South Africa heightens focus on promises vs delivery after SONA

The State of the Nation Address reveals plans for economic growth and recovery.

In last week’s state of the nation address (SONA), President Cyril Ramaphosa confirmed that economic growth to stimulate job creation would be the main priority of the state. “Without growth there will be no jobs, and without jobs there will be no meaningful improvement in the lives of our people,” he said.

Distell CFO Lucas Verwye says that this year’s SONA was no doubt a difficult balancing act for the president as the effects of Covid-19 play out in the economy, with heightened focus from citizens, private sector and rating agencies on delivery vs promises.

Hollard Insurance group CFO Dirk Viljoen believes that while the focus on the priorities is positive, they aren’t new, and little progress had been made on them before Covid-19 struck. “In times like these, I would have liked to hear a focus on execution of the priorities. For a country to have ideals to build super cities, basic elements need to be in place.”

Procuring additional power
During the address, the president confirmed that private companies and mines will be allowed to produce their own electricity with no limit on how much power they will be allowed to generate. He added that the government is also looking to develop additional grid capacity from renewable energy, natural gas, hydropower, battery storage and coal.

“We noted the action behind the procurement of an additional 11,800 megawatts of power from renewable energy, natural gas, battery storage and coal in line with the Integrated Resource Plan 2019,” Lucas says. “This is vital to our [Distell’s] local resource requirements in South Africa as we not only supply the local market, but manufacture for export purposes too, and benefit the fiscus.”

Improving water resources
Water use licences have previously taken up to five years to process, but the president said these licences will now be issued within 90 days. He said the state is also working with the Agricultural Research Council and other scientific and agricultural bodies to develop drought mitigation strategies that focus on developing drought-resistant seeds, planting and storing fodder, removing invasive plants and management strategies to prevent soil degradation.

“As the biggest buyer of grapes for wine in South Africa, we also note with interest plans around water resources and quality monitoring as our industry is dependent on reliable infrastructure, although we have become more efficient as an industry in using this precious resource embedded by the two- to three-year drought in the Western Cape,” Lucas says.

Plans for economic recovery
The president said finance minister Tito Mboweni will outline a series of measures to reduce public sector spending and “improve its composition” during the Medium Term Budget Policy Statement (MTBPS) next week. “We are engaged with labour and other stakeholders on measures to contain the public wage bill and reduce wastage,” he said.

The finance minister’s “far-reaching economic reform measures” contained in the national treasury’s ‘Economic Transformation, Inclusive Growth and Competitiveness’ paper will also be implemented. The paper contains plans to charge government departments interest on late payments, reducing red tape by 25 percent in five years, and the better financing of farmers.

The president said a joint government and civil society working group has been charged to develop a national anti-corruption strategy and implementation plan. He said the strategy will be launched by the middle of the year.

Lucas says that the alcohol industry intersects with manufacturing, tourism, SMEs and agriculture, which are all key industries identified to speed up the economic recovery in South Africa. “We can play an integral part of the overall recovery story in South Africa.”

Improving education
The president said nine new technical and vocational education and training (TVET) college campuses will be built in Sterkspruit, Aliwal North, Graaff Reinet and Ngqungqushe in the Eastern Cape, and in Umzimkhulu, Greytown, Msinga, Nongoma and Kwagqikazi in KwaZulu-Natal over the next year. He also confirmed plans to establish a new university of science and innovation in Ekurhuleni, Gauteng.

In line with his 2019 SONA, the president said vocational specialisation subjects have been introduced at 550 schools, and 67 schools are now piloting the occupational stream. He said coding and robotics will be introduced at grades R to 3 in 200 schools in South Africa in 2021, with a plan to implement it fully by 2022.

Building super cities
Nearly two years after announcing the establishment of an infrastructure fund, the president said the fund had finalised the list of “shovel-ready” projects that will be worth over R700 billion in the next 10 years. These will be funded from both government and non-government contributions. They include projects in areas such as student accommodation, social housing, independent water production, rail freight branch lines, embedded electricity generation, municipal bulk infrastructure, and broadband roll-out. “The cranes and yellow equipment that we have longed to see across the landscape of our country will once again soon be an everyday sight,” he said.

He said R64 billion will also be spent by the state, and “at least” another R64 billion from the private sector, over the next few years to build student accommodation. He added that 37,000 rental apartments for low-income households, which could leverage as much as R9 billion of private investment, will start construction this year.

And the construction of the Umzimvubu Dam in the Eastern Cape will also start, he said.

A new smart city in Lanseria, with space for between 350,000 to 500,000 people, will be constructed. The president said the city will not only be smart and 5G network ready, but will be a leading benchmark for green infrastructure across the continent and internationally.

Addressing unemployment
One percent of the national budget will also be set aside to deal with the high levels of youth unemployment in South Africa. “This will be through top-slicing from the budget, which will require that we all tighten our belts and redirect resources to address the national crisis of youth unemployment,” the president said. The finance minister will announce more details at the MTBPS near the end of the year.

He added that industry master plans for vehicle manufacturing, clothing and textiles, poultry, steel and sugar have been completed, to save close to 200,000 jobs.

Supporting small businesses

Starting this week, the National Youth Development Agency and the Department of Small Business Development will provide grant funding and business support to 1,000 young entrepreneurs in the next 100 days. The president said this forms part of a more ambitious programme to assist 100,000 young entrepreneurs over the next three years to access business skills training, funding and market facilitation.

He said the state will designate 1,000 locally produced products that must be procured from small to medium companies in South Africa. The Procurement Bill will soon be presented to parliament as part of the state’s efforts to empower black and emerging businesses and advance radical economic transformation.

The president added that within the next two weeks the state will set a new poultry import tariff adjustment to support the local industry.

Effective from Thursday, Ramaphosa also said new regulations published in the Government Gazette will enable investigation and action against abuse of buyer power and price discrimination.

Dirk explains that, unfortunately, it seems as if the government is getting stuck at centralising all initiatives, which will limit its potential. “More could be done to stimulate small businesses, and a proper investment to improve our education system. The obsession with transformation as a prerequisite limits the real transformation that could be achieved by incentivising everyone who partakes and builds the country – rich and poor, black and white, males and females.”

He adds that growing the economy will benefit all, particularly job creation, which will naturally lead to transformation.