Cape Town - South African businesses last week reacted cautiously to President Jacob Zuma’s State of the Nation address (Sona), charging that while it had managed to touch a few right buttons particularly on small businesses, it did not go deep enough to address the country’s economic problems.
Most said while Zuma highlighted some steps to address the economy, the low growth trajectory continued to pose a risk to fiscal consolidation.
Momentum’s Sanisha Packirisamy and Herman van Papendorp said raging unemployment and elevated inequality left the country exposed to the risk of a potential sovereign ratings downgrade.
“The announcements made at Sona are unlikely to affect South Africa’s low growth trajectory in our view,” they said.
“Our real GDP growth forecasts remain intact at 1.2 percent for 2017 and 2.0 percent for 2018.
"Further out, a lack of meaningful reform to improve South Africa's investment climate or tackle problems in the country's struggling state-owned enterprises is likely to cap growth at around 2 percent.”
Investec economist Kamilla Kaplan said the transformative efforts that Zuma mentioned in his speech would largely be driven by increased state intervention through legislation, regulations and licensing.
Kaplan said current legislation to enforce the transformation outlined pertained mainly to land reform, the mining sector, property and public procurement.
“The forthcoming 2017 Budget (February 22) will be closely monitored for any allocations of resources and commitments to the transformation policy outlined in the Sona,” Kaplan said.
“It is, however, expected the Budget will maintain the path of fiscal consolidation, particularly as South Africa's sovereign credit rating remains at risk of a downgrade.”
Anton van Heerden, managing director and executive vice-president for Africa and the Middle East at Sage, said the speech managed to put small and medium businesses at the centre of the country's growth strategy for the next few years.
Van Heerden said that was important because successful economies were built at the back of solid small and medium enterprises.
“Small business puts wealth in the hands of the entrepreneurs and their community, and it’s often more labour-intensive than capital-intensive large enterprises,” said Van Heerden.
“Encouraging more South Africans to start businesses is the best way to reduce poverty and inequality.”
The Consumer Goods Council of South Africa said the economic transformation objectives outlined in the speech could be achieved by implementing inclusive policies that encouraged broader participation in growth.
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The council said the proposed amendments to the Competition Act should not result in unintended consequences of driving away investment.
The council said: “Our members need a clear policy narrative from the government that we can commit to and work alongside with the government to achieve economic growth and employment creation.”
Novare’s economic strategist, Tumisho Grater, said the speech was in line with market expectations.
Grater said the pandemonium that unfolded earlier in the address was, however, not favourable for ratings agencies.
“Investors will not just be looking at one event, but a collective view of developments regarding where the country is headed,” he said.
“The next big event on the calendar is the national Budget speech, which will also form part of the bigger picture.”
Lew Geffen, chairman of real estate group Lew Geffen Sotheby’s International Realty, said the chaotic images in Parliament would be closely watched by the international community.