Picture: President of South Africa, Cyril Ramaphosa. (Supplied).

CAPE TOWN - Newly-appointed President Cyril Ramaphosa’s promises in the State of the Nation Address can be realised through increased collaboration between government, business, labour and civil society, says Economist at Momentum Investments, Sanisha Packirisamy. 

According to Packirisamy, the president will have to increase efforts to restore the trust deficit that was apparent during the previous administration. 

“Ramaphosa’s involvement could prove beneficial in restoring confidence, given his background in trade union movements and his previous participation in the private sector. Moreover, a reconfiguration in cabinet (through the appointment of capable and trustworthy individuals in key departments (including mineral resources, public enterprises, energy and social development) will be necessary to execute Ramaphosa’s plan to shift SA’s growth trajectory to a higher platform over time”, said Packirisamy. 

The biggest challenge that is facing the President is to resolve the network of patronage that infiltrated key structures in SA, in the previous administration, she said. 

On SA’s economic outlook, Packirisamy said that “Chinese growth activity, should help real growth in SA reach close to 1.5% from below 1% in 2017 through a lift in exports, whereas the domestic demand trajectory will rely on the extent of the recovery in sentiment”. 

She adds that a more convincing pick up in business confidence could provide an upside risk to investment growth.

However, this is likely after the 2019 national elections, when policy uncertainty recedes further, she said. 

On the importance placed on jobs for the unemployed and youth, Packirisamy said that high levels of unemployment can lead to social unrest, a rise in criminal activities and a reduction in living standards.

When asked whether the country needs rebuilding and whether this will be the President’s focus, Packirisamy said that a clear economic plan and increased efforts to achieve it are likely to restore downtrodden consumer, business and investor confidence, fuelling growth prospects in the medium term.  

According to Momentum Investments, the highlights of SONA were as follows:

Addressing the unemployment challenge

What this means: Improved job prospects should allow for an alleviation in poverty levels and improve the quality of life for all South Africans through an increase in growth in real gross domestic product (GDP) per capita, which has declined for three years running, between 2015 and 2017.

Marketing investment opportunities

What this means: Raising investor confidence can promote investment growth and lift SA’s potential to a higher growth platform over time. 

Accelerating investment in infrastructure

What this means: Infrastructure growth is critical to boosting SA’s longer-term growth potential and will enable a higher quality of service delivery, as well as improve the country’s competitiveness

Improving regulatory clarity

What this means: Despite a mild recovery in international commodity prices, investment in the mining sector has lagged on continued regulatory uncertainty, which has negatively affected confidence. Despite suggesting land redistribution would be accelerated, a stretched fiscus is likely to cap progress on land redistribution. The president maintained expropriation without compensation would be implemented in a way that increases agricultural production and food security, but this remains a risk in Momentum Investments’ view and could continue to hinder inward investment in the agricultural sector.

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