As the country gears up for the State of the Nation Address (Sona) on Thursday, President Cyril Ramaphosa will need to dig deep to appease the electorate of a country in crisis.
According to the South African Reserve Bank (SARB), South Africa entered a negative phase in the business cycle in December 2013, and has remained there ever since, making this the longest downturn since records began.
“However, President Cyril Ramaphosa is unlikely to mention this in his Sona speech,” says Institute of Race Relations (IRR) spokesperson Gabriel Crouse.
“South Africa’s negative business phase, as the SARB calculates it, is in its 110th month. The previous longest downward phase was 55 months, from 1989 to 1993. In other words, the current downturn is twice as long as the previous one.
“Additionally, Ramaphosa has been president for 59 months, which means he has presided over the majority of the current downturn and his presidency alone, if measured separately from the uninterrupted downturn that began in 2013, would be the second-longest downturn on record,” he says.
Crouse points out that until Ramaphosa’s presidency, South Africa’s longest business phase was a positive one, which began in the spring of 1999 and ended in 2007. “In that 99-month upswing, fiscal discipline reduced national debt from roughly 40% of GDP to 25%, three million jobs were added, productivity grew by 3-5%, inflation plummeted, and living standards improved for tens of millions through boosted consumption.
“Employment, consumption, productivity, inflation, and fiscal health are some of the factors incorporated in SARB’s complex business cycle evaluation.”
The “ZumaPhosa” era has halted the progress of the mid-2000s where it did not reverse it, adds Crouse. “South Africa now has the highest unemployment recorded anywhere on the planet, productivity per person has not improved in nearly a decade, government debt has almost tripled as a portion of GDP, the cost of living is climbing faster than private wages, and real investment continues to wither.”
He suggests that Ramaphosa is sure to promise improvement but is almost certain to make matters worse. “The Employment Equity Amendment Bill (EEB), which will allow the government to set public sector-style race quotas across the private sector at pain of ruinous fines, already awaits his signature. It will soon to be joined by the Expropriation Bill, which allows the government to expropriate invaded land without compensation, among other provisions.
“Ramaphosa has the power to halt South Africa’s downturn, but appears to lack the will. For him to do so will require overtly pushing back against ideologically motivated, counterproductive policies. He should start by announcing that he will veto the EEB, since it is unconstitutional on at least six grounds that the IRR has pointed out to the Presidency.
He should implement the Zondo Commission Report’s advice to “maximise value for money” by explicitly putting that priority above racial preferences and localisation in all state procurement, which is approaching R1 trillion per annum.
Regarding the Eskom crisis, in February 2022 the Finance Deputy-Director General, Dondo Mogajane, said: “We told them they could even sell the two newest stations – Medupi and Kusile – but for some reason, no progress is being made.” Ramaphosa could use Sona to give his support to selling those stations to pay down Eskom debt and fund the needed maintenance on other stations, he says.
