/ 11 February 2022

Business reacts: Sona commitments will not move the dial — yet

Sona Ramaphosa
Did Ramaphosa hit the right note? (GCIS)

Business has decried the lack of urgency in President Cyril Ramaphosa’s State of the Nation address, which was largely focused on digging South Africa out of its growth and unemployment slump. 

In a statement, Business Leadership South Africa (BLSA) chief executive Busi Mavuso noted that the president’s address “did not chart a particularly new course”. 

“Business was hoping for a greater sense of urgency and a far stronger commitment to accelerating both the reform agenda and infrastructure rollout,” Mavuso said.

“Overall, BLSA believes the president could have done more to address blockages to the efficient implementation of already agreed policy and didn’t go far enough to build confidence that 2022 would be the year of delivery.”

In his decidedly pro-business speech, Ramaphosa emphasised the role of the private sector in charting the course for growth and job creation. The country’s growth slump, which was worsened by the pandemic, has been characterised by a deepening unemployment crisis. In the third quarter of 2021, the unemployment rate hit 34.9%, the highest level since 2008.

The state “must create an environment in which the private sector can invest and unleash the dynamism of our economy”, Ramaphosa said. 

He later added that it is a key task of the government to create the conditions to enable the private sector: “And this is the case, whether we like it or not, all over the world. It is when [the] government creates that environment that will enable businesses — both small and big — to emerge, to grow, to access new markets, to create new products and to hire more employees.”

The president made commitments to cut red tape constraining businesses, to boost infrastructure investment and to forge ahead with reforms.

Mavuso said business was hoping for “another ‘big bang’ announcement of a way to break out the inertia that seems to be bogging down both the infrastructure rollout and reforms to the energy sector”. 

“Barring that, the least the president needed to do was to ensure that the blockages to reforms, particularly in the energy sector which is so crucial to our economic well being, would be swiftly and ruthlessly removed,” Mavuso said.

“There is so much at stake with each bout of load-shedding stripping the economy of billions of rands and this will keep happening until supply meets demand.”

The BLSA did, however, welcome the president’s focus on small business. Ramaphosa announced a redesigned loan scheme for small businesses and that he had appointed former Exxaro chief executive Sipho Nkosi “to cut the red tape that stops small businesses from growing and thriving”. 

“This is something BLSA has long been calling for and both measures come at a critical time for SMEs [small and medium enterprises] that have been battered by the ravages of the Covid lockdowns. The presidency’s commitment to improving the ease of doing business made early in his term of office had seen little momentum.”

The Minerals Council of South Africa also welcomed Nkosi’s appointment, saying efforts to cut red tape in government departments “is a vitally important appointment for removing unnecessarily complicated hurdles that have held up billions of rands worth of investments”.

The council noted that the country needs “urgent, tangible action from the state”. 

In his analysis of Ramaphosa’s speech, Peter Attard Montalto, the head of capital markets research at Intellidex, said “there is clearly positive reform going on on a range of fronts  … [yet] the headline dial is not shifting”.

The speech, Montalto said, was broadly as expected “and we don’t think especially moves the dial for December”.

“With so many commitments from the government, they now want a social compact which basically means business making commitments on the jobs they will create, but this is simply not credible in our view. If the dial continues not to move in the year ahead … then we will all think this speech looked decidedly odd. Maybe that’s how to view things here — the president had little option but to repeat large chunks of last year’s speech and delivery will either happen or not.”

Montalto noted that business sentiment is unlikely to shift on the back of Thursday night’s address, considering the slow pace of delivery. “One gets the impression of a range of reform pressures mounting up on the economy to budge it forward but still not really moving the dial — yet. Herein is the problem for the markets, investors and business considering the speech. You either believe that the dial will move soon or you don’t. History suggests less rather than more dial moving.”

For the most part, Ramaphosa hit the right notes. But, Montalto concluded, “that was always the case”