With the president’s State of the Nation (Sona) speech coming up on Thursday, Business Leadership SA is hoping that Ramaphosa will refrain from sloganeering and rather show a clear commitment to the hard work needed for reform implementation.
Busi Mavuso, CEO of Business Leadership SA (BLSA), says in her weekly newsletter that the Sona speech is a key agenda-setter for the work of government and in an election year, there is probably more pressure than ever to demonstrate success and make bold commitments to action.
“Last year, the president focused his speech on the recovery from the Covid pandemic. We have moved on and now our focus is much more on improving the performance of our economy, which is held back by factors that have nothing to do with Covid.”
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Electricity remains a significant issue
She says the electricity crisis remains a significant constraint despite progress made and the logistics system has rapidly become a disaster for the economy, requiring urgent intervention.
“Last year, restoring energy security was the president’s “most immediate priority” and a year later it is fair to say that there has been progress.
“There has been a dramatic increase in private investment in large-scale electricity generation according to registrations with the electricity regulator. There has also been massive investment by households and businesses in rooftop solar, partly thanks to incentives from government.”
However, she says, Eskom’s operational performance which the president promised would improve in his speech last year, remains frustratingly far from target with the energy availability factor so far in January below the average of last year.
“However, with the growth of private supply, electricity security can be achieved anyway. This progress is thanks to focused efforts by the presidency working in tandem with business via the National Energy Crisis Committee.
“But despite the progress, we are still suffering through load shedding. The end is visible on the horizon if we maintain momentum. We must complete the restructuring of Eskom to set up an independent grid operator to allow for an open electricity market and drive increased investment in the grid, ensuring it has capacity for new generation.”
Progress on this has been made with the appointment of a board and licensing of the grid operator, she says and adds that she hopes the president recommits to driving hard on concluding the restructuring process and the rest of the Energy Action Plan.
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The logistics crisis has worsened since last Sona
Mavuso also points out that in last year’s Sona, the president made limited comment on the logistics system, although he noted that underperforming rail and ports would be addressed.
“The logistics crisis has rapidly worsened as the performance of rail and ports deteriorated. Jobs are lost simply because miners and others cannot get their output to ports.
“We are right now watching shipping traffic diverted around Africa because of the Red Sea crisis pass us by, choosing Walvis Bay or Maputo, because our ports are incapable of providing a decent service to them.”
She says the logistics crisis has seen a galvanised response from business and government, with the establishment of the National Logistics Crisis Committee modelled after Necom. It has already produced a logistics roadmap that represents the best thinking on how to improve our logistics performance.
“But it now needs focused attention on implementation, ensuring all parties and particularly Transnet, are aligned in doing so. The president can add the political momentum necessary to accelerate progress.”
Mavuso also points out that last year’s Sona included many promises of increased investment in infrastructure, including logistics, bulk water and roads. However, she says, official figures show that public spending on infrastructure continued to drift downward, while investment from the private sector has grown markedly in the last 18 months.
“That growth is in part thanks to positive reforms, particularly in allowing private investment in infrastructure, but we still see the public sector struggling to invest in infrastructure. There have been some positive moves to consolidate the infrastructure effort in National Treasury and I look forward to hearing from the president about how this problem will be unlocked.”
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Unemployment and labour market reforms – hope for SONA
Unemployment is, of course, one of the most serious challenges despite a modest decline in recorded unemployment in the last year, she says.
“The presidential youth employment initiative delivered several positive interventions to support youth employment, but it is only when the private sector is galvanised to employ more people that we will see a large-scale change.”
She warns that cannot happen without reforms that address labour market regulation, a holy cow that the president’s government seems unable to touch.
“It is one he should be bold about – reforms are possible that maintain worker rights but free up employers to take on more staff. I live in hope.”
Crime and corruption are another front that the president promised would see much progress last year and Mavuso says there has been some, such as reforms that are improving South Africa’s compliance with global money laundering regulations. However, we continue to struggle to prosecute those implicated in serious corruption while crime and sabotage are a major contributor to the electricity crisis.
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National Health Insurance will not be an achievement
“In an election year, there is always political pressure for populism. I feel that the National Health Insurance (NHI) scheme is one example of populism over practicality, as it is never going to work. The president said last week that it would be signed into law before the election and that will just be the start of litigation to block it.”
Mavuso says the president seems to feel that putting an unworkable law on the books would be an achievement but will not be one.
“A genuine and deep improvement in the health system would be, but the NHI Bill will do the opposite by driving doctors and other medical staff out of the country and damaging the private healthcare sector without any improvement in the public system. Yet the president seems determined to drive it through.”
She acknowledges that government has managed to hold the line on other fronts.
“Tax collections have been weak due to poor economic growth and we simply cannot afford to expand spending recklessly, whether on the public sector wage bill or on social grants. National Treasury’s grip on the fiscal position has given business and investors confidence and the president can signal his support for discipline.”
An election year obviously adds a dynamic to Sona, she says.
“Business’ main interest is in supporting economic growth and slogans do not deliver it. We need the hard work of reform implementation to continue and I hope the President uses his speech this week to assure us that it will.”