State of the Nation Address down, Budget to go

It is a matter of one down, one to go. Now that the State of the Nation Address (Sona) is over, the National Budget Speech is the next big event that will show where South Africa is headed this year. The budget must now give details about the president’s promises and explain where the money will come from.

Busisiwe Mavuso, CEO of Business Leadership South Africa (BLSA), says in her weekly newsletter that the Sona was detailed and about real delivery rather than promises. “It rightly highlighted the progress we’ve made in electricity reform and evolving change in logistics and criminal justice.”

She says the Sona was a display of unity by the government of national unity (GNU), which supports confidence in its sustainability.

“Perhaps the most prominent new focus for government is on under-performing municipalities, with promises to establish professionally managed utilities for water and electricity provision.

“There were several pledges from the president that will need to be delivered through the budget which must also contend with the unexpected shock withdrawal of foreign assistance from the US government.”

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State of the Nation Address focused attention on reforms needed

Mavuso says the Sona did what it needed to do, focusing the country on delivering the reforms needed to achieve 3% gross domestic product (GDP) growth by the end of this year.

“It was detailed and about real delivery rather than promises. It rightly highlighted the progress we made in electricity reform, logistics and criminal justice, among much else, while also highlighting the importance of pushing those reforms.

“The speech was a display of unity by the GNU, continuing the theme I had seen the week before in Davos of a united Team SA, the GNU parliamentarians were united in their reception of the speech. The reforms highlighted by the president need everyone to back them and strive toward implementation.

“I find it encouraging that parliamentarians from all GNU parties clearly signalled their support for the president’s words.”

She says there were many positives in the Sona. “Perhaps the most prominent new focus for government is on under-performing municipalities, with promises to establish professionally managed utilities for water and electricity provision which can ringfence revenue to ensure appropriate infrastructure investment.

“A broader process to redesign the local government system is also welcome to address what has become the weakest link in government service delivery and a growing risk to other public sector institutions, like Eskom, which are owed billions in debt.

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White paper for municipalities good idea in State of the Nation Address

“The proposed consultation process leading to a white paper will be an important opportunity to develop new thinking that can enable local governance that is sustainable and of better quality. Business has a clear interest in supporting local government and BLSA has done so by funding mentorship programmes for municipal engineers and the repair of waterworks, for example, enabling schools to access running water and toilets.”

Mavuso points out that efficient local services are essential for our communities as well as the businesses that operate within them. “We look forward to engaging with the process to think through how we can improve the performance of local government.”

She says all eyes will now turn towards the budget speech next week. “There were several pledges from the president that will need to be delivered through the budget. Among them are promised reforms to the regulations governing public-private partnerships, an arrangement that allows public and private sectors to partner to invest in and deliver large infrastructure projects.

“These reforms have been in the making for several years, and it is high time they were finalised so we can get on with the job of turning South Africa into a construction site. Along with those, the President also noted the ambition for innovative ways to get private investment into logistics and electricity.

“This requires government to accelerate reforms, particularly in logistics, to enable swifter collaboration and transactions between the state-owned enterprises and private operators, through concessions and other mechanisms. The economy would benefit greatly, for example, from competition between ports and rail routes, which could be created by concessioning use to different private operators.”

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Budget speech must also deal with withdrawal of US aid

In addition, Mavuso says the budget must also contend with an unexpected withdrawal of foreign assistance from the US government, which she finds deeply unfortunate. “It appears that a combination of efforts to cut back foreign development spending by the new US government and a mistaken view that the Expropriation Act amounts to a land grab, led the White House to order the halting of all aid and assistance to South Africa over the weekend.

“While the Expropriation Act is not perfect, it does not remove constitutional rights to property and due process in any expropriation.”

She emphasises that the loss of US funding is material, particularly for the US President’s Emergency Plan for AIDS Relief (Pepfar) programme that is integral to managing of the HIV/Aids pandemic. “Pepfar last year contributed $453 million (R8.5 billion) in direct funding to South Africa, a substantial portion of the R30 billion spent on the fight against HIV.

“Pepfar has been critical to the development of South Africa’s HIV response, not just in funding, but also in know-how and scientific research, and was until now a proud example of America’s support for development and improved health elsewhere in the world.”

Mavuso says the US, of course, remains an important trading partner for South Africa, and our respective private sectors have extensive relationships that will remain strong.

“With one of the set piece speeches now done, I am encouraged by the direction government is going and the opportunity to work with it to ensure we achieve our mutual aims of driving growth.”