With the slow growth recorded in 2013, South Africa’s business community was looking to President Jacob Zuma’s 2014 State of the Nation Address (SONA) on Thursday to spell out how the government planned to jumpstart a faster growth path.
The weakened rand and the crisis in the Eurozone (a major trading partner) and slow growth in emerging markets are affecting exports and investment. The strikes in key growth sectors have dampened business and consumer confidence, and the central bank said last year that the “overly-high wage settlements” were a “key risk” to inflation and the growth outlook for South Africa.
South Africa’s government seems to recognize the issues that need to be addressed, for example, the strikes in the mining sector, the weak rand and unemployment. President Zuma’s speech touched on these issues, and also past achievements.
There were some mixed reactions to the speech delivered at Parliament Buildings in Cape Town.
Head of the Wits School of Economic and Business Sciences, Jannie Rossouw, said President Zuma’s focus on areas such as mining, tourism, and green economy would instil confidence in investment, which was needed for job creation.
“The mining industry is pretty central to the economy and the emphasis on infrastructure is welcome. This was the best we could have hoped for at the end of an administration heading into an election.”
Economist Kenneth Creamer said the President’s warning on conflict in the mining industry ought to be taken seriously by stakeholders. “There are tremendous structural changes underway in the mining industry and the current wave of conflict needs to be replaced by genuine dialogue if there is to be a win-win outcome.”
But leader of the United Democratic Front, Bantu Holomisa said the President’s speech was “misleading”, particularly with regarding to the number of job opportunities that the government forecast.
The leader of the Democratic Party, Helen Zille, said President Zuma did not do enough to address job shortages in his speech. “Work opportunities are temporary replacements…while very important to relieve poverty, they are not a substitute for real jobs that happen because of economic growth,” she said.
Frontier summarised key points in President Zuma’s speech below
The President said the weak rand posed a significant risk to inflation, and would hike the price of government’s infrastructure programme. However, he said South Africa would cope ‘with this period of turbulence.’ He asked export companies, particularly in the manufacturing sector, to take advantage of the weaker rand and the stronger global recovery. The President said streamlining regulatory and licensing approvals for environmental impact assessments, water licences and mining licences would make it easier to do business in the country.
The mining sector is important to the economy, earning R20-billion in taxes and creating half a million jobs. President Zuma said stakeholders need to find a permanent solution. “I want to underline an important point, the importance of economy, particularly to the mine owners and leaders of the unions. In no way can we have conflict that destroys the economy. It is very important that we negotiate to try to find solutions.”
The government, business and labour is engaging to create an attractive business and investment climate. “Arising out of this process, we have now streamlined regulatory and licensing approvals for environmental impact assessments, water licenses and mining licenses. Parliament is finalizing amendments to the law to give effect to this very positive development, which will cut to under 300 days, the time it takes to start a mine, from application to final approvals.
Development of petroleum, especially shale gas, is going to be a game-changer for the South African economy. “Having evaluated the risks and opportunities, the final regulations will be released soon and will be followed by the processing and granting of licences,” he said.
Promoting local businesss
The state will procure at least 75% of its goods and services from South African producers. He said the government would need to work far harder to develop emerging industrialists.
The latest quarterly labour force survey, released by StatsSA says in the fourth quarter of 2013 unemployment dropped marginally from 24.5% to 24.1%. Job gains came predominantly from the informal sector, while in the formal sector employment growth came mainly from the creation of additional government jobs.
Growth rates of above 5% will be required to create adequate jobs in the country, according to the President. The cabinet set target of creating 6 million jobs from 2014 to 2019, mainly for young people. This is in line with the Expanded Public Works Programme and the Community Work Programme. “The Employment Tax Incentive Act is going to be a key job driver. It encourages employers to hire younger workers,” said the President.
President Zuma announced plans to set up a central tender board to adjudicate tenders in all spheres of government. A chief procurement officer would work in tandem with the board. The Anti-Corruption Hotline had led to 13,000 cases of corruption and maladministration being referred to government departments, while 1,542 officials had been dismissed from the public service, he said.
He said crime had decreased by 21% since 2002, but the current violent public service strikes are a great concern especially in the election year. Zuma said what was worrying about the protests was what appears to be premeditated violence. “When protests threaten lives and property and destroy valuable infrastructure intended to serve the community, they undermine the very democracy that upholds the right to protest,” he said.
President Zuma said over the past 20 years, achievements have been made in providing access to services such as water, sanitation and electricity. The President highlighted the introduction of long-term state planning capacity in the form of the National Planning Commission, and the National Development Plan (NDP), as a “major achievement of the fourth administration”.