Cape Town - South African President Jacob Zuma did little in a key speech yesterday to inspire confidence in an economy battered by mining strikes and power shortages.
Zuma’s state-of-the-nation address to Parliament in Cape Town “was more of the same,” Mamello Matikinca, a strategist at FirstRand’s investment-banking unit, Rand Merchant Bank, said in a note to clients today.
“Sustainable solutions to the fundamental problems facing the country, such as labour relations and the quality of education, remain elusive.”
Zuma, 72, pledged to boost the economic growth rate to 5 percent by 2019, improve the business climate and play a more proactive role in resolving “untenable” labour strife.
He began his second five-year term in May amid a 21-week strike that’s shut the world’s biggest platinum mines, the threat of recession and credit-rating downgrades.
“The speech really did not indicate that the president was willing to take any major political risk to kickstart crucial aspects of the South African economy,” Daniel Silke, director of Cape Town-based Political Futures Consultancy, said by phone yesterday.
Zuma’s speech was his first public appearance in more than a week following a two-day stay in the hospital after suffering from exhaustion.
He was driven to the front entrance of the National Assembly and took the hand of Speaker Baleka Mbete as he descended the steps into the speaking chamber.
Standard and Poor’s cut the nation’s credit rating to one level above junk on June 13, concerned that a slowdown in growth will make it difficult for the government to stick to its budget targets.
The strike by 70,000 mineworkers caused gross domestic product to contract an annualised 0.6 percent in the first quarter.
The state will help revitalise mining towns while ensuring companies meet their obligations to improve workers’ living conditions, Zuma said.
Economic policy in Zuma’s second term is focused on implementing a 20-year National Development Plan that seeks to cut South Africa’s jobless rate to 14 percent by 2020 from 25 percent.
“The economy takes centre stage in this program,” he said.
“It remains our strong belief that the most effective weapon in the campaign against poverty, is the creation of decent work, and that creating work requires faster economic growth.”
The central bank last month cut its growth forecast for this year to 2.1 percent from 2.6 percent.
The rand has slumped 2.4 percent against the dollar this year, extending last year’s 19 percent plunge.
It gained 0.9 percent to 10.7435 as of 3:06 p.m. in Johannesburg after data showed the current-account deficit narrowed in the first quarter.
Zuma said the government will address power shortages that have caused rolling blackouts since last week, including speeding up the provision of funding for a third new coal-fired power station and the development of new nuclear-energy plants.
“We are determined to work with the private sector to remove obstacles to investment,” Zuma said.
“The low level of investments is a key constraint to economic growth. We would like to see the private sector showing as much confidence in the economy as the public sector.”
Sixty-one percent of 3,370 adults surveyed in February and March said the state wasn’t doing enough to address unemployment, research company Ipsos said in a June 13 e-mail.
Just 12 percent said they got value for money from the taxes they paid, it said.
“We are not sitting on our laurels or hiding our heads in the sand,” Deputy President Cyril Ramaphosa said in a speech in Cape Town today.
“The government is very much alive to the challenges we face. Watch this space. There is going to be performance.”
While the strike that shut shafts owned by Anglo American Platinum, Impala Platinum and Lonmin may be nearing an end, further labour unrest is brewing.
The National Union of Metalworkers of South Africa said its 200,000 members in the metal and engineering industries plan to strike from July 1, after employers refused to meet their demands for a 15 percent wage increase.
Zuma’s speech “contained few fireworks, either negative or positive,” Anne Fruhauf, southern Africa analyst at New York-based risk adviser Teneo Intelligence, said in an e-mailed note to clients.
“The president’s action plan is unlikely to inspire much confidence in the government’s ability to turn around the stuttering economy.” - Bloomberg News