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Zuma's speech underwhelms analysts

Cape Town – Economists and analysts were by and large underwhelmed by President Jacob Zuma’s 2017 State of the Nation Address (SONA) for failing to provide policy certainty and concrete detail on the ruling party’s radical economic transformation agenda. 

Save for mentioning that radical socioeconomic transformation will be realised through legislation, black economic empowerment charters, the budget and regulation, South Africans are none the wiser as to how and when exactly it will be brought about, said Christie Viljoen, economist at KPMG. 

In Zuma’s SONA delivered on Thursday night, he reiterated the ANC’s earlier comments that South Africa simply could not delay radical economic transformation any further. 

READ: Zuma sheds light on radical economic transformation

The only two detailed interventions Zuma mentioned in his speech were the fact that new regulations gazetted in January will make it compulsory for big contractors to subcontract 30% of business to black-owned enterprises. 

The other intervention entails legislation that will soon be presented to Cabinet and then Parliament, which will prevent over-concentration in certain sectors of the economy. 

“Besides these two remarks there’s nothing concrete on the table,” said Viljoen, “but we’ve become used to uncertainty in South Africa.” 

Dennis Dykes, Nedbank chief economist, said although everyone in South Africa would agree that South Africa requires radical economic transformation it remains to be seen whether transformation will be pushed “with a big stick”. 

“By far the preferred way would be to come up with proper win-win situations where everybody is benefiting by providing incentives for people to transform,” Dykes said. 

Zuma’s announcement that big contractors will need to subcontract to black-owned businesses also raises questions, as it will be raising costs to the state. “This is what we’ve seen with Eskom and SAA.” 

READ: Zuma ignores state-owned entities in SONA

In a country, such as South Africa, Dykes says, where there’s a lack of investment and such a huge unemployment rate you’d rather expect government to roll out the red carpet for investors – both local and international. 

Morné Mostert, director of the Institute for Futures Research (IFR), said in a statement Zuma in his SONA presented a strategy that would work perfectly for a world of the early 1900s. 

He perpetuates policy uncertainty, among other things in relation to property ownership, when foreign direct investment (FDI) decision makers are already starting to withdraw from South Africa, encouraging ownership and management of designated groups in factories, when factories are the main target of job losses through artificial intelligence – “all the while punting redistribution while ratings agencies and the unemployed are closely scrutinising South Africa for any possible signs of growth”.

Herman van Papendorp, head of investment research and asset allocation, and Sanisha Packirisamy, economist – both at MMI Holdings – said in a company note some of the interventions Zuma announced on Thursday could further dissuade investment by the private sector and stifle employment growth. 

READ: Economy growing, but not enough to create jobs - Zuma 

“The announcements made in the SONA are unlikely to affect South Africa’s low growth trajectory in our view. A lack of meaningful reform to improve South Africa’s investment climate or tackle problems in South Africa’s struggling state-owned enterprises is likely to cap trend growth to around 2%,” Packirisamy and Van Papendorp said. 

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