The 2023 State of the Nation Address (SONA) delivered by President Cyril Ramaphosa to Parliament on 9 February gave a wide-ranging, candid and realistic appraisal of South Africa’s present tough and challenging economic landscape.

Prof Raymond Parsons, economist from the North-West University (NWU) Business School, says the SONA in general acknowledged the urgency of implementing key solutions, especially in dealing with the serious challenges on the energy, transport, crime, poverty and unemployment fronts. In particular, the Eskom crisis was strongly recognised in the SONA as the Achilles heel of South Africa’s economic performance.

“Two important decisions were the announcement of a national state of disaster to deal with the energy crisis and the proposed appointment of a Minister of Electricity in the Presidency. With regard to the latter an assessment of the usefulness of this appointment will have to wait until after the larger restructuring of the government and the Cabinet reshuffle.”

Prof Parsons says while the national state of disaster may well speed up decision-making at several levels to deal with the energy crisis, there are also downsides to the decision.

“Experience with the Covid-19 lockdown emphasised the need for transparent consultation with business and other stakeholders. It remains important for South Africa to learn the lessons from the handling of the Covid-19 crisis. Safeguards are needed to prevent corruption, and the intended role of the auditor-general is welcome. It is also important for a national state of disaster to deal with the electricity crisis to be seen as a temporary solution and that an exit strategy is already being planned.”

According to Prof Parsons, the SONA therefore confirmed that the energy crisis now weighs heavily on South Africa’s economic and business prospects. As a result, the latest revised gross domestic product (GDP) growth forecasts by the South African Reserve Bank (SARB) 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 socioeconomic 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.”

Prof Parsons points out that 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% a few years ago. It is now widely accepted that sustained GDP growth rates of beyond 2% that are required for inclusive growth in South Africa eventually need total fixed capital formation support of about 25% of GDP.”

He says it therefore remains important that the plans and projects outlined in the SONA are implemented in a manner that minimises policy uncertainty and maximises continuity to underpin investor confidence.

Prof Parsons explains that it is also clear from the SONA that “flogging a system” can now no longer achieve results – reform is the key. Timelines must be set and enforced, with consequences if they are not met. Implementation and accountability are paramount.

“To rebuild business confidence political leadership must therefore ensure that, in the aftermath of the SONA, words will be backed by credible action. If a crisis of confidence is to be successfully managed, great discipline and persistence will be needed in future to confound the cynics.”