Sona 2022: A missed opportunity

President Cyril Ramaphosa did not chart a particularly new course in his State of the Nation (Sona) address on Thursday evening.

Business was hoping for a greater sense of urgency and a far stronger commitment to accelerating both the reform agenda and infrastructure rollout. Overall, Business Leadership South Africa (BLSA) believes the president  could have done more to address blockages to the efficient implementation of already agreed policy and didn’t go far enough to build confidence that 2022 would be the year of delivery.

Business was hoping for another ‘big bang’ announcement of a way to break out the inertia that seems to be bogging down both the infrastructure rollout and reforms to the energy sector. The last such moment was when the president intervened to ensure the cap for energy self-generation without a licence was raised to 100MW, not the 10MW limit that Energy Minister Gwede Mantashe wanted to impose. That was a breakthrough moment in liberalising the sector which generated much optimism that the government was serious about getting the economy on a strong growth path.

Unfortunately, much of the momentum and goodwill generated by that move has dissipated as other areas of the energy reform process are being held up for no specific reason. For example, Minister Mantashe said in October last year that the sixth bid window of the Renewable Energy Independent Power Producers Programme would be held by end-January this year.

Barring that, the least the president needed to do was to ensure that the blockages to reforms, particularly in the energy sector which is so crucial to our economic wellbeing, would be swiftly and ruthlessly removed.

There is so much at stake with each bout of load shedding stripping the economy of billions of rands and this will keep happening until supply meets demand.

Be that as it may, BLSA welcomes President Ramaphosa’s focus on the small business sector. First, he announced a redesigned loan scheme for small businesses which will involve development finance institutions. Second, he said he had appointed Sipho Nkosi, chair of the Small Business Institute and former CEO of Exxaro Resources, to the Presidency “to cut the red tape that stops small businesses from growing and thriving”. This is something BLSA has long been calling for and both measures come at a critical time for SMEs that have been battered by the ravages of the Covid lockdowns. The Presidency’s commitment to improving the ease of doing business made early in his term of office had seen little momentum.

He also provided an important update on the drive to build a capable state, saying government would soon be finalising a framework for the professionalisation of the public service. This would include tighter measures for recruitment of public servants, continuous professional development through the National School of Government and partnerships between state bodies, professional associations and universities. Improving the capacity of the public sector is vital to our long-term development.

In other areas there were some positive elements but also some missed opportunities.

Social relief grant

Extending the R350/month social relief of distress grant to end-March 2023 rather than going for a “big bang” introduction of a permanent basic income grant was the sensible option. There is an obvious need for more extensive social welfare support. This is an area that needs careful research into the repercussions that higher tax rates and possibly increased debt levels will have on the rest of the economy.

The president’s pledge to seek ways to expand South Africa’s social relief programme but without crippling the fiscus is precisely what BLSA has been calling for on this important policy. We also welcome his promise to “engage in broad consultations and technical work to identify the best options to replace this grant”.

Immigration policy

The revised critical skills list was published earlier this month to ensure immigration policy matches country’s needs. Work is also being done to revamp the work visa system and to “make sure it’s easy for people to come for tourism, study and job opportunities”. Backlogs of visa applications are also being addressed.

These are all very positive moves which are important to our beleaguered tourism sector and are also critical for running competitive businesses.

Despite recent reports indicating otherwise, no mention was made of job reservation policies that would exclude foreign nationals from certain jobs.

Infrastructure development

This was a disappointing aspect of the Sona address. No recognition was given to the core problems that are delaying the rollout of infrastructure projects. Research commissioned by BSLA found that there is still not enough expertise in the field of large infrastructure projects in the correct areas of government while its systems and approval processes are cumbersome and unnecessarily complicated because they require input from numerous different government departments. Those are the main factors that have been impeding progress since the president took office and announced a firm commitment to reach the National Development Plans goal of investing 30% of GPD annually. Unfortunately, since then, investment levels have been declining, with gross fixed capital formation of just 15% of GDP in 2020.

Covid-19

Ending the state of disaster is a good move. It won’t happen immediately as “other measures under the national health act as well as other legislation” need to be finalised. But it’s important for businesses to be able to operate at full capacity.

Energy transition funding

The President did not mention anything new in terms of the disbursement of the $8.5bn pledged at COP26 towards SA’s just energy transition, repeating the announcement of the appointment of former Absa CEO Daniel Mminele as head of the presidential climate finance task team.

We would like to have learned more about the composition of that task team. When the pledge was announced, the political declaration also provided for a task force to develop a programme of work over the next 12 months and BLSA called for this task force to be inclusive, with representatives from all spheres of society. We hope business, labour and other social partners are fully included in the decision-making process and, critically, there are strong measures imposed to combat the ever-present threat of corruption.

July unrest report

President Ramaphosa’s response to the expert panel’s report into the unrest in July last year was strong, promising changes in key positions within the security cluster and that 12,000 new police personnel would be recruited.

He quoted the panel’s findings, which stated that there was an unequivocal failure of the country’s police and intelligence services. The report also found that the “internal differences” and factional fights in the governing ANC contributed to the carnage that played itself out in KwaZulu-Natal and Gauteng, and these squabbles should be viewed as a national security threat.

He said: “The report on the July unrest says Cabinet must take full responsibility for what happened. We accept this and take the responsibility.”

“The security services have been tasked by the National Security Council to urgently develop implementation plans that address the range of recommendations made by the expert panel,” he said. “We will, as recommended by the panel, develop and drive a national response plan to address the weaknesses that the panel has identified.”

Zondo commission report

The promise that those implicated in Zondo reports into state capture would be prosecuted is important. That will send an important message that the days of impunity are behind us. Accountability needs to be an integral feature of the country in the years ahead and the President went to great lengths outlining the measures being taken in attempts to accelerate the prosecuting process of those implicated.  The President announced that government was conducting a detailed review of all applicable legislation and a comparative study of other jurisdictions to strengthen whistle-blower protection.

Unfortunately, he never said much about the structures recommended by Judge Raymond Zondo to prevent corruption in future, such as the anti-corruption agency and measures designed to prevent tender fraud, among others. BLSA would have welcomed a firm commitment to such important measures given the massive corruption in Covid-linked tenders.

He did, however, present a strong stance on the Special Investigating Unit’s final report on its investigation into Covid-related contracts. He said 45 cases, with a combined value of R2.1bn, had been enrolled with the Special Tribunal. The Presidency had also set up mechanisms to monitor implementation of the recommendations of the SIU and ensure that government departments and entities act against those who have violated regulations and broken the law.

BLSA also welcomes his establishment of multi-disciplinary units to address economic sabotage, extortion at construction sites and vandalism of infrastructure.

100-day compact

We will wait to see what the president has in mind with his 100-day target to achieve “a new consensus to deal with poverty, unemployment and inequality”. In BLSA’s view, a social compact was achieved with the Economic Recovery and Reconstruction Plan that was agreed between all social partners last year. What matters now is implementation.

Busi Mavuso is CEO of BLSA