The country is facing a “stark reality” with a stalled economy that has not achieved any meaningful growth for over a decade, President Cyril Ramaphosa said during his State of the Nation Address (SONA) on Thursday night.
With the unemployment rate at the highest in at least a decade, State Owned Enterprises like Eskom and SAA floundering and trade and manufacturing sectors bleeding jobs, many looked to Ramaphosa's speech to provide solutions for the dire state of the economy.
“Our economy has not grown at any meaningful rate for over a decade. Even as jobs are created the rate of unemployment continues to deepen. The recovery of our economy has stalled as persistent energy shortages have disrupted business and people’s lives. Several SOEs are in distress and our public finances are under severe pressure," Ramaphosa told the joint sitting of the NAtional Assembly..
“It is you the people of SA who carry this burden confronted by rising living costs, unable to escape poverty and hopelessness,” Ramaphosa said. He said the stagnating economic conditions was preventing “us from reaching our potential”.
“Government cannot solve economic challenges alone. Even if we were to marshall every single resource at our disposal and engage on huge expenditure of public funds we would not be able to guarantee all those who are unemployed work.”
Ramaphosa said the government had not done enough to free the economy from the grim inheritance of the past “nor the mistakes that we ourselves had made”.
He qalso spoke of the debilitating effects of load shedding.
“This SONA is about inclusive growth to build a capable state and place our economy on the path to recovery. This year we fix the fundamentals,” Ramaphosa said.
He said South Africans have suffered with the effects of a constrained electricity supply for over a decade.
“The load shedding over the last few months has had a debilitating effect on our economy and our people
“At its core, load-shedding is the inevitable consequence of Eskom’s inability over many years – due to debt, lack of capacity and state capture – to service its power plants.”
Ramaphosa said that in order for Eskom to undertake the fundamental maintenance necessary to improve the reliability of supply, load-shedding will remain a possibility for the immediate future.
He pledged that government would implement measures that will fundamentally change the trajectory of energy generation as Eskom works to restore its operational capabilities.
These measures to rapidly and significantly increase generation capacity outside of Eskom include:
* a Section 34 Ministerial Determination will be issued shortly to give effect to the Integrated Resource Plan 2019, enabling the development of additional grid capacity from renewable energy, natural gas, hydro power, battery storage and coal;
* to open bid window 5 of the renewable energy IPP and work with producers to accelerate the completion of window 4 projects;
* to negotiate supplementary power purchase agreements to acquire additional capacity from existing wind and solar plants and to put in place measures to enable municipalities in good financial standing to procure their own power from independent power producers.
Dr. Mundia Kabinga, Senior Research Fellow and Lecturer in Finance and Strategy in the UCT GSB’s Development Finance Centre (DEFIC) described the context in which the country found itself in this economic quagmire.
He said statistics revealed that South Africans are slightly worse off than they were 20 years ago.
“The SA economy is a lot worse off than it was 20 years ago. There is 50% youth unemployment and we need a more rigorous set of policies. African continental free trade agreement provides opportunities for us to expand into the continental market but we will be competing against Nigeria and Kenya,” Kabinga said.
He said disinvestment in the SA economy showed that investor confidence was low and this needed to change radically.