By Bonang Mohale
The State of the Nation Address (SONA), ordinarily happens at the annual opening of Parliament and is an address to the nation by the President of the Republic of South Africa. The President addresses a joint sitting of the two houses of Parliament, the National Assembly (NA) and the National Council of Provinces (NCOP).
It focuses on the current political and socio-economic state of the nation. It is a constitutional obligation and yearly tradition, wherein the chief executive reports on the status of the country, unveils the government’s agenda for the coming year, and proposes to Parliament certain legislative measures.
An order of magnitude review of the President’s fourth SONA (07 February 2019; 20 June 2019 and 19 February 2019) on 13 February 2020, wherein both His Excellency’s remarks and closing comments, emphasized the arrival of The New Dawn (Unity Renewal and Reconstruction), underscored by the urgent need to reinvigorate the economy, transformation, regional and continental integration and proximity to all social partners.
He reiterated the SONA seven Priorities and five Goals, viz. emphasizing both the scarcity and complexity of capital allocation; the need for localisation and beneficiation; to increase both business confidence and investor sentiment; to restore credibility and improve governance and integrity; to ensure guaranteed access; Africa Free Trade Agreement to increase the size of the market in the continent in order to be globally competitive; need for clean, effective and transparent government; the notion of an ‘entrepreneurial state’; the ease of doing business; the four focus industries being agriculture, manufacturing, tourism, and ICT – the prohibitive connectivity costs and the urgency of releasing spectrum; that South Africa is open for business;
He was quite honest about the effects of state capture and corruption; the fact that ‘mistakes were made and missteps taken’ in the past nine years! Some of the challenges being immigration; Visas; energy and Eskom as the single biggest contingent liability; etc. On the issue of land and due to a very small margin of error allowed in implementing such emotive corrective measures as ‘Land Expropriation without Compensation’, the President’s message was loud and clear that this is NOT Venezuela’s nor Zimbabwe’s poorly managed ‘land grab’.
The intent is precisely to increase clarity, provide regulatory certainty and enhance policy stability. He reiterated the fact that this is already more than catered for in our current Constitution under Section 25, sub-section 3 that deals with the ‘property rights’. That, in the public interest, when the conditions of ‘just, fair and equitable’ have been adequately fulfilled, the provision does currently exist for ‘compensation to go down to ZERO’. The Constitution is clear on the three principles of land restitution, redistribution and development. The President must send a clear, crisp, concise and precise strategic message that South Africa is not only open for business but, alas, have now put system and processes in place to execute!
He must be explicit about how are we going to roll out the vaccine, address the sub-investment grade status by all three rating agencies, claw our way out of the recession, overcome the still metastasising cancer of state capture and eradicate the legacy of apartheid.
Rating Agencies are looking for only 4 things, economic strength, fiscal strength, institutional strength and susceptibility to event risk. He must adequately and comprehensively provide palpable and demonstrable evidence of what exactly are we going to do, how are we going to do it, by when and who is going to be finally held accountable!
The political marching orders have been given at the conclusion of the 24 January ANC NEC Lekgotla in the five Priorities as to defeat the Covid-19 pandemic; economic reconstruction and recovery; the African agenda and building a better world; state capacity, local government and basic services and unity and renewal. In the wake of the unusually deadly times, untold damage that the coronavirus pandemic has continued to wreak on people’s lives, to their livelihoods and society, the world has already experienced more than 103 million confirmed cases and 2, 2 million deaths! Here at home, more than 1, 5 million cases and 44 thousand deaths.
Comparing ourselves with our BRICS counterparts in terms of ‘vaccine doses administered’ on the 27 January, Brazil was on 579 thousand; Russia on 800 thousand; India on 2 million and China on 15 million. We only took delivery of ours on Monday, 01 February.
The President has set us a ‘herd immunity’ target of 67 percent in 2021. This represents about 40 million people that must be vaccinated at a rate of about 100 thousand per day! The total cost could be R2 billion to R18 billion depending on the type of vaccine (Pfizer, Johnson & Johnson, AstraZeneca or Moderna), dose (single – which dramatically improves compliance or double), foreign exchange, cargo insurance, imported or locally manufactured, etc.
The only chance we have of flawless and seamless execution of this mammoth task is, among others, working hand in glove with all the social partners, depending on the existing and already far more effective and efficient logistics of the private sector (inventory management systems, warehouses, cold chain maintenance, freight, personnel), government central procurement, etc.
Based on our past performance of being incapable of execution and delivering on mega-projects in full, on time and on budget, AND that we are about 1.6 million doses short, we will probably only reach the 40 million target in the middle of next year with a real probability of being buffeted by the third wave in winter of 2021.
Considering that South Africa only had about 16.4 percent of the population on medical aid in 2018, this means a maximum liability to medical schemes of about R7 billion, representing about 2 percent of all premiums.
Unfortunately, the fiscal crisis is coming! It is practically impossible to keep on the current trajectory and momentum. What with South Africa’s debt at about R3 trillion, where we are borrowing at a rate of R2. 1 billion per day, debt to GDP ratio of 93 percent and when we include government guarantees to SoE/Cs, it is 110 percent! Our debt servicing costs are now R20 billion, our deficit is sitting at 16 percent. We are forecasting a less than 3 percent GDP growth in 2021 and only in 2024 will we reach the 2019 GDP growth level.
It will take us 9 to 10 years to get back to pre-Covid-19 employment levels. Real GDP growth is expected to be minus 7 percent in 2020, tax revenue projections at about minus 18% (currently tracking better than expected moving our projected revenue deficit from about R313 billion to R240 billion- R280 billion), implied tax buoyancy rate averaging 1. 47, non-interest expenditure with cumulative cuts of R300 billion, poor educational outcomes and unemployment rate of about 40 percent (excluding people who have given up looking or cannot, especially in the last ten months of national lockdown)! South Africa now has more downside risks than upside opportunities. It is now behind the curve in so many ways, it is now beginning to squash ‘the human spirit’!
Business has been consistent in what needs to be done. The government has great intentions but woefully inadequate execution mainly due to purposefully hollowed out capacity, reduced capability, poor coordination and lack of prioritisation.
To address the lowest levels of confidence, trust and hope since the Second World War, we must send some top state capture miscreants to prison; secure vaccines as a matter of life and death; execute on the long-promised deep systemic socio-economic reforms; reduce the soaring government debt (increased interest payments absorb an ever-rising share of tax revenue thereby leaving less available to buy vaccines, build hospitals, clinics, schools, houses, etc.); fix the more than 740 SoE/Cs; increase our infrastructure spend; execute on the ten-year-old spectrum auction as it is now underwhelming when South Africa says it is going to do anything; focus on GDP growth; with more than 10 million people unemployed, we must urgently create jobs in large numbers for outsized and oversized impact and fix the quality of our educational system.
At this rate, our SACU trading partners, Botswana, Lesotho, Namibia and eSwatini will soon have 6G whilst we are still fiddling with 4G! Austerity must be taken much more seriously.
Bonang Mohale is the Chancellor of the University of the Free State, Professor of Practice in the Johannesburg Business School (JBS) College of Business and Economics, Chairman of both The Bidvest Group Limited and SBV Services. He is the past President of the BMF and author of the best selling book, “Lift As You Rise“.