SONA sets scene for 'austerity-style' budget, says analyst

2020-02-14 01:58
President Cyril Ramaphosa arrives at Parliament for the State of the Nation Address.

President Cyril Ramaphosa arrives at Parliament for the State of the Nation Address. (GCIS, Flickr)

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President Cyril Ramaphosa's SONA has set the stage for an "austerity-style budget" which will place pressure on Finance Minister Tito Mboweni to deliver, says political analyst Daniel Silke.

This would require Mboweni to announce the "top slicing of government departments".

"We are likely to see the minister grapple through an austerity style budget. It will be a very tough budget," said Silke.

In terms of how SONA would have been viewed by the markets, investors and ratings agencies, he said it would in all likelihood have been received in a "neutral fashion".

"SONA did not address issues around structural reform. He didn't talk about ... for example, the wage bill, which ratings agencies discuss. Lanseria, the sovereign fund - it is not clear where the funding will come from."

Silke decried the fact that the speech was "neutral".

"It was a far ranging speech that still skirted or perhaps deliberately obfuscated the more controversial aspects of structural reform," said Silke.

He said the SONA also failed to clarify the role of the private sector in terms of rescuing state owned enterprises.

"The speech did not give clarity regarding the big rescue. He went with what was relatively safe. Many of those issues require a leap of faith in terms of managing these projects ... and without adequate proof of how they will be accomplished it will leave South Africans with very little confidence that they can be accomplished," said Silke.

Silke said the speech reflected the ambiguity within the ANC and how the state relates to the private sector.

"The speech was ambiguous and lacked a clarity and focus and a direction for taking South Africa forward. It lacked a reboot, but it would not have ruffled feathers in the alliance. It was a safe speech."

However, Ramaphosa's Eskom plan provided a glimmer of "urgency", which Silke said was a plus.

The President announced the following steps:

- 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. 

- We will initiate the procurement of emergency power from projects that can deliver electricity into the grid within 3 to 12 months from approval. 

- The National Energy Regulator will continue to register small scale distributed generation for own use of under 1 MW, for which no licence is required. 

- The National Energy Regulator will ensure that all applications by commercial and industrial users to produce electricity for own use above 1MW are processed within the prescribed 120 days.  It should be noted that there is now no limit to installed capacity above 1MW. 

- We will open bid window 5 of the renewable energy IPP and work with producers to accelerate the completion of window 4 projects. 

- We will negotiate supplementary power purchase agreements to acquire additional capacity from existing wind and solar plants. 

- We will also put in place measures to enable municipalities in good financial standing to procure their own power from independent power producers. 

"The IPP for municipalities was at long last an important concession ... to those who believe the state should not be in complete control of power production," said Silke.

Overall, however, Silke said he didn't see enough meat on the bones to propel him to "any sense of confidence".

Dr Zwelinzima Ndevu, of Stellenbosch University's School of Public Leadership said the President made a number of important announcements, "such as municipalities' procurement of electricity directly, creation of a state bank, restructuring of SAA, building of a new university and TVET colleges, boosting small businesses".

Ndevu pointed out that Ramaphosa had, however, failed to elaborate on the modernisation of government, and greater access to higher education.

"The biggest surprise for me was the announcement of the establishment of the sovereign wealth fund which has been an ANC resolution and the short period for water licensing which is good news. It is still not clear how Eskom's unbundling will not create more problems such as duplication of roles," said Ndevu.

On the eve of SONA, Mbhazima Shilowa, former Gauteng premier, trade unionist and Cope leader wrote that it was incumbent upon the President to rally the country behind a discernible plan and trust them to help implement it.

"To an extent that the masses demobilised in the hope that a democratic government on its own will deliver or that theirs was only to help remove Zuma, it is time to rise not in rebellion but in support and joint effort with the government to ensure the much promised better life for all is realised."

"I wait with bated breath on what he, as head of government is prepared to do to show that it is not all talk but a determination to change the plight of our country for the better," wrote Shilowa.

Read more on:    tito mboweni  |  cyril ramaphosa  |  budget  |  sona
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