Economists and business have been united in their call for President Cyril Ramaphosa to ‘walk the talk’ and guard the state’s money bags, after his announcement of a national state of disaster to deal with the ongoing energy crisis in his State of the Nation Address on Thursday.
ECONOMISTS and business have been united in their call for President Cyril Ramaphosa to ‘walk the talk’ and guard the state’s money bags, after his announcement of a national state of disaster to deal with the ongoing energy crisis in his State of the Nation Address (Sona) on Thursday.
Ramaphosa also took the unprecedented decision to appoint a minister of electricity dedicated to ending load shedding which is devastating the economy.
NWU Business School economist Professor Raymond Parsons said the Sona confirmed that the energy crisis now weighed heavily on South Africa’s economic and business prospects.
As a result, the latest revised SA Reserve Bank gross domestic product growth forecasts of only 0.3% in 2023, 0.5% in 2024 and 1% in 2025 set the broad growth parameters within which South Africa in general and the government in particular, must manage the country’s socio-economic challenges.
“To get a bigger, stronger and better economy the Sona ‘message’, therefore, needs speedy implementation to help build confidence and credibility in ways that acknowledge the centrality of the private sector in the solutions,” he said.
A strong theme in the Sona was the need to boost fixed investment to encourage faster growth and job creation, including higher targets for the next Presidential Investment Conference.
“The reality is that the percentage of total fixed investment is now only 14% of GDP, having fallen from about 19% from a few years ago. It is now widely accepted that sustained GDP growth rates of beyond 2% required for inclusive growth in SA eventually need total fixed capital formation support of about 25% of GDP. It, therefore, remains important that the plans and projects outlined in the Sona are implemented in a manner that minimises policy uncertainty and maximizes continuity to underpin investor confidence,” Parsons said.
Sanisha Packirisamy, an economist at Momentum Investments, and Herman van Papendorp, the head of Investment Research & Asset Allocation at Momentum Investments, said the rand and local bonds showed little movement in reaction to Sona, but financial markets were likely to view the announcements as being broadly positive.
“The success of these interventions rely heavily on government funding and as such the upcoming national budget plays a pivotal role in getting the ball rolling on the implementation of these announced plans,” they said.
They said the Sona emphasised the risk that insufficient energy supply posed to growth and investment in the economy.
Cas Coovadia, Business Unity SA (Busa) CEO, said, “We welcome the President’s acknowledgement of these crises facing our country and for outlining measures to address them. The speech outlined some good ideas, as well as bad ones.”
Busa said it was not convinced that declaring a state of disaster would help address the energy crisis.
“It must be seen as a low point in the life of our society that mismanagement and lack of governance has created circumstances in which a state of disaster has to be declared. We believe the appointment of a minister for electricity in the office of the President is a bad idea that will add to the confusion and turf wars rather than solve the problem. It is yet another example of failure to take bold decisions and opting instead for the soft but expensive option of adding another ministry rather than holding those ministers responsible for the crisis accountable,” it said
Business was concerned about the potential of a repeat of corruption seen under the Covid-19 state of disaster, although it welcomed the announcement that the Auditor-General would oversee the use of resources.
Business Leadership South Africa (BLSA) said the announcement of the state of disaster was worrying in the context of the over-reach and undermining of citizens’ rights that occurred during the Covid-19 state of disaster, as well as the massive corruption linked to Covid-related tenders.
“Another concern is that BLSA believes that many of the above measures could be implemented effectively without a state of disaster. It’s important, therefore, for government to limit the use of the extra powers it has granted itself purely to address the load shedding crisis on a least-regret basis,” it said.
But the BLSA said if used responsibly and effectively, the state of the disaster, along with the new electricity minister driving the energy reforms, did offer hope of faster implementation of the measures needed to end load-shedding in the short term, and secure South Africa’s energy supply over the longer term through increased generation capacity.
BLSA said Ramaphosa had made a bold move in announcing that he would appoint a minister of electricity within the presidency to oversee implementation of the energy action plan.
“It is of course concerning that the energy sector will now be governed by the Presidency as well as two other ministries, the Department of Public Enterprises, which the President said would continue to be responsible for Eskom and steer its restructuring, and the Department of Minerals and Energy (DMRE). Delineating clear responsibilities will be important, particularly between the ministers of energy and electricity,” it said.
“But BLSA is encouraged by this move. The President said he was installing the new electricity minister within the Presidency because he needed someone to be centrally located to work day and night on resolving loadshedding and indeed, concerns have often been raised about the DMRE’s commitment to the extremely important goal of transitioning to a low-carbon economy,” it said.
– BUSINESS REPORT
