South Africa’s economy is stuck in a ‘trap’ – what Ramaphosa needs to announce this week to fix it

Business Unity South Africa (BUSA) has outlined the announcements that president Cyril Ramaphosa needs to make in his state of the nation address on Thursday (10 February) to kickstart economic growth in the country and escape a ‘low-growth trap’.

The address represents a crucial chance to convey the message that his government recognises the crisis the country is in, has co-developed a strategy with social partners in response to the crisis, and is prepared to implement it, the group said.

“As a result of fiscal constraints, a social crisis of unprecedented proportions has arisen, with poverty a growing challenge and unemployment at record-high levels.

“With low GDP growth, stagnant fixed capital formation, and falling GNI per capita, South Africa’s economy has been stuck in a low-growth trap.”

Although Covid-19 has intensified the situation, the fundamental challenge is the failure to achieve rapid enough economic growth over the past decade, itself a feature of our failure to implement long-needed structural reforms, Busa said.

The group said that it would like to see the following in the state of the nation address:

• A proclamation that there is an urgent need for structural economic reforms which involves a message that South Africa is open for investment. This requires policy certainty and interventions to improve the ease of doing business.

• A clear implementation strategy that demonstrates the importance of the government’s commitment to the Economic Reconstruction and Recovery Plan that identifies and calls for bids on five or six critical growth-enhancing infrastructure projects as a catalyst for job creation.

• An announcement that the President will ensure his government operates in a cohesive manner and that there will not be mixed messages from different departments.

• A clear message that law and order in our country is seriously compromised and this will not be tolerated any longer. We need tangible progress on bringing those responsible for the July insurrection, as well as State Capture, to book. Investors require confidence that the government has the capacity and will prosecute and uphold law and order.

• An announcement that the president will release clear, firmly structured processes for each deliverable, clear responsibilities for members of the Cabinet, and timelines to achieve precise implementation milestones to focus on meeting the above goals.

• A clear message on how the government is planning to implement the findings of the Zondo Commission Report, with a clear plan and timeline for implementation. Steps must be taken immediately to identify clear cases of criminality and to capacitate relevant institutions to deal with these areas.

• An action plan to deal with the SOE crisis must include decisions on which SOEs are of strategic importance, the private sector’s role, as well as applicable governance and skills challenges.

• A clear implementation strategy on how the government plans to address the current energy crisis in the country.

• It is imperative for the President to stress the importance of respecting the justice system and constitutional order, and not undermining it.

“As always, business stands ready as a willing and able partner to co-deliver on many of the critical interventions necessary to ensure that our country is placed on the path of inclusive economic growth and social development,” BUSA said.

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