Sona 2024: What we actually need to hear

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JIMMY MOYAHA: We’re going to be taking a look at the State of the Nation Address [Sona] that is expected to happen tomorrow. There’s a lot of talk around what we hope President Cyril Ramaphosa will say, but also what we know the president might not say.

I am joined on the line by Dr Nthabiseng Moleko, who is a developmental economist at Stellenbosch Business School, to take a look at this. Good evening, Dr Moleko, thanks so much for taking the time.

Year in, year out, we get a State of the Nation Address. It’s always promises. It’s always ‘this is what we’ve done, this is what we’ve achieved’. What are we expecting this time around?

NTHABSENG MOLEKO: Thank you so much for having me. Around, I’d say 56%, which is more than half of our targets which were set up last year, were not met. And the bulk of them, the 44% that were met, were the minority. We had about 52 commitments. If you just look historically, you can look at the financial services or financial access, which is around growing [the] economy and [creating] jobs.

So the bulk of the issues that the president mentioned around corporatisation and licensing, of, for example, the Post Bank, setting up an SME fund of R10 billion to support the growth of small businesses – I think issues around specifically sectors like hemp and cannabis, which needed regulatory framework to enable investment and particularly communities in the Eastern Cape and those who have this growing naturally.

It’s a big no. We weren’t able to yield results in this respect.

If you look at the enablers, or what we call logistics and network industries that enable growth, we weren’t able to finalise some of our appointments, particularly bidding.

We had two, [and] only one of the two was appointed in terms of the terminals between Durban and Ngqura. We were meant to rehabilitate our Transnet locomotives and expand the fleet, and also restructure Transnet Freight Rail. We didn’t do this.

So if I just go through the list, there’s a battery of commitments, but you can see there from the growth perspective, we didn’t yield the outcomes we want – particularly in unemployment and jobs, again. And I think the bottom question and the underlying question one wants to know is what is the cause?

I think one of the underlying direct causes is that the composition of our growth and the growth strategy cannot yield change unless we change the structure of our growth.

We will change the rate of growth, the type of growth, the impact of growth if we change the composition of our growth. And the composition requires that we industrialise, we manufacture, we produce, we include more South Africans that are excluded – the youth, women and black South Africans in particular – and these things have to be done deliberately.

I think some of the targets were very well thought through, but we have to realise them and action them so that we can see the transformation we need in the economy.

There are other aspects around social indicators, safety and security, crime and so forth. They are part of the less than 40% of the target that were met: 44% were met, 56% not met.

JIMMY MOYAHA: This is what I love about chatting to developmental economists. It’s always solutions and solving the problems. As you were speaking, I know of a friend who is a developmental economist who sounds very similar and would reiterate a lot of the points that you are mentioning here.

Dr Moleko, we are looking at this from a rational and a logical point of view. The reality is we’re in an election year. We’re going to get promises tomorrow, we’re going to get conversations that we may have had for the last couple of years, we are going to be told load shedding is going to end – and all of that.

What practical pronouncements are we needing to hear tomorrow from a growth perspective? From an economic perspective, given that we sit with 58% youth unemployment, what practical things do we need to hear instead of more promises?

NTHABSENG MOLEKO: Well, the first thing that I would focus on is ‘what I’ve promised before’.

I think the logical thing is to not make new promises. So let’s look at: ‘What did I say I would do before? Okay, of the 62 I said I’d meet I haven’t met 35. So what will I do about finalisation of the licensing of the Post Bank? What will I do about the SMME fund?’

Why is that important? It’s important primarily because SMMEs, being the backbone of any economy, require finance.

Financial inclusion is one of the direct giveaways of whether you’re going to see a growing economy or an unequal non-inclusive economy.

South African banks have been unable to assist with the financial structure that we see, the hegemony and oligopolistic structure of four or five banks that control more than 80% of the value of assets and banking finance currently.

So the state has to intervene deliberately. The state has to intervene. I think that, for me, the key drivers – I would cluster them. I would focus the first beam, which can be done, at the capacity of the state.

The president had promised that he was going to do not just, I think, a skills audit, but to make government work, [and] one of the things is to ensure entry exams for those who enter the public service.

Do they have the required and the requisite skills, because the public sector is the one [to which] the budget and Treasury give all of the resources that the Sars commissioner is collecting.

How well is this money being utilised? Do the people within these departments have the competence?

The issue of fulfilling our commitments – even in the different departments and different provinces, money is being turned back. This is money that can be used in health and education across the board and early childhood development, ECD – whether it’s expansion of infrastructure in under-resourced areas.

But if you don’t have the people with the capacity in education, and the security cluster in our policing system, you’re not going to be able to meet your commitments.

That can be done immediately.

I think the other aspect is money that needs to be made use of for long-term infrastructure development. We can use the local capital. We don’t need to always borrow money from your multilateral agencies, your IMF and World Bank. Foreign currency-denominated debt is destroying Africa. Many countries are having to enter debt restructuring, primarily because currencies are weakening. We have seen it in South Africa and the ZAR against the dollar, but we are seeing it because of the weakening commodity prices.

And many of our economies are reliant on forex earned from exports of commodities. So the minute your currency depreciates and you see a weakening of the exchange rate of the currency, whether it’s the kwacha, the cedi, in this case, the ZAR, your revenue collection and your ability to meet your targeted payments to your multilateral agencies weaken. Then you are sitting with a probability of default, sovereign risk premiums heighten and all kind of problems [arise] from the public deficit side.

So we need to look at using our savings and capital, particularly from the private sector, more carefully. I think there’s an infrastructure asset class that has now been recommended through Regulation 28. That is an opportunity for us to use that.

We’ve got the Infrastructure Fund from the DBSA [Development Bank of Southern Africa]; let’s capitalise and use our savings for development through the mechanisms that the financial markets enable.

So there’s a couple of things that can be done. We have the infrastructure and the institutions, but I think the will and the urgency around that is what needs to be fast-tracked.

JIMMY MOYAHA: How I wish we had more time for this conversation, but we’re definitely going to come back to it, and we’re going to have an extended version of this.

But for now, we’ll leave it at that. That’s Dr Nthabiseng Moleko, developmental economist at Stellenbosch Business School, sharing her thoughts and insights around Sona 2024 as we await that speech from the president tomorrow evening.