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Business uninspired by President Zuma's Sona

Lisa Steyn

President Jacob Zuma's Sona did little to inspire the business world, which seems to have just heard it all too many times before.

President Jacob Zuma (AFP)

But mention of a tax review and new land reform has managed to get economists hot under the collar.

While economists and businessmen agree the President touched on all the right points, they say the devil is in the detail.

Kevin Lings, chief economist at Stanlib, said he didn't see anything particularly new. "There was not a lot there that will convince you that 11-million jobs by 2030 would be readily achieved," he said.

But Sandile Zungu, spokesperson for the Black Business Council (BBC), said it was time for action. "I think the President means business and speaks with greater clarity and conviction,'" he said.

Chris Hart, chief economist at Investment Solutions, said the speech was lacking in broad policy issues, and although Zuma spoke of growth in threefold to create the desired jobs, "there was not much there to draw investors in."

Global crisis
In his speech, the President was quick to set the scene in the context of a global crisis.

"The crisis in the Eurozone affects our economy as the Eurozone is our major trading partner, accounting for around 21% of our exports," Zuma noted.

While Gross Domestic Product [GDP] growth is expected to average at 2.5%, down from 3.1% in the previous year, Zuma said growth rates in excess of 5% were needed to create more jobs.

But Hart said that the global crisis could not be blamed for government's shortcomings. "[Since 2008] other countries have rebounded to previous growth levels and are creating jobs … An ineffective state is intruding into the economy … and the deterioration is becoming more and more stark as time progresses," Hart said.

"The economy has much better growth prospects than what we have achieved," said Dennis Dykes, chief economist at Nedbank. More competition in sectors like infrastructure and energy would help the country to achieve its goals quickly.

Blockages
Zungu said growth rates of up to 10% were not impossible, if certain blockages could be eliminated.

"When we [the BBC] met with government, we highlighted that economic performance has been nothing to be proud of."

However, Zungu said that if blockages could be removed - some relating to infrastructure, labour, broadband, and quality of education, amongst others - "then it's is not inconceivable the economy could grow at that rate."

Tax

Zuma announced that later this year, the Minister of Finance Pravin Gordhan will commission a study of current tax policies, to make sure there is an appropriate revenue base to support public spending.

Zuma added that part of this study would evaluate the current mining royalties regime.

"Instead of increasing revenue, government should be looking at where it is spending too much in the wrong areas," said Dykes.

Lings agreed that the tax review was worrying as there is already a concern that government revenue is under pressure. A review would cause uncertainty over revised tax rates, if it looked at other sectors. "The ambit for the review needs to be clearly defined,' Lings said.

Hart said it could be a positive or a negative thing, but agreed "clarity is needed quite quickly".

Land reform
​Zuma said government's mid-term review last year revealed a number of shortcomings in its land reform implementation programme.

He noted there are proposed amendments to the Restitution of Land Rights Act (1994) in order to provide for the re-opening of the lodgement of restitution claims, by people who missed the deadline of 31 December 1998. "Also to be explored, are exceptions to the June 1913 cut-off date to accommodate claims by the descendants of the Khoi and San as well as heritage sites and historical landmarks," Zuma said.

"It concerns me that you can apply for a claim again," Lings said, as it opens the sector up to uncertainty, and would do nothing to stimulate growth in the sector. "In our minds agriculature is a key area for South Africa, so this is a big concern."

Hart said the shortcomings of the programme only boiled down to a "huge failure of the state" to implement it properly.

SMMES Zuma also said the development of black owned enterprises and black industrialists will be prioritised. Zungu said that the BBC was please Zuma specifically mentioned this, but was less impressed by the President's call for SMMEs to be paid by government departments within 30 days. "It is not the first time for him to say that … but non-payment continues unabated with little consequence … We need to move towards an action mode," Zungu said.

Zuma said departments are required to submit monthly reports so that government could monitor progress in this regard and that accounting officers who fail to execute this directive, should face consequences.


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