‘Radical change will beat SA’s triple challenge’

President Jacob Zuma. File picture: Sumaya Hisham

President Jacob Zuma. File picture: Sumaya Hisham

Published Jun 18, 2014

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Cape Town - President Jacob Zuma seemed sombre and subdued as he began to deliver the first State of the Nation address of his second term at a joint sitting of the National Assembly and the National Council of Provinces last night.

Unlike the pre-election address delivered in February, when he spoke at length of the “good stories” of the ANC-led governments since 1994, last night’s address focused immediately on the country’s economic crisis.

But in the later part of his speech, the president resorted to rattling off statistics of what had been achieved.

However, he did announce new interventions to deal with the question of a national minimum wage and improvement in the lot of mineworkers along with an inquiry into the country’s inclination to violent and protracted strikes.

At first it seemed as if Zuma was aware that a slew of economic data to be released today is expected to paint a gloomier picture after last week’s downgrading of South Africa’s sovereign credit rating.

Gina Schoeman, an economist at Citi, said: “Unfortunately, the damage to the first-quarter gross domestic product (GDP) is already done. Though we do not expect a technical recession, we now expect 2014 GDP to be weaker at 2 percent.”

Headline inflation is expected to rise at an annualised rate of 6.6 percent in May from 6.1 in April.

Rand Merchant Bank said this would be the highest level since July 2009. It estimated a 0.2 percent month-on-month increase would be driven mainly by food prices.

Kamilla Kaplan, an economist at Investec, said the current account deficit was likely to widen to 5.7 percent of GDP, compared to 5.1 percent in the last quarter of 2013.

Zuma launched into the speech by saying the economy took centre stage in the government’s programme.

He said the “triple challenge of poverty, inequality and unemployment” would only be rolled back by “radical socio-economic transformation”.

“Change will not [happen] without some far-reaching interventions,” Zuma said.

He acknowledged that without faster economic growth the creation of desperately needed jobs would not happen.

The government hoped to achieve 5 percent annual GDP growth by 2019.

The country was in a difficult period aggravated by long and violent strikes, slow global recovery and power constraints.

He said he would reinvigorate the Presidential Business Working Group, which had been investigating six streams of inquiry into stimulating the economy.

“We would like to see the private sector having as much confidence in the economy as the public sector,” he said.

The government was determined to work with the private sector to stimulate and grow investment in the country.

Zuma needed to address threats to South Africa’s economic stability, Neren Rau, the chief executive of the SA Chamber of Commerce and Industry, said yesterday.

Rau said industrial action, sustainable electricity supply, and the credit downgrades were some of the issues requiring high-level attention.

The strike in the platinum sector, the extent of damage wrought on the economy, and criminal elements in a number of strikes raised serious questions about whether open-ended industrial action was still appropriate, he said.

“South Africa simply cannot continue to tolerate a situation where strikes disrupt the social priorities of community safety and job creation.”

Rau said the business community was anxious to assist government in finding solutions to these problems.

Kaizer Nyatsumba, the chief executive of the Steel and Engineering Industries Federation of SA, said yesterday that Zuma should use his address to the nation to send a strong message to the local and international markets that the government would turn the country’s economy around.

“By far the biggest challenge confronting South Africa today is economical and definitely not political,” Nyatsumba said.

“South Africa certainly cannot afford yet another downgrade by the international ratings agencies, nor can it afford another shrinkage in our economy,” he added.

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