Time is up for South Africa
SA Inc has two opportunities over the next two weeks to assure the international community that the government has clear direction and concrete actions to put the economy on a sustainable path of economic growth.
This is according to Absa’s Johan Gouws, who said that it will need to show how the country’s fiscal position will be improved in the medium term, starting tonight when the president, Jacob Zuma, delivers his State of the Nation Address (SONA) in Cape Town.
“South Africa is standing at a cross roads in terms of regaining the confidence of foreign investors given the country’s growth prospects and the recent replacement of the Minister of Finance in December last year,” Gouws said.
The second opportunity will come during the Budget speech, to be delivered by Pravin Gordhan on 24 February.
Absa said that the overarching theme of the speech is expected to once again be around creating a better life for all which has been the government’s mantra for some time.
“This ‘promise’ has resulted in significant social pressure on government given the high levels of unemployment, poverty and inequality that still exist. These matters together with the poor municipal service delivery will most likely feature strongly in the speech given the upcoming municipal elections later this year,” Gouws said.
Recent discussion between government, Treasury and business are likely to result in some comments relating to creating a more conducive environment for economic growth through public and private sector partnerships, Absa said.
“Comments relating to privatization of key state assets might materialize given the tight financial position that government finds itself in. Mention should also be made about the challenges that the current weak economic environment pose for SA and how government is looking to respond to these challenges given the prospect of a possible downgrade in SA’s credit rating during 2016,” Gouws said.
Other areas that may feature might include those relating to property rights, transformation and education.
Gouws said that the key objective for SONA would be to create confidence. “Confidence in government policies, confidence in the SA economy’s ability to achieve a higher growth path and confidence in SA as an attractive investment destination for foreign investors.
“Time has run out for putting new ideas on the table and tonight’s speech will have to be focused on clear goals, timelines and measures to improve the state of the nation on a sustainable basis,” he said.
Earlier in February, emerging markets economist Peter Attard Montalto of Nomura, opined that the president’s address is likely to be more important than the budget.
“After the political shock of three finance ministers in two weeks, opening Pandora’s box in December, a key question has arisen as to the political power of the new (old) Finance Minister Pravin Gordhan,” said Montalto.
“We will watch closely – as will ratings agencies – to see the broader scope of policies on issues affecting growth and the investment environment.”
Apart from possible protests and disruptions from opposition parties, Montalto expects a broadly left-leaning Sona speech in terms of policy specifics outside of what it calls “National Treasury areas”.
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