The State of the Nation (Sona) speech is a key agenda setter for the work of government. In an election year, there is probably more pressure than ever to demonstrate success and make bold commitments to action. I hope President Ramaphosa’s speech this week will show a clear commitment to the hard work of reform implementation rather than sloganeering.
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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Our electricity crisis remains a significant constraint, despite progress made, and our logistics system has rapidly become a disaster for our 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. Partly thanks to incentives from government, there has also been massive investment by households and businesses in rooftop solar. 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 has been 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 need to complete the restructuring of Eskom to set up an independent grid operator to allow for an open electricity market, and to 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. I hope the president recommits to driving hard on concluding the restructuring process, and the rest of the Energy Action Plan.
In his speech last year, the president made limited comment on our logistics system, though noted that underperforming rail and ports would be addressed. But the logistics crisis has rapidly worsened as the performance of rail and ports has deteriorated. Jobs are being 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.
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, particularly Transnet, are aligned in doing so. The president can add the political momentum necessary to accelerate progress.
Last year’s speech included many promises of increased investment in infrastructure, including logistics, bulk water and roads. But official figures show that public spending on infrastructure has 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.
Unemployment, of course, is one of our most serious challenges despite a modest decline in recorded unemployment in the last year. His presidential youth employment initiative has 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. That can’t 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 is another front that last year the president promised would see much progress. There has been some, for example reforms are improving South Africa’s compliance with global money laundering regulations. But we continue to struggle to prosecute those implicated in serious corruption while crime and sabotage are a major contributor to our electricity crisis.
In an election year, there is always political pressure for populism.
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I feel that the National Health Insurance 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 – that will just be the start of litigation to block it. The president seems to feel that putting an unworkable law on the books would be an achievement – it will not be. 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.
However, government has managed to hold the line on other fronts. Tax collections have been weak due to poor economic growth and we simply can’t 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. Business’s 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.