SONA 2021 – Movement behind the scenes

12 Feb 2021

Tertia Jacobs

Treasury economist, Investec Corporate & Institutional Banking

In his fifth State of the Nation address (SONA), President Ramaphosa said that like fynbos, South Africa would rise from the ashes of the Covid-19 pandemic.

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President Ramaphosa covered a broad spectrum of issues. Continuity was provided by referencing plans in previous speeches, with progress reports on their current status and what the next steps are. However, restructuring, rebuilding, and reviving an economy, suffering from legacy issues caused by state capture and the shock from the COVID-19 pandemic, is not a one-year plan. 

The speech delivered more detail than we had anticipated, consisting not only of announcements, but also to show the critics that there is increasing will to get things done. The President tried to deliver an upbeat message to improve confidence in government by highlighting areas of progress, notwithstanding prevailing negativity. There is opportunity in every problem. Ramaphosa made it clear that there is considerable work being done behind the scenes. However, our view is that the implementation of public-private partnerships needs to be accelerated for business confidence to be revived and the economic recovery to gather sustainable traction.

sona 2021 cyril ramaphosa

Setting priorities

The President focused on four pillars to highlight government’s need to prioritise and focus on delivery in 2021. The four pillars are (1) dealing with the COVID-19 pandemic; (2) accelerating the economic recovery; (3) creating jobs and inclusive economic growth; and (4) fighting corruption and strengthening the state.

1. Dealing with the COVID-19 pandemic

Firstly, the fight against the COVID-19 pandemic suffered a setback with the AstraZeneca vaccine proving ineffective against the South African COVID-19 strain. The President could not at this stage provide any additional information to what is already in the public domain about Plan B. This involves procuring 9m doses of vaccine from J&J, in addition to 12m doses from the global Covax facility, 20m doses from Pfizer, and others from the African Union’s Africa vaccine acquisition task team.

12m
Includes procuring 12m doses from the global Covax facility

2. Accelerating the economic recovery

Accelerating the economic recovery was headlined by a progress report on what has been achieved to date, priority actions, and pipeline projects. The information about the infrastructure investment plan that has a project pipeline of R340bn in network industries is not new. But areas of activity that were again highlighted included: the transport sector - with road projects of R19bn and the revival of construction and rehabilitation of the N1, N2, and N3 highways; student accommodation in Gauteng (300,000 student beds); SA connect that includes the broadband rollout; water investment (Phase 2A of the Mokolo and Crocodile River project and the uMkhomazi Water Project) and human settlements (to house 68 000 people in Gauteng). The infrastructure fund of R100bn is now in full operation. The plans for the development of Lanseria city in the next decade are evolving.  

The second initiative to revive growth focuses on local production and the integration of processes in new actions. Sectoral master plans for poultry, sugar, textiles, leather, and autos have been completed and signed off. Further, 42 products have been identified that should be sourced locally and 1 000 locally produced products are to be procured from SMMEs.

The African Continental Free Trade Area provides an additional platform for SA businesses to expand into markets across the continent. 

R19BN
road projects of R19bn and the revival of construction and rehabilitation of the N1, N2 and N3 highways
Burnt proteas
"Our national flower the Protea is a species of fynbos... At least once every twenty years, fynbos must burn at extremely high temperatures to allow the ecosystem to be rejuvenated and grow afresh" - President Ramaphosa likening fynbos to the resilience of the South African people.

3. Creating jobs and inclusive economic growth

The President stated that “we will continue to support employment for as long as it is necessary while the labour market recovers, even as we work to promote stronger and more resilient growth in the private sector”. It is not clear if this will includes an extension of the Presidential Employment Stimulus Programme of R12bn which has created 430,000 jobs by the end of January, with a further 180,000 jobs in the recruitment phase.

430,000
jobs

4. Fighting corruption and strengthening the state

Corruption was mentioned last and the attendance of Judge Zondo at Parliament was notable. Dealing with corruption remains a top priority for the President. Reference was made to progress in restoring the criminal justice system with the appointment of capable, experienced, and trustworthy professionals, improved cooperation and sharing of resources between the respective law enforcement agencies, enabling a more integrated approach to investigations and prosecutions and the implementation of the National Anti-Corruption Strategy, which lays the basis for a comprehensive and integrated society-wide response to corruption. A National Anti-Corruption Advisory Council will be established. This is a multi-sectoral body that will oversee the initial implementation of the strategy and the establishment of an independent statutory anti-corruption body that reports to Parliament.

infrastructure developments

New actions and policy certainty

President Ramaphosa mentioned Operation Vulindlela, which is a joint initiative of the presidency and the Treasury with the purpose of monitoring the implementation of initiatives in the electricity, water, telecommunications and transport sectors, as well as reforms to our visa and immigration regime, in his new developments section. These include the following:
 
  • Energy supply will be enhanced with the issue of a request for 2 600MW from wind and solar energy as part of Bid Window 5 in three months, followed by another bid Window 5 in August 2021. The licensing for the threshold of new embedded generation projects, currently at 1MW, will be increased with the amendment of Schedule 2 of the Electricity Regulation Act over the next three months. 
  • The auction of high demand spectrum is at an advanced stage, pending ongoing litigation processes. 
  • Developments in other network industries include (1) Durban harbour is to be repositioned as a harbour for the Southern Hemisphere; (2) the rail corridor from Gauteng is being extended to enable the export of vehicles through Port Elizabeth; (3) and a national Water Resources Infrastructure Agency will be established. 
  • Critical skills will be announced within a week; and a full rollout of eVisas to visitors from China, India, Nigeria, Kenya, and 10 other countries will commence. 

SOE’s, local authorities and grants/unemployment benefits

New information on SOE reform was limited to a statement that the Presidential State-Owned Enterprises Council has outlined a clear list of reforms that will enable these companies to fulfill their mandates (currently under review) for growth and development. This will entail a centralised SOE model with standardized governance, financial management, and an operational performance framework for all SOEs.  
 
With many local authorities suffering from a lack of competence and being critical to service delivery, the District Development Model is focused on strengthening skills through the appointment of properly qualified/trained officials.  
 
The President announced that local elections will take place in 2021. 
 
The special COVID-19 grant of R350 per month will be extended by a further three months to April, and TERS benefits paid out by the UIF until March 2021, but only for those sectors that have not been able to operate. The Loan Guarantee Scheme will also continue.
R350
The special COVID-19 grant of R350 per month will be extended by a further three months to April

Next on the agenda

The Minister of Finance will table the February 2021 Budget Review on 24 February. More detail will be provided about the SONA programme against the background of: political pressure to raise the public sector wage bill; funding of the COVID-19 vaccine; financial assistance to SOE’s including the Land Bank; an overrun in budgeted revenue receipts; rising interest payments; a debt to GDP ratio that is at risk of approaching 100% over the next three years if growth is not revived and spending curtailed.

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