President Cyril Ramaphosa’s state of the nation address placed growth and job creation at the centre of the nation’s agenda. He also outlined some policy shifts in how this might be achieved, but has he done enough to shift the needle on growth?
There are several stretch targets and bold policy promises in the address that could turn up the dial on growth and to which Ramaphosa’s cabinet can be held accountable. What’s missing is a credible bureaucracy to actually implement them.
If there were, economists would be falling over themselves to revise their growth forecasts upward. At best, the Ramaphosa’s speech might have made them a bit more hopeful, but probably not enough to shift their view of the country’s growth prospects from “average” to “attractive”.
It all sounds so good on paper: foreign direct investment leapt from R17bn in 2017 to R70bn in 2018. In addition, 2018’s investment summit attracted R300bn in investment pledges. These will be followed up by the investment envoys and by another investment summit later in 2019.
There will also be a team in the presidency dedicated to removing barriers to investment. In fact, Ramaphosa has committed to such reforming zeal that SA will be catapulted more than 30 places up the World Bank’s ease of doing business rankings — from 82nd place now to the top 50 by 2021.
This would certainly confound the sceptics at the World Bank, who’ve been vainly urging SA to undertake structural reforms to raise the economy’s competitiveness for years. So despairing is the bank of SA’s ability to execute reform that it expects the country’s growth rate to average just 1.6% over the next three years. The National Treasury forecasts growth to average 2% over the same period.
Of course, if Ramaphosa delivers on some of his key undertakings, there is no reason why SA couldn’t grow at 2%, or substantially more. Most important is his commitment to improve the operational efficiencies of state-owned enterprises (SOEs) and make them financially self-sufficient — especially Eskom. If this is done in conjunction with other promised reforms to reverse SA’s deep-seated lack of competitiveness — such as reducing logistics and internet costs — it would boost investment and growth decisively.
However, the task of reforming SA’s loss-making SOEs is monumental and requires both physical and political capital, which are in very short supply.
Economists have bemoaned the lack of detail in the address on Eskom’s restructuring, but have taken some comfort from Ramaphosa’s undertaking that in changing the utility’s business model he will safeguard the fiscus and SA’s sovereign credit rating and ensure tariff increases remain “affordable”.
Another stand-out commitment is the plan to introduce a world-class e-visa regime. When Ethiopia introduced e-visas, arrivals from China rose by nearly 20%. The idea is spot-on as a way of boosting both tourism and investment, but what really astonishes is that Ramaphosa labelled it the government’s “highest priority for the year” — not land reform, nor reducing poverty.
This suggests a mindset shift in the executive about what really matters, and that Ramaphosa is deadly serious about dismantling the barriers to investment and growth.
In education too there has been a breakthrough. Previously the state of the nation address was preoccupied with how to solve the problems in higher education. This time, Ramaphosa focused almost exclusively on the foundation phase, accepting expert advice that improving reading comprehension in the early years is possibly “the single most important factor” in overcoming poverty, inequality and unemployment. An explosion of early-reading resources has been promised.
The bottom line is that while the Ramaphosa administration is certainly on the right track, and is prioritising the right things, it’s still too soon to bank on a successful turnaround. He needs many more concrete wins to convince the sceptics that he can deliver what he has promised. But then he is only just getting started.
As Ramaphosa said: “Watch this space …”
• Bisseker is a Financial Mail assistant editor.
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