PRESIDENT Jacob Zuma last night launched a last-minute bid to save
his own and SA’s credibility in a speech heavily focused on the economy,
aimed at staving off a credit ratings downgrade.
The speech was, however, met with mixed reactions.
Mr
Zuma’s state of the nation address ticked many of the boxes that
business and the investor community have in the past two months
emphasised needed rapid and serious attention.
However, whether
what he promised was enough and whether the general sentiments will be
backed up with the necessary action is likely only to be determined
after the budget speech on February 24.
Sketching a bleak picture
of the global economy and conceding that some domestic constraints had
worsened the picture, Mr Zuma acknowledged the danger of an imminent
ratings downgrade and the need for action by the government.
"Our
country seems to be at risk of losing its investment status from credit
ratings agencies. If that happens it will mean that it will become more
expensive to borrow money from abroad to build a better life for all.
"The
situation requires an effective plan from us, by doing things
differently and acting on things that have not been acted on quickly
enough before."
To avoid a downgrade the government, business and labour had to provide a common narrative for the good of the country, he said.
Finance
Minister Pravin Gordhan, whose budget is eagerly awaited, described the
speech as "bold", saying it was a good start in the process of building
confidence in SA. While there were problems globally, it was also
important for SA to take responsibility for its own economic situation,
he said
Others were, however, sceptical of the speech.
The rand slipped 0.3% to R15.94/$ after the address, erasing all gains notched up earlier in the day.
Democratic
Alliance leader Musi Maimane said the speech had failed to put forward a
convincing programme to put the economy back on track and avoid a
ratings downgrade.
"The president is still using the 2008 economic
crisis as a scapegoat for SA’s poor economic performance and failure to
create jobs.
He essentially conceded a downgrade to junk status, giving up the fight and showing no innovative leadership."
Kevin
Lings, chief economist at Stanlib, described the speech as "a step in
the right direction", which required further details in the budget to
assess their credibility. Among these were promises of some
privatisation of state-owned enterprises and efforts to improve the
effectiveness of government spending.
But on another of the
essential ingredients that rating agencies and economists have cited — a
credible growth plan — Mr Lings said he was disappointed.
"The
National Development Plan was mentioned but that seems in the
background. What the growth strategy might be and how it will be
implemented, he did not show us at all."
Lumkile Monde, senior
lecturer, Wits school of economics, said although Mr Zuma was quite
cautious, probably due to the political constraints of his constituency,
he did not say enough about cutting spending.
"We needed to hear, for example, that he is cutting his own executive."
"His
comments on state-owned companies, while important, will only be
believed when there has been action. The reality is that as long as
these companies contain cronies among top executives and on boards who
are there to give away transactions, things will not improve for the
better," Mr Monde said.
Peter Attard Montalto, a senior emerging
markets economist at Nomura International, said Mr Zuma’s speech sounded
"too much like business as usual".
The speech struck the "wrong
note" because it contained no sense of economic panic or different ways
of doing things to boost growth.
Working through a list, much of
which arose in his discussions with private-sector CEOs earlier this
week, Mr Zuma promised to: fast-track partnerships with the private
sector; cut red tape; address the governance and performance problems in
state owned companies;
encourage skilled migration into SA; promote and encourage tourism in
the context of a competitive exchange rate; and expedite regulatory
certainty in the mining sector.
He appealed to Parliament to expeditiously deal with amendments to the Mineral and Petroleum Resources Development Act.
"We
have heard your concerns about state owned companies…. For state-owned
companies to successfully implement the national development plan they
must be financed soundly and they must be properly governed and
managed.… Companies that are no longer relevant to our development
agenda will be phased out," he said.
He said the recommendations of the presidential review commission on state owned enterprises, would be implemented.
The
commission recommended the disposal of non-core state companies and
encouraged private investment in others, such through public share
offerings.
Such measures, he said, "are essential for growth and to reduce national debt levels".
Mr Zuma said the nuclear energy expansion programme remained part of the future energy mix.
"Our plan is to introduce 9,600 megawatts of nuclear energy in the next decade."
He said the government would test the market to ascertain the true cost of building modern nuclear plants.
"Let me emphasise that we will only procure nuclear on a scale and pace that our country can afford."
Promising
again to cut wasteful government expenditure, Mr Zuma proposed that
parliament give serious consideration to the expense of maintain two
capitals.
Government would also — as promised in 2013 — make
greater efforts at limiting overseas travel, conferences, catering and
social events.
With Linda Ensor, Sam Mkokeli, Natasha Marrian and Bloomberg
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