Economists tell Ramaphosa to fix the economy ahead of SONA
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Durban - Economists have called on President Cyril Ramaphosa to use his State of the Nation Address (Sona) later this month to provide measures to resuscitate the ailing economy.
Last month President Cyril Ramaphosa formally proposed June 20 for the delivery of his address to Parliament.
This week Stats South Africa announced that the country’s GDP had made its biggest drop in a decade when it dropped by 3.2 percent in the first quarter of 2019.
With South Africa’s Growth Domestic Product (GDP) dropping by 3.2 percent in the first quarter of 2019,economists said the precarious economy must be the focal point of SONA.
Johann Els, an economist with the Old Mutual Investment Group of South Africa (OMIGSA), said Ramaphosa’s biggest challenge would be to rebuild confidence in policy makers and in the country’s economic policy.
“There is a very strong correlation between consumers and businesses being confident about the future and strong economic growth, we saw that in the period of 2002 to 2008 when Thabo Mbeki was president, Trevor Manuel was minister of finance and Tito Mboweni was governor of the Reserve Bank,” Els said.
During that six year period, there had been strong confidence in political stability and in policy making, resulting in strong growth during the period, he said. Els said that confidence had been eroded over the past nine years, which saw a collapse in confidence in politics and policy making, leading to a collapse in economic growth.
“The average growth over the past four years has been 1%, which is dismal compared to the period 2002 to 2007 when we had about 5% GDP growth, so Ramaphosa will highlight economic growth and unemployment,” Els said.
He said that it was critical that in the delivery of his address Ramaphosa rebuilt confidence in state institutions, state owned enterprises and to allow organs of state such as the National Prosecuting Authority and police to do their jobs.
“What the population wants to see is how strict the controls are on corruption and we have to see the state being improved in terms of service delivery. I know that it can’t and it won’t happen overnight but we have to see a continuation of that.
“Investors want to see stable economic policies before they commit to investing in the country and in this state of the nation address economic is even more important than ever because not only unemployment, the budget and the debt ratio all hang around economic growth,” said Els.
Economist Chris Hart, who was formerly with Standard Bank, commented that he did not understand what government’s priority was on economic policy as Ramaphosa spoke on jobs and economic growth in his inauguration address, in his Sona in February and was likely to do so again on June 20. But despite this, the government on June 1 signed carbon tax into law.
“Carbon taxes are anti growth and anti jobs, certainly in a South African context, because carbon taxes attack the base of our economy which is mining and beneficiation and those are two industries that will struggle the most under carbon taxes.
“That’s one of the reasons why Australia ditched it because it was so detrimental to the country and what we’ve seen is in terms of what’s been happening jobs and growth are basically very low priority of policy in terms of what the government does versus they actually say.
“Jobs and growth at this stage have been more a public relations exercise than something that’s going to be dealt with by real policy initiatives that make South Africa more investor friendly,” Hart said.