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‘Zuma speech likely to ignore debt’

There is little doubt that President Jacob Zuma will focus on matters of development in his State of the Nation address tomorrow but analysts say its significance may be characterised by what he will not say.

Cadiz Corporate Solutions mining specialist Peter Major said yesterday that the expansion of South Africa’s total debt to R1 trillion since Zuma came into office would most likely not be mentioned.

President Jacob Zuma. Credit: REUTERS

“The [State of the Nation] speech will be the biggest damp squib... especially when we have the Budget coming up.”

The problem with the debt levels was that the money spent went into consumption and not on capital projects. It was spent “under the smokescreen of recession” globally. This had turned the fiscal prudency period of former president Thabo Mbeki and ex-finance minister Trevor Manuel on its head.

The Zuma-led government had not abided by the principle of spending “as much money as you get in”. The unfortunate consequence of this was that the period of fiscal prudency and balanced budget would probably never return.

Analysts agree there will be a focus on the implementation of the National Development Plan (NDP) in tomorrow’s State of the Nation speech, and the Presidency has confirmed this, but economists are not certain whether Zuma will come down tough on business, the government or labour to resolve the country’s high unemployment, inequality and poverty.

They suspect the president may choose, instead, Brazilian ex-president Lula da Silva’s option, which is to smooth ruffled feathers by looking to easier options to resolve the three evils.

Political economist Steven Friedman said “there are a hundred different ideas” contained in the new government mantra – the NDP – to implement.

He suspected Zuma would choose the softer options. This was borne out of the resolutions of Mangaung, where a conciliatory line was taken.

For example, while land reform and transformation issues were considered important, the Lula option of redistributing state-owned land, and also land that had not necessarily been profitable, could be the way forged for agriculture.

Sanlam chief economist Jac Laubscher said a key problem identified in the NDP was the need for a “meritocratic public service” and this was something that would not be achieved overnight. Unfortunately the “fiscal window” built up carefully in previous years had been squandered. Much of this related to the ever-growing state personnel salary bill, Laubscher argued.

In fact, all the signals were that the capacity of the state was getting worse, with the auditor-general raising alarm bells about the quality of financial reporting of government departments and municipalities. These were providing opportunities for corruption and maladministration.

Both Manuel and his successor, Pravin Gordhan, had used their Budget speeches to focus on the need to “cut out” fraud and corruption, yet it had grown progressively worse.

Major said mining might get a bad report. While it was “the most over-discussed industry in South Africa”, he said, it shad probably the lowest operating margins of all the industries. “They [the government] never say that to the banks or the retail guys… Mining is an easy target to score points on.”

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