As Cyril Ramaphosa prepares to deliver his fifth state of the nation address on Thursday in the shadow of the pandemic, the millions watching on TV will be looking for something for them: will he extend the R350 social grant, and if so, for how long?
As it stands, this as well as an announcement confirming when SA will get its Johnson & Johnson vaccines, are his only valuable cards to play. Such is the extent of government dysfunction and weakness, which, exacerbated by the pandemic and the lockdown, means he has few accomplishments since his last address to announce.
A large portion of his promises made during 2020 have fallen far short of the mark and his credibility is wearing thin. Bottlenecks in energy procurement and broadband licensing remain and Ramaphosa has found himself, in every speech over the past year, promising again that these will be solved. Progress on these will remain for business the yardstick on which the speech is measured.
Over 2020, Ramaphosa effectively delivered two state of the nation addresses, one in February and another in April, where he unveiled the government’s R500bn Covid-19 response plan. How have these plans fared in reality?
The issue around the credibility of the R500bn response plan is growing. Whether or not he announces a grant extension — he came under enormous pressure at the ANC lekgotla to agree to this and in the end actually did (subject to availability of funds) — it would be unwise for Ramaphosa to repeat the R500bn number. It’s very clear that the response has been nothing like the R500bn, with economists and analysts struggling to add it up.
This is enormously difficult to do as the actual allocations to departments and functions did shift and change along the way, which given the crisis conditions is not surprising. On best estimates of what was actually spent, rather than allocated in the initial plan or reallocated in budgets, about R200bn did flow to people and businesses and therefore into the economy, that otherwise would not have. It is far from the 10% of GDP Ramaphosa likes to boast of, but at about 4% of GDP, it was not an abject failure.
This includes R18bn via the R200bn loan guarantee scheme — the weakest link in the scheme and whose future is expected to be addressed in Ramaphosa’s speech. The Unemployment Insurance Fund, which was expected to contribute R40bn to the package, doled out R57.4bn by the start of February. The social grant top-up and R350 grant, which was initially expected to be R50bn, paid out R30bn on grant top-ups and R15bn on the R350 grant, parliament was told in January.
The R100bn allocated to job creation and employment support in the April announcement — which became a tug-of-war between the presidency, which wanted it, and the Treasury, which did not — was the biggest casualty. In the supplementary budget in June, finance minister Tito Mboweni allocated only R19.5bn, which was described as “a provisional allocation for Covid-19 relief”.
By the time the medium-term budget policy statement came around in October, the employment stimulus programme was reduced to R12.bn, with the remainder of the R19bn going towards the funding of the extension of the monthly R350 social relief grant. The R12bn has funded Ramaphosa’s presidential employment stimulus, which has recruited 600,000 mostly young people into part-time employment in schools, crèches and in infrastructure maintenance.
What happens to this programme and whether it is extended by its champion or ended by Mboweni in two weeks’ time is another key thing to watch for in Ramaphosa’s speech.
Other smaller amounts that were spent could also be counted as “stimulus money”. These include: R513m, allocated for loan relief for small businesses; R47m disbursed by the Industrial Development Corporation; and R200m in support to tourism operations.
Assuming that the R70bn in tax relief did occur (we will find out in the budget), the figure comes out at about R200bn.
When it comes to the February state of the nation promises, there has been some success. A big tick, for instance, goes to the pledge to rein in the public sector wage bill, where the government has stuck to its guns. On others, such as the promise to fix commuter rail, the pandemic and the lockdown have caused havoc. Not only were stations not improved, as the speech envisaged, but they were stripped and looted. Railway tracks, which were in disrepair, now have people living on them and have to be rebuilt almost from scratch.
The biggest shortcomings, though, have once again been in the critical structural reforms to energy and broadband infrastructure that the economy needs to generate growth.
In February 2020, Ramaphosa said the government expected to conclude the licensing of high-demand spectrum for industry via auction before the end of 2020. That deadline has since moved to March 2021, but with court action by telecom giant MTN under way over the way in which the spectrum has been bundled, which precludes bidding for certain packages, that deadline will certainly have to move again.
The energy security picture also looks much like the one a year ago. The 2020 address set out firm steps to improve energy security, on which some progress has been made. But the pace has been so slow that its economic effect remains years away. So, while mineral resources & energy minister Gwede Mantashe did issue a ministerial determination to procure new capacity, 12 months later not a single additional megawatt has been procured.
An “emergency” or risk mitigation round for independent power producers (IPP) eventually occurred. Bids are in but they have not yet been adjudicated. Bid window 5 for renewable independent power producers, which Ramaphosa said would be opened, is now vaguely scheduled for the first quarter as the industry and government wrangle over local content requirements.
The government has put in place, as pledged, the mechanism for municipalities to procure their own energy from IPPs as long as they get ministerial permission. Also at issue is Mantashe’s insistence that firms that wish to generate their own energy, over 1MW, must be licensed by the National Energy Regulator of SA.
If Ramaphosa can force him to budge on that — business is asking for exemptions up to 50MW — there will be something in the speech for them as well.
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