SONA: Positive impact of policy framework will depend on successful implementation and collaboration with private sector

Marelize Santana -- Fri, 02/14/2020 - 08:19

SONA: Positive impact of policy framework will depend on successful implementation and collaboration with private sector

“The wide-ranging state of the nation address (SONA) delivered by president Cyril Ramaphosa to Parliament recognised the grave socio-economic challenges currently faced by South Africa, especially its low growth and high unemployment.”

This is according to Prof Raymond Parsons, a well-known economist and academic from the North-West University (NWU) Business School.

“The SONA outlined the broad framework from government to address these challenges, coupled to certain specific decisions. The emphasis in the SONA on inclusive growth and the need to urgently remove the obstacles to structural economic reforms is welcome. The SONA also acknowledged the importance of collaboration with the private sector to promote job-rich growth.”

Prof Parsons says positive aspects in the SONA included the steps announced on the energy front and measures to encourage youth employment.

“The decision to allow energy generation outside Eskom, especially for well-run municipalities, is an important step in the right direction. It remains imperative to lessen the risk that Eskom continues to pose to South Africa’s economic performance,” he says.

“Other SONA announcements require more detail and need more clarification. The extent to which the SONA can reduce policy uncertainty and boost investor confidence will depend on whether the sense of immediacy created by the SONA will be translated into positive action and tangible outcomes.”

He says that, as important as the SONA is in setting the overall economic and political direction, references in the SONA to issues such as the creation of a Sovereign Wealth Fund, the financing of Eskom, disciplining the public sector wage bill, and establishing a State Bank must await further exposition in the budget on 26 February.

“The fiscal arithmetic in the budget will also show whether South Africa is indeed stabilising its public finances, reducing bailouts to dysfunctional state-owned enterprises, and winding down its overall debt. It is the 2020-21 budget that Moody’s will assess in deciding whether to downgrade South Africa’s investment rating, thus triggering the likelihood of universal junk status for the country.”