President Cyril Ramaphosa delivers his State of the Nation Address in Parliament on June 20.  FILE PHOTO: Phando Jikelo/African News Agency(ANA
President Cyril Ramaphosa delivers his State of the Nation Address in Parliament on June 20. FILE PHOTO: Phando Jikelo/African News Agency(ANA

Ramaphosa speech short on details about struggling state firms - economists

By ANA Reporter Time of article published Jun 21, 2019

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JOHANNESBURG  - President Cyril Ramaphosa's speech on Thursday outlining the state of the nation was rather short on details on how to revive struggling state firms, some economic analysts said on Friday.

In his state of the nation address to parliament, Ramaphosa acknowledged that Africa's most industrialised economy, which expanded by a sluggish 0.8 percent last year, was not growing sufficiently or creating enough jobs, saying this was a concern "that rises above all others".

He however made little mention of the drain on national resources wrought by state-owned enterprises, although he acknowledged that one reason for lacklustre growth was the rotational powercuts cashstrapped electricty utility Eskom was forced to implement earlier this year to avoid overwhelming the national grid.

The details Ramaphosa gave regarding Eskom were largely disappointing, economist Peter Attard Montalto said, noting that the president made no mention at all of the similarly beleaguered national carrier SAA and public broadcaster SABC.

"We find this bizarre and it will worry creditors that no political high level support was offered at all," said Montalto, the head of capital markets research at Intellidex.

He added that while there was a mention of the steps taken so far on visas including Chinese and Indian visa changes, there was none of  wider visa reform especially around skilled immigration, despite the issue being highlighted as critically important for investor sentiment.

While Ramaphosa's speech addressed some pertinent issues, lingering political uncertainty remained in areas such as land reform, longer-term solutions for spending commitments and financial sustainability for state-owned entities, said Sanisha Packirisamy an economist at Momentum Investments.

"Garnering positive sentiment requires political will, a reduction in political and policy uncertainty and the implementation of growth-enhancing reforms," Packirisamy said.

"The president’s plan to accelerate SA’s growth trajectory remains heavily reliant on the ability of the top leadership to execute on the economic plans put forward.

Ramaphosa defended the credibility of the central bank, which has come under criticism, including from some members of the ruling ANC party, for what they see as its blind pursuit of its inflation targeting mandate at the expense of economic growth.

"Our Constitution mandates the South African Reserve Bank to protect the value of our currency in the interest of balanced and sustainable growth," he said.

"Today we reaffirm this constitutional mandate, which the Reserve Bank must pursue independently, without fear, favour or prejudice."

Intellidex's Montalto however said while Ramaphosa reaffirmed the central bank's mandate and its independence "the wording was odd and left open the prospect of more debate about inflation targeting being 'necessary but not sufficient' for sustainable growth".

"What had to be said was said broadly but this will not be the end of this issue," he added.

The South African Chamber of Commerce and Industry (SACCI) said the intent vocalised by Ramaphosa to revitalize the economy through small business centres where youth entrepreneurs would be given both technical and financial support was a significant positive move.

The chamber also welcomed what it called the decisiveness around resolving the capital and operational issues surrounding Eskom and said it looked forward to the medium term budget policy statement due from the finance minister in October to see how this would be funded. 

"Whilst the president has indicated good objectives especially on how to ignite the economy, we are looking forward to getting an understanding of the actual execution plans," SACCI said.

- African News Agency (ANA)

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