Commentators had a mixed reaction to the much-anticipated State of the Nation (SONA) address delivered by President Jacob Zuma. We looked at some of the reactions:
“President Zuma’s State of the Nation Address (SONA) before Parliament has yet again demonstrated that he cannot be trusted to grow the economy, create jobs and fight corruption,” was the opening statement in a release issued by rival party the Democratic Alliance (DA).
It was their opinion that Zuma failed to address the growing unemployment crisis by which our already ailing economy is further hampered.
Last year National Treasury predicted economic growth at two percent for 2015. This forecast was downgraded to 1.5% in the Medium Term Budget in October last year.
“One year later, and our projected economic growth is at a paltry 0.8%. It is clear that the current plans to “ignite growth and create jobs” are simply not working. And further it will leave the 8.3 million jobless without any hope of finding work,” added the DA. Similarly the Freedom Front Plus (FF Plus) said that SONA as a whole was ‘unimaginative and did not really address South Africa’s serious economic problems.’
The FF Plus said that an announcement that the public sector would be reduced or that Eskom will be privatised, would have been seen as significant and would have sent a very strong message that government is serious about reducing expenditure. But unfortunately the opportunity to do so, has been missed by the president.
Dr Pieter Mulder, FF Plus leader, also expressed disappointment at the lack of a plan or suggestions on how commercial and small farmers will be helped to stay on their farm, with regards to the current drought situation.
Ian Wason, CEO of debt managing company DebtBusters, stated: “South Africans without work put government under more pressure every year for service delivery, as they are unable to afford day to day living costs.
“More so, they put pressure on their families and often their children to work and support them instead of pursuing their own education and career goals.”
“The indication from President Jacob Zuma during the 2016 State of the Nation Address is that the economic growth is going to remain stagnant and only grow by one percent in 2016/17 financial year. This directly contradicts with the nation’s urgent need to curb growing unemployment,” stated Kaya Mfono, associate director of the public sector advisory at Grant Thornton.
Government, some feel, don’t appear to have the answers. Global markets research company, Nomura, pointed to the ‘total lack of any new way of thinking in wider government policy to boost growth.’
“We struggled to find some meaningful new policies to boost current and potential growth and ultimately provide the necessary microeconomic structural reforms needed to avert sub-investment grade. There was no sense of urgency or crisis on the lack of job’s creation forecast for this year,” stated Nomura economist, Peter Attard Montalto.
Montalto further stated the review of past SONA policies too overly optimistic. “For instance, boosting private sector investment was trumpeted, yet real private gross fixed capital formation grew by only 0.3% vs. a 2010-14 average of 4.3% and a pre-crisis average of 9.4%. This was similarly the case on positing recognition of mining sector concerns on regulatory uncertainty, which are now several years old.”
Overall, commentators labelled the speech negative for South Africa and its assets in the medium term ‘but a difficult theme to trade in this current weak USD environment.’
FNB economist, Mamello Matikinca agreed, adding: “The speech emphasised the need to address ailing economic growth, improve business sentiment and coordination between business and government. It appears that despite government’s eagerness to address these issues and avoid a sovereign downgrade, they remain very accommodative.”
The property sector also weighed in, as Lew Geffen, Chairman of Lew Geffen Sotheby’s International Realty said: “As much as the government believes that the country remains an attractive international investment prospect, the numbers currently prove otherwise.”
This came after Zuma, in his speech, said that the aim was to make South Africa ‘the new one-stop shop for investments and an inter-ministerial investment promotion.’
But Geffen added: “I have absolute belief that South Africa will ultimately prevail, though, but only after the ANC realises that the country should be run as a nation and not a political party.”
Will Gordhan fix it?
The question is whether everything has been left for Pravin Gordhan to explain in his Budget Speech. Montalto doesn’t think so. He believes that specific hints would have been during the SONA speech even though the details would be left to Gordhan in the Budget Speech. “Second, the left wing policy content of today’s speech shows the political constraints still around Treasury even if they do have more space on fiscal and parastatals. But we shall wait and see,” added Montalto.
All eyes are on Minister of Finance Pravin Gordhan now as we look to the Budget Speech to be held on 24 February.
“The government’s commitment will become evident when the finance minister delivers his Budget towards the end of the month. As it stands, we are of the view that the sovereign will be downgraded.
“Data released during the week suggests that we should see a positive contribution to GDP growth from mining and a subtraction from the manufacturing sector. However, we are seeing signs of a pickup in exports, boosted by the weak rand, and as such the manufacturing sector should find some support as the year progresses. We expect the same for the tourism sector,” Matikinca said.
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