Economists respond to Sona: just electioneering with no detail

As expected, this year’s Sona was just electioneering with no detail from president Cyril Ramaphosa about how government will tackle the many challenges that cause poor economic growth, economists say.

The president was always going to be speaking to the voters, especially given the poor ANC polling data released over the past week, the economists at the Bureau for Economic Research (BER), Lisette IJssel de Schepper, Romano Harold and Nicolaas van der Wath, say.

“As always, the focus of the lengthy State of the Nation (Sona) was on accomplishments, including South Africans’ wins those on the sports field and cultural front, as well as broad policy priorities going forward.”

The important funding details and arguably even more important implementation plans are largely left to the Budget and respective ministers, while Ramaphosa blamed global factors as well as the ‘era of state capture’ and corruption for some of the current economic challenges and he was quite frank about SA’s stark (youth) unemployment problem, the BER economists say.

“It was somewhat ironic that the statement that ‘energy security is on track’ was almost immediately followed by the notification from Eskom that load shedding would be ramped up to Stage 3, which changed to Stage 4 overnight.”

However, they say, we must be thankful for small mercies – the president did not include references to smart cities or other pie-in-the-sky projects, with the speech perhaps being somewhat more relatable to many SA citizens (and voters).

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Aspects of the Sona that stood out

What stood out for them were:

• “In line with our long-term view about the SRD grant, the president said it will be extended, assumingly beyond the current extension to March 2025 and be improved as a first step to income support for the unemployed. The insinuation that this would be a first step instead of an outright move to a basic income grant should be received positively by the markets. While there are undoubtedly merits to a basic income grant from a societal perspective, a more incremental approach would help with affordability from the fiscus’s side, although a sustainable source of revenue would still be needed to fund it over time.”
• In the same vein, they say, the president’s mention that the National Health Insurance (NHI) would be implemented incrementally is also likely to be welcomed, if that means slow and steady instead of in one big shock to the system. “Again, it also comes back to the affordability and in this instance, the capability. Better outcomes are more likely with a slower approach, allowing government to address issues of concern, such as  the number of healthcare workers.”
• The acknowledgement of the necessity of investment in transmission infrastructure and further financial pledges towards the Just Energy Transition Investment Plan was welcome, although this was nothing new or surprising, the BER economists say. “The Climate Change Response Fund (although, again, this was nothing new) could be a prudent proactive action or just be another token announcement without real realisation.”
• Some mention of reform of the freight rail system and general logistics system were expected, but Ramaphosa did not offer anything new or concrete. “There was also no mention of further bailouts or support for Transnet and this will be a keen focus in the upcoming Budget.  However, the continued focus on solutions involving a private sector element is encouraging.”

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Electioneering expected in Sona, still ‘unfinished business’

NWU Business School economist Prof Raymond Parsons says he also expected an inevitably largely party-political statement and a stock-take of government’s achievements over the decades. “There were nonetheless highly familiar features that require critical assessment to determine if certain outcomes were actually realised.”

There is clearly still much ‘unfinished business’ on the national agenda, including a more coherent overall economic plan for much higher job-rich inclusive growth, he says.

“The president acknowledged the importance of expediting solutions in collaboration with the business sector and civil society, to overcome the serious on-going obstacles that continue to weaken the country’s economic performance.”

In particular, he points out, the partnership with business in resolving the wide-ranging problems of energy and logistics, as well as crime and corruption, must remain of a priority. “A large part of the economic resilience South Africa nevertheless exhibited so far clearly owes a great deal to the positive engagement and commitment of the private sector in expediting public delivery.”

Beyond the broad expectations of the Sona the tough financial realities and difficulties in the Budget on 21 February nonetheless remain, he says.

“Fiscal space has now shrunk markedly. A strong combination of weak growth, rising debt and excessive spending have posed serious risks to the fiscal outlook. Given the unresolved fiscal vulnerabilities apparent in the Medium Term Budget Statement in November 2023, the bar is set high for the main Budget later this month.”