[TOP STORY] The Presidency’s Sona scorecard is ‘not that great’

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SIMON BROWN: I’m chatting with Isaah Mhlanga. He’s head of research at Rand Merchant Bank. Isaah, I appreciate the time today. The president’s State of the Nation [address is on] Thursday evening. Ahead of this we’ve got a scorecard from the presidency. It actually paints a fairly decent picture, but the real state of the nation is not that great. In the tweet you put out, one of the key points you make is that a lot of what isn’t being done is the sort of stuff which would be most consequential for creating jobs and creating growth.

ISAAH MHLANGA: Absolutely. Thanks a lot. Indeed, if you look at the list of reforms that the presidency put there, it gives itself 11 of 19 reforms that have been achieved. But if you look in terms of those that have been achieved, some of them actually don’t mean much. Let me just [give] one, for instance – ‘starting the unbundling of Eskom’. Anybody can start something, but it is in the completion where the real benefit comes. So ‘starting’ itself must never be listed as a success. There are quite a number of them that follow similar assessments.

But if we just look in terms of those that have not been achieved, actually the most important ones that will be impacting economic growth and unemployment positively have not been achieved. I think that’s where the issue is. They seem to be taking much longer than what was initially expected.

SIMON BROWN: This revolves a lot around power, and we know the story. Right now I’ve got load shedding, and that’s an ongoing reality. SOEs to be retained, consolidated, or disposed of. These are some of the really big ones. He credits himself for fixing rural roads. Now we can debate that. I’ve driven down some of those rural roads recently. They’re not great. It’s the really big ones which have all got the red crosses against them, and that’s a huge issue.

ISAAH MHLANGA: Absolutely. Look, I think this is not to discount some of the successes that have been made, particularly the law enforcement authorities and strengthening some of the institutions which have been run down through the Jacob Zuma era. There have been some successes in changing the legislation, but the change in legislation that governs these institutions in itself is not the full picture. It’s the first step [in getting] these institutions to [have a] real impact in what they’re supposed to do. That’s what we are supposed to see from here onwards.

But also if we just look in terms of what the president needs to be assessing, it is to look at the powers of the nation and what really bothers the nation, what really is holding job creation, what really is holding back poverty reduction. A lot of those issues are surrounding energy, are surrounding the rural economy – including proper roads and infrastructure within the rural areas where the large majority of the people who are still unemployed reside.

SIMON BROWN: I take the point as well around some of the achievements. For example, one of them is the spectrum auction. It has been achieved. It was [for] industry still very, very late. Make no mistake, it’s a big step on its own. It is an important step.

ISAAH MHLANGA: Absolutely. You could also add one that the industry pushed [for] quite a lot. The removal of the cap as far as embedded generation is concerned, initially from 1MW  to 10MW, and it  eventually went to 100MW, ultimately because industry pushed. But also because of our energy situation it was removed completely. And there is quite a strong pipeline of renewable energy producers who are now building that pipeline, such that over the next two years we will see more industry being dependent on their own production for their own businesses. That’s going to relieve pressure on Eskom. So that helps correlate, and it has been achieved because the private sector pushed.

So we need to see businesses pushing for the right reforms that make their operating environment much simpler to operate so they can keep their businesses running. Keeping quiet would not help the South African economy, because we have politicians who are too slow to react, who just perhaps don’t get the seriousness and the urgency of implementing these reforms, purely because some of them have vested interests.

SIMON BROWN: Vested interests. You make a great point around business. Often it’s business, and often it feels it is business in spite of government, rather than in collaboration with government.

Again, we come back to the first point. That’s great in many cases for growth. It might even be great for jobs. It’s probably not significantly benefiting the poor in many cases.

ISAAH MHLANGA: So far you could say yes, but ultimately, if the economy grows, it will result in poverty reduction, maybe even if not directly through job growth. But the taxes that are paid by Business South Africa into the fiscus are used by government to pay the various grants that government pays to many South Africans. Over half of South Africans are receiving some form of a grant from the government, and that needs to be paid for. So when businesses thrive, they pay taxes, and when those taxes are used effectively they can reduce poverty.

SIMON BROWN: Tax paid by business in Sandton can fix a road in Kwambonambi or a rural area.

We’ll leave it there. That’s Isaah Mhlanga. You’ll find him at Rand Merchant Bank.

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