Extract South Africans know better than to expect ‘shock and awe’ in Thursday’s state of the nation address. Since the beginning of the year, President Cyril Ramaphosa has been on a roadshow, delivering big speeches and announcing his broad intentions for the country.
It started with the ANC’s January 8 anniversary celebrations in Durban and the first major set piece was the February state of the nation address.
The ANC’s election campaign was a continuous restatement of the goals of the New Dawn and by the time it got to the party’s big closing rally, there was hardly anything to write home about.
Ramaphosa delivered speeches at the announcement of the May election results, after he was elected president in the national assembly, and then at his grand inauguration ceremony in Pretoria. They all sounded great but were not the kind of speeches future generations will be quoting.
It can be deduced that there are no big surprises in store for the first state of the nation address of the sixth administration. All the major announcements regarding cabinet, the restructuring of government and key appointments in the National Prosecuting Authority and SA Revenue Service have been made.
In Ramaphosa’s very first state of the nation address in 2018, he did a splendid job of resetting the national mood and rallying people with his Thuma Mina message. But now the time for PR and feel-good moments has passed. This week’s state of the nation address is where the rubber has to hit the road in terms of action on the economy.
The country’s dismal economic data, including the GDP contraction of 3.2% in the first quarter of 2019, means there that there can be no more stalling on decision-making on key issues. Just as it was the case in February, the future and sustainability of state-owned enterprises (SOEs) will have to top the list of priorities for government.
Ramaphosa acknowledged in February that Eskom was in crisis and posed great risks to the country. “We need to take bold decisions and decisive action. The consequences may be painful, but they will be even more devastating if we delay.”
He signalled that Eskom needed a new business model to stop the drain on scarce resources. He also announced that the utility would be unbundled.
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“To bring credibility to the turnaround and to position South Africa’s power sector for the future, we shall immediately embark on a process of establishing three separate entities — generation, transmission and distribution — under Eskom Holdings,” he said.
We need to take bold decisions and decisive action. The consequences may be painful, but they will be even more devastating if we delay.
However, those “bold decisions and decisive action” he mentioned had to be held off during the election cycle as the repercussions of restructuring Eskom are too explosive to deal with during a politically sensitive period.
Now, there is no longer time for debate and task teams to defer decisions on the power utility. The R69bn in rescue funding announced by finance minister Tito Mboweni in the 2019 budget can hardly plug the hole and the fiscus simply cannot afford further bailouts.
Last week’s cabinet lekgotla was presented with reports on Eskom based on the work of various teams. The Eskom sustainability task team, headed by Anton Eberhard, looked into the unbundling process as well as the financial sustainability of the utility.
Speaking in May at a UCT Graduate School of Business event in Johannesburg, Eberhard revealed that a compendium of interventions were being considered to deal with the financial crisis, and that these were still under discussion with the national treasury, department of public enterprises and Eskom.
Earlier in 2019, Eberhard had indicated that a new, innovative financing facility was being looked at that could include a concessionary component. But details have remained sketchy and it is clear that consumers and taxpayers are in for more pain to keep the power utility afloat for the foreseeable future.
A technical review team appointed by public enterprises minister Pravin Gordhan has also apparently reported on its work to last week’s cabinet lekgotla.
The team, comprising academics, engineers and power systems professionals, is coordinated by Tsakani Mthombeni and Ian Morrison and has looked into the state of the plant and maintenance to determine the security of the power supply.
With all the groundwork being completed, Ramaphosa will be in the position to give a full status report on Eskom. His speech will be closely watched for immediate interventions, particularly for Eskom to be a going concern, and the timeline for the process ahead.
SAA remains another headache until clear decisions are announced. In February Ramaphosa hinted at ways to reduce the financial burden of the airline on the state.
“Where SOEs are not able to raise sufficient financing from banks, from capital markets, from development finance institutions or from the fiscus, we will need to explore other mechanisms, such as strategic equity partnerships or selling off non-strategic assets,” the president said.
But there has been no movement on this either and the risk of the airline being pushed into business rescue increases daily.
Ramaphosa should be in the position to pronounce more clearly on the issue of land now that he is armed with a report on his advisory panel on land reform and agriculture.
The panel, headed by Vuyo Mahlati, was mandated to review, research and suggest models for the government to implement a fair and equitable land reform process that would increase agricultural output, promote economic growth and protect food security.
Many of the pledges made in February remain in pre-implementation phase.
There are low hanging fruit for economic stimulation such as the registration of the radio spectrum and the overhaul of the visa regime so it is hoped that the president will do some butt-kicking to get the responsible ministers acting faster.
The best-case scenario for Ramaphosa’s address is a clear action plan, with timeframes and deliverables.
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