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Economy, jobs, SOEs to feature as key points in Ramaphosa’s Sona

Thursday's Sona followed the May general elections where the governing ANC received a reduced majority of 57.5% and the installation of the sixth administration.

FILE: President Cyril Ramaphosa delivers the State of the Nation Address on 7 February 2019. Picture: Twitter/parliamentofrsa

JOHANNESBURG – As President Cyril Ramaphosa put in the final finishing touches to his third State of the Nation Address (Sona) in Parliament on Thursday evening, the economy, job creation, and the management of the country’s key state-owned enterprises (SOEs) were expected to feature prominently in his speech to the nation.

The address followed the May general elections where the governing African National Congress (ANC) received a reduced majority of 57.5% and the installation of the sixth administration, which faced the uphill battle to turn around the country's fortunes after the so-called "nine lost years" under former President Jacob Zuma.

ECONOMY

Accelerating real economic growth to create jobs would prove to be a challenge for the president. South Africa’s gross domestic product contracted in the first quarter of the year by 3.2%, which was the worst drop since the same period in 2009 during the global financial crisis.

To add to our economic challenges, according to the Quarterly Labour Force Survey from Statistics SA for the same quarter, the official unemployment rate increased to 27,6% compared to the last quarter of 2018, with over half of young people aged 15 to 24 facing the burden of unemployment.

The ANC government’s plan to expropriate land without compensation would also be something that would be closely watched during Ramaphosa's speech and its implementation over the next five years by the new administration, particularly concerns over property rights and the possible models that could be used to achieve that.

This followed the National Assembly agreeing in December 2018 that Section 25 of the Constitution should be amended to make the expropriation of land without compensation more explicit.

In his reconfigured Cabinet announced last month, Ramaphosa appointed Thoko Didiza as minister of agriculture, land reform and rural development, a decision that was widely lauded by role players in the sector.

The president also recently received the report of the advisory panel on land reform and agriculture which was chaired by Dr Vuyo Mahlati. The aim of the panel - appointed in September 2018 - was to support the work of the inter-ministerial committee led by Deputy President David Mabuza on land reform on a broad range of policy matters.

Ramaphosa said in his Sona in February that government had identified land parcels owned by the state for redistribution, and promised that "strategically located land will be released to address human settlement needs in urban and peri-urban areas".

On agriculture, the president said government would continue to prioritise targeted skills development and capacity building programmes for smallholder and emerging black farmers.

JOB CREATION

Earlier this month, following the ANC’s national executive committee Lekgotla post the May polls, the party resolved on an ambitious plan to reduce the unemployment rate to 14% in the next five years, while focusing on skilling and reskilling programmes to 3.5-million South Africans.

In his last Sona, Ramaphosa outlined the five most urgent tasks for government with the economy, job creation, and the fight against corruption topping the list.

The president announced that based on the success of the inaugural Investment Summit in 2018 - which attracted around R300 billion in investment pledges from South African and international companies - government would host another summit to woo investors to stimulate economic growth and create much-needed jobs.

Ramaphosa said the investment generated should be spread out in projects throughout the country.

“In this regard, I have asked provincial governments to identify investable projects and ensure that we build investment books for each of our nine provinces to present to potential investors,” he said at the time.

However, the ANC’s plan to slash the unemployment rate to 14% would be something Ramaphosa would be expected to elaborate on further during the Sona following criticism from economists.

Among the measures underscored by the ANC to address this challenge of joblessness was through an industrial strategy, jobs summit initiatives, Operation Phakisa focusing on the oceans economy, and private-public growth initiatives.

Ramaphosa was also expected to provide practical details on how the ANC government would implement its priorities for the next five years through its Medium-Term Strategic Framework of government.

SOEs

Following years of mismanagement, corruption, and state capture - fixing the country's SOEs remained a challenge for Ramaphosa and his administration.

This week the SABC warned that it’s on the brink of collapse. The public broadcaster faced challenges related to its mounting debt which amounted close to R2 billion, an unsustainable huge wage bill, and a massive infrastructure maintenance backlog.

The national broadcaster was among several SOEs like Eskom and South African Airways (SAA) that were burdened with major financial and operational challenges.

The SABC has had to make the difficult choice recently between paying staff salaries and servicing its debt. Its board and management would be looking out in Ramaphosa's Sona whether government would deliver on its request for a R3,2 billion guarantee to stay afloat.

The beleaguered SOE currently spends more than R3 billion a year on salaries of more than 3,000 permanent employees and has so far averted retrenching 981 permanent staff and 1,200 freelancers the following push back from government.

Challenges at Eskom - which were described by Ramaphosa in his Sona in February as a crisis that poses a great threat to the local economy - would be on top of the president's priorities, especially progress on plans to restructure the power utility into three entities - generation, transmission and distribution - including the appointment of a chief restructuring officer to lead this process.

Ramaphosa said: "As we address the challenges that face Eskom, we also need to safeguard our national fiscal framework, achieve a positive impact on our sovereign credit rating, and pay attention to the rights and obligations of Eskom’s funders".

On Tuesday, the president met with members of Eskom’s board at his official residence in Cape Town.

According to the Presidency, the board presented a report on the implementation of a nine-point plan focusing on the need to ensure uninterrupted power supply, costs cutting, driving efficiencies and increasing revenue through, among others, higher collection rates.

The meeting followed an earlier meeting the president held with over 20 CEOs of SOEs at the beginning of June to discuss the contributions the entities could make to economic revitalisation and social development.

The meeting was prompted by the resignation of Eskom CEO Phakamani Hadebe and SAA CEO Vuyani Jarana, who complained about the lack of government support in turning around the ailing entities.

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