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South Africa’s President Cyril Ramaphosa delivered a strong pro-business message in his first state of the nation address as the head of a coalition government, singling out the country’s economic revival as the main priority of his final five-year term.
Speaking in Cape Town’s City Hall as the head of a unity government of 10 parties after the African National Congress won just 40.2 per cent of the vote in the May election, Ramaphosa pledged to “reindustrialise” South Africa, after a decade of GDP growth of less than 1 per cent.
Though Ramaphosa has made similar pledges before, the involvement of the market-friendly Democratic Alliance in the new executive, and as head of six ministries, has fuelled optimism among business leaders that these plans would be implemented.
The country’s stock exchange, the JSE, has risen 2.2 per cent since the poll.
Ramaphosa pledged to cut the red tape that has prevented skilled foreigners from getting work visas, overhaul dysfunctional municipalities and “massively increase the scale of investment” in infrastructure, a role now under the DA’s Dean Macpherson, the new minister of public works.
“We have a clear intention to turn our country into a construction site,” Ramaphosa said. “We want to see yellow equipment throughout our country and cranes [with] roads being built, as well as dams, bridges, houses, schools [and] hospitals.”
This echoes what Macpherson told parliament the day before, in which he revealed plans to attract R10bn ($547mn) in private sector investment to build new energy, communications, water and transport infrastructure.
Ramaphosa spoke on the 106th anniversary of the birth of Nelson Mandela, the country’s first democratic president, who led the first unity government in 1994 — a compromise designed at the time to ease reconciliation after apartheid, rather then help the ANC retain power, as it is now.
Mbhazima Shilowa, a former high-ranking ANC politician who quit the party more than a decade earlier, told the Financial Times that Ramaphosa spoke in broad strokes to all sides of the unity government. “He looked at both sides and gave a nod and a wink,” he said.
But Ramaphosa’s message was bolstered by a new wave of economic optimism, as the electricity blackouts, which have plagued the country for more than a decade and choked growth, were halted nearly four months ago.
Mteto Nyati, the chair of Eskom, told the FT in May that the power utility had been “fixed” by prioritising maintenance of old plants.
However, the power shortages have helped kick-start a boom in renewable energy projects to address the blackouts, after the ANC reluctantly opened up power generation to private sector investors.
Ramaphosa told the lawmakers that “we already have a huge pipeline of renewable energy projects, representing over 22,500MW of new generating capacity, estimated to be worth around R400bn ($21.9bn) in new private investment”.
At the same time, he said the country would introduce a “sustainable form of income support” to help the 32.9 per cent of South Africans without jobs, one of the highest unemployment rates in the world.
Half of all South African households rely on some form of welfare, illustrating the magnitude of the crisis.
Peter Attard Montalto, managing director of consultancy Krutham, said that while Ramaphosa’s speech seemed to contain little new on the surface, he did give critical commitments to unblocking growth.
“This won’t be a ‘buy’ moment for investors and trust is low to zero on speeches, but it will allow the continued restocking of goodwill on South Africa that has been going on since the elections,” he told the FT.
Goolam Ballim, the chief economist at Africa’s largest bank, Standard Bank, said earlier in the day that the recovery at Eskom and in ports and rail operator Transnet could add two percentage points to the country’s GDP.
“South Africa is on an accelerating trajectory for a few reasons. We know the electricity dynamic subtracted meaningfully from growth over the last two years . . . so there’s almost a switch-on where reliable electricity bakes in an elevated level of economic growth,” he said.
Ballim said the country could deliver 3.5 per cent real growth over the next five years, if the recovery remained on track.
