The most important message for businesses in Ramaphosa’s SONA: Nedbank
The most encouraging message from this year’s State of Nation Address (SONA) was the unequivocal affirmation by president Ramaphosa that the private sector drives job creation, says Nedbank.
In a research note on Friday (11 February), Nedbank said that this message will be welcomed by both the local private sector and international investors after historically anti-business messages from the government.
“We all know that government does not create jobs. Business creates jobs. About 80% of all the people employed in South Africa are employed in the private sector,” the president said.
“The key task of government is to create the conditions that will enable the private sector – both big and small – to emerge, to grow, to access new markets, to create new products, and to hire more employees.”
Ramaphosa stressed that it was the state’s role to ‘create an environment in which the private sector can investment and unleash the dynamism of the economy’.
While this message evoked mixed reactions from the general assembly, it is likely to offer some comfort to businesses and investors after absorbing the severe shocks of the past two years, Nedbank said.
It added that much of the SONA was devoted to listing the measures already taken and still to be implemented to create this growth enabling environment.
“This year’s SONA appeared designed to offer some reassurance to a wary public that the government was taking the necessary steps to move the country and the economy forward after two exceptionally difficult years and over a decade of economic stagnation.”
While there is undoubtedly evidence of some progress with structural reforms, the detailed feedback provided by the President still stands in stark contrast to the reality experienced on the ground, Nedbank said.
“Progress remains painfully slow, with many of the reforms first announced in 2018starting to gain traction. The extension of the emergency grant was widely expected, but the plans to establish some degree of minimum income support and expand public sector employment even further pose considerable fiscal risks.
“By contrast, the drive to reduce red tape, support small businesses and facilitate the development of new industries are encouraging. The challenge remains the faster implementation of these structural reforms and policy interventions.”
A missed opportunity
Business Leadership South Africa chief executive Busi Mavuso said the SONA was something of a ‘missed opportunity’, with the business sector hoping for a greater sense of urgency and a far stronger commitment to accelerating both the reform agenda and infrastructure rollout
“Overall, BLSA believes the president could have done more to address blockages to the efficient implementation of already agreed policy and didn’t go far enough to build confidence that 2022 would be the year of delivery,” she said.
Mavuso said business was hoping for another ‘big bang announcement’ of a way to break out the inertia that seems to be bogging down both the infrastructure rollout and reforms to the energy sector.
“The last such moment was when the President intervened to ensure the cap for energy self-generation without a licence was raised to 100MW, not the 10MW limit that Energy Minister Gwede Mantashe wanted to impose.
“That was a breakthrough moment in liberalising the sector which generated much optimism that the government was serious about getting the economy on a strong growth path.”
Read: Reaction to Ramaphosa’s state of the nation speech