The State of the Nation Address (SONA), scheduled for Thursday 7th February, will be delivered by President Cyril Ramaphosa against a backdrop of economic underperformance, high unemployment, depressed business confidence and rising government debt levels.
The SONA outlines the government’s key policy objectives and based on recent comments from the President, meaningful economic reforms is likely to be the key goal, says Investec economist, Kamilla Kaplan.
“Economic growth has stagnated at an average of below 2% since 2011, whereas the economy needs to produce growth rates closer to the 3 – 5% mark in order for unemployment rates to drop to the low double digits from 27.5% presently and for poverty alleviation. The SONA can be expected to emphasise the importance of collaboration between government, business and labour to foster an environment conducive to faster economic growth.”
Kaplan adds that higher economic growth is reliant on a strengthening in business confidence, and by extension a recovery in private sector fixed investment rates.
“As such, another key government objective needs to be a move towards increased government policy certainty, especially relating to expropriation without compensation amid concerns over the threat to property rights.”
She states that as the SONA informs the Budget, it can be expected that corrective actions regarding state owned enterprises will be outlined.
“These actions refer to improving governance and ensuring financial stability given that the associated contingent liabilities would push government debt well above the high risk benchmark of 70% of GDP. As the government’s largest guarantee exposure is to Eskom, the SONA may provide further detail on restructuring plans for the utility. Overall, the SONA is likely to deliver a message of fiscal responsibility given the real possibility of further sovereign credit rating downgrades.”