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Cape Town - Nomura emerging markets expert Peter Attard Montalto has expressed disappointment at the lack of forward-looking statements on economic improvements in President Jacob Zuma's State of the Nation address.
"The speech clearly had the focus squarely set on the upcoming May election but provided virtually no forward-looking elements on policy changes to address challenges in the economy or areas of action yet to be undertaken," said Montalto.
"The overall rallying cry was 'we have a good story to tell, South Africa has never been better'. As such there was virtually nothing much of interest to investors on the outlook."
Of significance was Zuma’s mention that the weak rand is seriously impacting infrastructure development plan costs. "We will have to watch carefully how this plays out in the budget at the end of the month... the path of least resistance will be simply to slow the pace of investment, which is not positive for growth," said Montalto.
He pointed to the "slightly odd" tone in Zuma's attempt to balance the right to protest service delivery issues with the need to do so in non-violent ways, "with protest action put down to the government’s success in delivery in other areas and violence (put) down to being pre-meditated and blamed on SA’s apartheid past".
Montalto regards this as the most controversial part of the speech, "especially after the violence of ANC supporters at a DA march yesterday (Wednesday)."
The national development plan (NDP) was "positioned front and centre in the speech, mentioned right at the start, with promises of additional monitoring and evaluation of implementation".
Said Montalto: "This however still seems to have little relation to the reality of only selective leadership on issues in NDP, which are less politically contentious or which departments like the National Treasury and Health would be doing anyway.
Zuma homed in on employment and provided "yet another jobs target" - 6 million by 2019.
"However, previous Sona (State of the Nation) jobs targets over the last five years have not been met and there is little reason to think this one would be without meaningful policy change."
Zuma's mention of the youth wage subsidy policy was "welcome", and the anticipated attempt was made to avoid conflict with unions "by saying no current workers would be impacted".
Shale licences in the Karoo and the national health insurance (NHI) plan were other welcome mentions. "However, there were successive promises on NHI over the past few years, including last year on the fact the funding wrapper would be ready by now, which it hasn’t, in part given the political sensitivity of the higher taxes required."
Zuma's mention of land reform did not contain any shockers and simply said matters will be brought forward at a faster pace, as already announced by government.
Montalto singled out mining as the "more difficult part of the speech".
"Zuma placed the reduced number of strikes in the sector last year down to government’s policy successes, whilst ignoring that it was because Amcu (the Association of Mineworkers and Construction Union) was busy securing its position in the sector, as well as the fact there were fewer multi-year agreements up for grabs.
"Equally, comments that the mining sector was now on a firmer footing due to investment in housing and the government's work with mining companies was odd during an ongoing and damaging wide spread strike in platinum, as well as the fact that our understanding remains that mining companies' very real and good progress on improving worker conditions and HR functions since Marikana have actually been done largely off their own backs."
Montalto summed up Zuma's speech by saying that overall, it did not contain any new spending commitments and nothing new on the policy front.
"It gives us a flavour of the budget to come at the end of the month, the political and fiscal constraints it will be under, and the fact everything is basically on pause now till after the election in policy terms."
"The speech clearly had the focus squarely set on the upcoming May election but provided virtually no forward-looking elements on policy changes to address challenges in the economy or areas of action yet to be undertaken," said Montalto.
"The overall rallying cry was 'we have a good story to tell, South Africa has never been better'. As such there was virtually nothing much of interest to investors on the outlook."
Of significance was Zuma’s mention that the weak rand is seriously impacting infrastructure development plan costs. "We will have to watch carefully how this plays out in the budget at the end of the month... the path of least resistance will be simply to slow the pace of investment, which is not positive for growth," said Montalto.
He pointed to the "slightly odd" tone in Zuma's attempt to balance the right to protest service delivery issues with the need to do so in non-violent ways, "with protest action put down to the government’s success in delivery in other areas and violence (put) down to being pre-meditated and blamed on SA’s apartheid past".
Montalto regards this as the most controversial part of the speech, "especially after the violence of ANC supporters at a DA march yesterday (Wednesday)."
The national development plan (NDP) was "positioned front and centre in the speech, mentioned right at the start, with promises of additional monitoring and evaluation of implementation".
Said Montalto: "This however still seems to have little relation to the reality of only selective leadership on issues in NDP, which are less politically contentious or which departments like the National Treasury and Health would be doing anyway.
Zuma homed in on employment and provided "yet another jobs target" - 6 million by 2019.
"However, previous Sona (State of the Nation) jobs targets over the last five years have not been met and there is little reason to think this one would be without meaningful policy change."
Zuma's mention of the youth wage subsidy policy was "welcome", and the anticipated attempt was made to avoid conflict with unions "by saying no current workers would be impacted".
Shale licences in the Karoo and the national health insurance (NHI) plan were other welcome mentions. "However, there were successive promises on NHI over the past few years, including last year on the fact the funding wrapper would be ready by now, which it hasn’t, in part given the political sensitivity of the higher taxes required."
Zuma's mention of land reform did not contain any shockers and simply said matters will be brought forward at a faster pace, as already announced by government.
Montalto singled out mining as the "more difficult part of the speech".
"Zuma placed the reduced number of strikes in the sector last year down to government’s policy successes, whilst ignoring that it was because Amcu (the Association of Mineworkers and Construction Union) was busy securing its position in the sector, as well as the fact there were fewer multi-year agreements up for grabs.
"Equally, comments that the mining sector was now on a firmer footing due to investment in housing and the government's work with mining companies was odd during an ongoing and damaging wide spread strike in platinum, as well as the fact that our understanding remains that mining companies' very real and good progress on improving worker conditions and HR functions since Marikana have actually been done largely off their own backs."
Montalto summed up Zuma's speech by saying that overall, it did not contain any new spending commitments and nothing new on the policy front.
"It gives us a flavour of the budget to come at the end of the month, the political and fiscal constraints it will be under, and the fact everything is basically on pause now till after the election in policy terms."
