The positive impact of the policy framework outlined in the SONA will depend on successful implementation and close collaboration with the private sector.
The wide-ranging SONA delivered by President Cyril Ramaphosa to Parliament last night recognized the grave socio-economic challenges currently faced by SA, especially its low growth and high unemployment., says Professor Raymond Parsons, economist at North West University Business School.
The SONA outlined the broad framework from government to address these challenges, coupled to certain specific decisions, he adds.
“The emphasis in the SONA on inclusive growth and the need to urgently remove the obstacles to structural economic reforms is welcome. The SONA also acknowledged the importance of collaboration with the private sector to promote job-rich growth.
“Positive aspects in the SONA included the steps announced on the energy front and measures to encourage youth employment. The decision to allow energy generation outside Eskom, especially for well-run municipalities, is an important step in the right direction. It remains imperative to lessen the risk that Eskom continues to pose to SA’s economic performance. Other SONA announcements require more detail and need more clarification.”
Professor Parons states that the extent to which the SONA can reduce policy uncertainty and boost investor confidence will depend on whether the sense of immediacy created by the SONA will be translated into positive action and tangible outcomes.
“And as important as the SONA is in setting the overall economic and political direction, references in the SONA to issues such as the creation of a Sovereign Wealth Fund, the financing of Eskom, disciplining the public sector wage bill, and establishing a State Bank must await further exposition in the Budget on February 26.
“The fiscal arithmetic in the Budget will also show whether SA is indeed stabilizing its public finances, reducing bailouts to dysfunctional state-owned enterprises, and winding down its overall debt. It is the 2020-21 Budget that Moody’s will assess in deciding whether to downgrade SA’s investment rating, thus triggering the likelihood of universal junk status for SA.”