President Cyril Ramaphosa is set to announce plans to revitalise the local manufacturing sector by pumping funds into pharmaceutical and green energy projects as part of a drive to boost the economy.
Ramaphosa will probably also use his state of the nation address (Sona) on Thursday to make fresh announcements on localisation, an often controversial policy that seeks to encourage manufacturers to use locally made products, according to sources who are familiar with the contents of the speech.
Moves to ramp up the production of low-cost electric vehicles and to position SA as one of the leaders in green hydrogen were put forward by Ramaphosa during 2021’s Sustainable Infrastructure Development Symposium.
These infrastructure projects are expected to be funded using instruments including the government’s finance institutions and the implementation of favourable tariffs for manufacturers that prioritise local production, according to sources.
While much of the commentary ahead of the speech has been dominated by whether the government will introduce a basic income grant, analysts will be looking for announcements on ramping up infrastructure, a key plank of the Economic Reconstruction and Recovery Plan, which Ramaphosa presented to parliament in 2020.
Recent years have been marked by a sharp decline in spending on construction, land, buildings and other fixed assets that are critical to the provision of services and maintaining infrastructure such as roads. According to a November 2021 report by Stats SA, public sector capital expenditure has declined by R82bn, or 29%, since 2016.
Bureau for Economic Research chief economist Hugo Pienaar said Ramaphosa should prioritise a policy mix that seeks to remove obstacles that prevent the private sector from investing in new capacity and employing more people.
“As one example ... it would be welcome if the president could outline concrete steps to expedite the approval processes for new green energy investments,” he said, adding that Ramaphosa should build on reform momentum created in the energy and rail sectors over the past two years.
He “could, for example, outline how government aims to tackle the ongoing constraints on the rail lines and with port infrastructure. When can we, for example, expect new investment in the Cape Town (and other) harbours?
“How is government facilitating an improvement in the cable theft situation?”
Business Unity SA’s Cas Coovadia would like the president to expedite reform in the energy sector and the restructuring of Eskom.
“Government must enable greater participation by the private sector in the rail network ... Government must implement the recommendations of the Zondo commission with urgency and ensure its procurement policies and systems are such that court action is minimised,” Coovadia said.
As part of the overhaul of Eskom, which resumed power blackouts on Monday, George Sebulela, president of the SA United Business Confederation, said the president should announce a substantial increase in generation capacity from the private sector.
Since the emergency power procurement programme was announced in February 2020, “not a single extra megawatt of electricity has been added to the grid”.
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