/ 12 February 2021

‘Localisation, localisation, localisation’: Ramaphosa delivers a business-friendly Sona

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President Cyril Ramaphosa encouraged South Africans to support local businesses after he mentioned that his suit was locally manufactured.

In last year’s State of the Nation address (Sona), President Cyril Ramaphosa said that he was fixing fundamentals: fixing public finances, growing the economy and fixing the country’s electricity problems. But before he could even begin his work, the pandemic hit. His focus shifted to protecting lives, while struggling to keep the economy from plunging deeper into the doldrums. 

Now his focus is back to fixing the economy. To do this, the president prioritised infrastructure development, with a focus on localisation, creating jobs and protecting livelihoods by extending the R350 special relief grants and the UIF-Ters payments for the next three months. 

Last year, the president announced a R100-billion Infrastructure Fund, which he said is now fully operational. 

In his address, Ramaphosa said infrastructure investment projects worth R340-billion are ongoing. The projects will be in the energy, water, transport and telecommunications sectors. “Construction has started and progress is being made on a number of projects,” said Ramaphosa. 

Other investment projects included the launch of two major human-settlements projects, which will provide homes to almost 68 000 households in Gauteng. Ramaphosa added that similar projects will be carried out in other parts of the country as well. 

The president also spoke about increasing local production and making South African exports globally competitive. He said this will lead to increased local production, which will spur the revival of our manufacturing industry.

This emphasis on localisation comes on the back of the African Continental Free Trade Area agreement, which kicked in last month. 

The intra-African trade area is the largest free trade area to come into existence since the World Trade Organisation was formed in 1995. Exports between African countries currently account for between 15% and 18% of total exports.

Africa boasts a population of 1.2-billion, a number that is expected to more than double by 2050; the trade agreement creates a $1.3-trillion single continental market intended to boost intra-Africa trade and economic growth. However, to achieve this aim, all trade tariffs will need to be eliminated. 

In his Sona speech, Ramaphosa said that the National Economic Development and Labour Council, as part of the recovery plan, has agreed that its members will work together to reduce the country’s reliance on imports by 20% over the next five years.

About 42 products have been earmarked for this initiative, including edible oils, furniture, fruit concentrates, personal protective equipment, steel products and green economy inputs, all of which can be sourced locally.

“If we achieve our target, we will significantly expand our productive economy, potentially returning more than R200-billion to the country’s annual output,” Ramaphosa said. 

Other localisation measures include producing local chicken, using locally produced sugar and ramping up the country’s clothing, textile, footwear and leather. 

These measures, which will help to assist small businesses that have been battered by the pandemic, will also help to boost business confidence. 

Last week the South Africa Chamber of Commerce and Industry said that the business confidence index averaged 86.5 in 2020. This is the lowest annual average since the index was launched in 1985.

The country has also been battling with an unemployment rate of 30.8%. He announced that more than 430 000 jobs had been supported by the Covid-19 economic stimulus by the end of January 2021, and that 180 000 jobs are currently in the recruitment phase.

Lastly, you cannot grow the economy without fixing the country’s electricity problems. In the past week, Eskom implemented load-shedding again, because the power utility was battling with maintenance and wet coal. Ramaphosa said the government will soon initiate the procurement of an additional 11 800 megawatts of power from renewable energy, natural gas, battery storage and coal, in line with the Integrated Resource Plan 2019.

Despite this work, the indebted Eskom estimates that, without additional capacity, there will be an electricity supply shortfall of between 4 000MW and 6 000MW over the next five years, “as old coal-fired power stations reach their end of life”. 

Ramaphosa said the government will tackle this by issuing a request for proposals for an additional 2 600MW from wind and solar energy.