Huge dent in South Africa’s progress

Business leaders in South Africa welcomed the State of the Nation Address (SONA), but recent tensions between South Africa and the USA paint a worrying picture.

Business Leadership South Africa CEO Busiswe Mavuso said she was encouraged by President Cyril Rampahosa’s SONA, which focused on reforms needed to achieve 3% GDP growth in 2025.

BLSA is one of the biggest business advocacy organisations in the country. Its board members include executives from Vodacom, the JSE, PwC, and Standard Bank.

South Africa’s growth has been weak over the last decade, and the 3% figure for 2025 depends on the government starting reforms in key areas.

Mavuso was happy that the SONA focused on actual delivery rather than promises.

“It rightly highlighted the progress we’ve made in electricity reform, logistics and criminal justice, among many other things, while also highlighting the importance of pushing those reforms,” said Mavuso.

“Perhaps the most prominent new focus for government is on under-performing municipalities.”

The president hopes to establish professionally managed utilities for water and electricity provision, which can ringfence revenue to ensure appropriate infrastructure investment.

Moreover, BLSA welcomed a broader process to redesign the local government system, which has become the weakest link in government service delivery.

It is also spiralling into other public sectors, with Eskom owed billions in debt from municipalities.

“The proposed consultation process leading to a white paper will be an important opportunity to develop new thinking that can enable local governance that is sustainable and of better quality,” added Mavuso.

“Efficient local services are essential for our communities and the businesses that operate within them.”

Eyes will also now turn towards the Budget Speech by Finance Minister Enoch Godongwana next week.

Several pledges from the president’s speech will need to be delivered through the budget.

Part of the focus will be the promised forms to the regulations governing public-private partnerships, which allow public and private sectors to partner to invest in and create large infrastructure projects.

The president also noted the ambition to get private investment into logistics and electricity, with both sectors struggling amidst the poor performance of Eskom and Transnet.

“This requires the government to accelerate reforms, particularly in logistics, to enable swifter collaboration and transactions between the state-owned enterprises and private operators through concessions and other mechanisms,” said Mavuso.

“The economy would benefit greatly, for example, from competition between ports and rail routes, which could be created by concessioning use to different private operators.”

US-sized dent

Despite the internal progress being made in South Africa, the budget will have to contend with an unexpected withdrawal of foreign assistance from the US government.

US President Donald Trump recently signed an executive order freezing aid to South Africa and prioritising the resettlement of Afrikaners in the United States as refugees.

Mavuso said that the US government seems to be of the mistaken view that the Expropriation Act amounts to a land grab.

“While the Expropriation Act is not perfect, it does not remove constitutional rights to property and due process in any expropriation,” said Mavuso.

“The loss of US funding is material, particularly for the Pepfar programme that is integral to our management of the HIV/Aids pandemic.”

Pepfar provided South Africa with $453m (R8.5 billion) in direct funding to South Africa, a large portion of which was used for HIV treatments.

Mavuso added that the US remains an important trading partner to South Africa but was positive that the private sector has extensive relationships that remain strong in the country.

“February is always a critical month in setting the tone and agenda for government, between the SONA and the budget.

“With the budget the set piece speeches now done, I’m encouraged by the direction government is going and the opportunity to work with it to ensure we achieve our mutual aims of driving growth.”

“Next week, we will see the next important push from the Minister of Finance, and I hope it will provide further impetus to our joint efforts.”