20 June 2019

South Africa: Will Ramaphosa Deliver Stronger SONA Emboldened By ANC's Election Victory?

President Cyril Ramaphosa is set to deliver his third State of the Nation Address (SONA) on Thursday evening and the focus is expected to be on whether he delivers a stronger message in his speech, emboldened by his party's 2019 election victory.

Faced with a sputtering economy, Ramaphosa is likely to focus on youth unemployment, economic growth, corruption and state-owned enterprises.

Youth unemployment and the economy

In his second address as president in February 2019, Ramaphosa spoke at length about measures his government would take to curb the scourge of unemployed youth.

Part of this was making the challenge a national agenda item with plans for a job summit and an investment conference.

The country's unemployment rate is at a 15-year high of 27.6%.

The youth account for more than half (52%) of the total unemployment figure.

During the ANC's national executive committee (NEC) lekgotla, the party resolved to decrease the overall unemployment rate to 7% in the next five years.

The mammoth task envisioned by the ANC and, by extension, Ramaphosa's government, is set against a backdrop of an economy which shrank by 3.2% quarter-on-quarter (seasonally adjusted and annualised) in the first quarter of 2019. This was the biggest plunge since the 2008 global financial crisis, and the second-highest drop seen in more than two decades.

Ramaphosa's economic growth-centred government may prove increasingly necessary.

Fin24 reported that growth year-on-year has remained flat at 0% (unadjusted), and means that the South African Reserve Bank and National Treasury will likely need to revise GDP growth expectations for 2019 downwards, from around 1.3% to closer to 0.5%, placing the government's fiscal targets under significant strain.

In his February 2019 SONA, which read like a report back from promises made during his maiden speech in 2018, the president boasted that his investment conference, with the help of envoys, had generated at least R70bn in the first three quarters of 2018 with the aim of raising this number even further.

"The level of growth we need to make significant gains in job creation, will not be possible without massive new investment."

State-owned enterprises and corruption

Ramaphosa's growth project is battling to gain ground due to loss-making SOEs that continue to drain the fiscus, as many seek government bailouts.

His biggest headaches are Eskom with debt of R500bn, SAA at R21.7bn and the SABC at around R3.2bn.

Recently, the public broadcaster's chief financial officer, Yolandi van Biljon, said the SABC had a debt of more than R1bn due to creditors and had to play a fine balancing act between its various priorities.

Meanwhile, in Finance Minister Tito Mboweni's first budget speech, he announced that the government would receive R69bn for bailouts, spread over the three fiscal years, with the embattled South African Post Office receiving a R1.5bn bailout.

This announcement followed Ramaphosa's decision to unbundle Eskom into three entities, namely generation, transmission and distribution.

Following the resignations of Eskom CEO Phakamani Hadebe and SAA head Vuyani Jarana, Ramaphosa held a meeting with chief executives of more than 20 SOEs last week.

City Press reported that the top executives complained that political interference, excessive bureaucracy and a lack of support from the government continued to cripple their work.

Revive the NPA

In his leaked resignation letter, Jarana unpacked how uncertainty about funding and slow decision-making processes were delaying the airline's turnaround strategy, Fin24 reported.

"The strategy is being systemically undermined, and as the group chief executive officer, I can no longer be able to assure the board and the public that the LTTS (long term turnaround strategy) is achievable," he said. Jarana was appointed CEO in November 2017 with the task of improving the ailing airline's financial health.

In 2019, Ramaphosa promised to clean up shop and revive the NPA with the help of his new National Director of Public Prosecutions (NDPP), Shamila Batohi.

She quickly established a unit, which would be headed by advocate Hermione Cronje, with the focus of investigating and prosecuting allegations of state capture and high-level corruption.

The newly revived NPA's commitment to crime fighting has been demonstrated by the arrest of one of KwaZulu-Natal's leading politicians, Zandile Gumede, who was later suspended by the party as mayor of eThekwini.

Gumede is out on R50 000 bail, in a case in which she is accused of a string of charges, which include money laundering, corruption and racketeering.

Source: News24

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