"The deciding factor in the latest State of the Nation Address (SONA) will be the successful coordination and implementation of plans and projects, which also help to reduce policy uncertainty.”
This is according to Prof Raymond Parsons, well-known economist and academic from the North-West University (NWU) Business School.
He says president Cyril Ramaphosa’s key message on the need for job-rich growth, expanding job opportunities for unemployed youth, ensuring good governance, and addressing the Eskom crisis, strongly resonates with the well-known concerns of business and the markets.
“President Ramaphosa rightly wants to see a much higher growth rate than the current population growth if South Africa is to successfully combat unemployment, poverty, and inequality.”
According to Prof Parsons this will require that growth in the years ahead rises beyond 3% from its current expected growth of about 1% (or even less) in 2019. He says higher private and public investment is needed to make this happen.
“South Africa will also need to implement structural reform policies which maximize the number of jobs created at any given growth rate. It is clear from the SONA analysis that a priority-led action agenda is therefore indeed required if the economy is to be turned around on a collaborative basis sooner rather than later.”
Regarding the overall policy framework, Prof Parsons says the decision in the SONA to again anchor future policy stances with the National Development Plan (NDP), is also an important step in the right direction.
“This can help reduce policy uncertainty, but will again depend heavily on translating plans into action and to ensure delivery,” adds Prof Parsons.
“The problem with the NDP and other plans has thus far largely been one of lack of adequate implementation. Much here will depend on widening and deepening the relationship with the private sector, especially if South Africa is to move closer to a 'social compact' in future.”
Prof Parsons says president Ramaphosa’s reaffirmation of the South African Reserve Bank's (SARB’s) constitutional mandate must also be welcomed.
“The SARB is widely respected both in South Africa and abroad for its general conduct of monetary policy, and is seen as a key bastion of institutional strength, especially at a time when investor confidence in South Africa is at stake. The statement in the SONA on the status and role of the SARB underlines the president's commitment to economic stability, as well as to SARB autonomy.
“Two vulnerable areas arising from the SONA are implications of the low growth rate for the Medium-Term Budget Policy Statement (MTBPS) in October, and the fiscal consequences of another bailout for Eskom,” he adds.
He says some tough decisions still need to be taken to reconcile expectations with affordability in the country's public finances. “The MTBPS will probably need to reflect a revised fiscal plan to manage shifting economic realities if South Africa is to protect and rebuild its investment rating.
“The implementation of pro-growth reform policies and projects will therefore remain essential if the SONA's growth and employment targets and financial stability goals are to be reached over the next decade.”
