal is possibly government’s biggest test.
With regards to the energy generation gap, we urge that government’s own Integrated Resource Plan is implemented and that regulatory impediments be eased so that renewables and other energy sources can be put on stream quickly.
We urge government, the ANC in Luthuli House and its alliance partners to speak in a unified voice. That can assist in mobilising society and in turn gain credibility in the marketplace.
These are just some of the messages that we hope emerge from the State of the Nation speech next month, and it is a monumental task. But these are just some of the measures needed if we are to realise the targets set in the NDP. It is a plan that is sold as the blueprint to defeating poverty, unemployment and inequality and one that needs to be brought back into our national consciousness.
Just how he achieves that is by making implementation a key cornerstone of his administration.
Mboweni’s budget speech that follows a mere couple of weeks after his address will have to be the opening salvo.
Mboweni has committed the state to a course of fiscal prudence and the SAA funding debacle of recent weeks, if anything, exposes just how committed he is to that cause. In the case of the airline, it can no longer rely on the fact that its shareholder believes it is “too big to fail”. It’s a necessary change in approach, but with Eskom, the risks to the country are much higher.
While the Development Bank of Southern Africa has stepped into the breach with a R3.5bn loan, the airline can never again be lulled into a sense of complacency. As Mboweni has said before, it must operate like a business.
The country needs to take some extraordinary measures. As Ramaphosa said in state of the nation address last June, “It is time to make choices. Some of these choices may be difficult and some may not please everyone.”
This article was first published in Business Day
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