Sona | Empty promises: It's a poor show, Mr President

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Eskom is a major threat to the economy, but also offers opportunities for the private sector's involvement in power generation and distribution.
Eskom is a major threat to the economy, but also offers opportunities for the private sector's involvement in power generation and distribution.

President Cyril Ramaphosa will deliver his state of the nation address (Sona) on Thursday evening, but there are still many promises from last year's Sona that have not been fulfilled. City Press looks at the progress made in respect of six key promises.

Promise 1: Government will create an environment favourable to private sector investment:

2022 Sona: The state must create an environment for private sector investments and unleash the dynamism of the economy.

David Ansara, executive director of the Free Market Foundation, says Ramaphosa has been promising economic reform for a long time, but this is not reflected in his government's policy decisions. For that, he must bear full responsibility.

Under Ramaphosa's leadership, the operating environment has become rather hostile towards the business world and as a result, the local economy has deteriorated by almost every measure over the past five years.

Investors are finding it increasingly difficult to realise returns in the environment. Eskom is a single point of failure for the South African economy. This brings enormous additional costs to businesses, especially in manufacturing, agriculture, mining and retail.

Promise 2: Momentum with infrastructure investment:

2021 Sona: A large-scale roll-out of infrastructure throughout the country, and: We have now developed an infrastructure project pipeline worth R340 billion in network industries, such as energy, water, transport and telecommunications.

According to Professor Raymond Parsons, an economist from the North-West University's business school, the total fixed capital investment now amounts to 14% of GDP, compared to around 18% a few years ago.

Professor Danie Meyer from the college for business, economics and research at the University of Johannesburg says this is far from the target of 30%. The state must make 10% of these investments but currently achieves only 4%. In addition, the private sector is actually on an investment strike due to policy uncertainties and the current power shortages.

Slow procurement procedures, the stifling effects of the construction mafia and poor implementation at the local government level are also holding back infrastructure investment, he says.

According to Parsons, there are some positive investments where companies reallocate their capital expenditure to wean themselves from Eskom.

Parsons and Meyer agree that investment is essential for economic growth and job creation.

 Pledge 3: Digital migration:

2022 Sona:

One of the biggest constraints on technological progress in our economy is the unacceptable delay in migrating from analogue to digital signals. Switching off the analogue signal has already been done in a few provinces; the other provinces will migrate to a digital signal by the end of March 2022.

The department of communications and digital technology told City Press that the proposed date for the final shutdown is now March 31 2023 - therefore, a year later than Ramaphosa's undertaking. Four out of the nine provinces' analogue signal has yet to be switched off.

Dominic Cull of Ellipsis Regulatory Solutions, which provides legal assistance to telecommunications companies, says Communications Minister Khumbudzo Ntshavheni is doing much better with the digital migration process than her predecessor, Stella Ndabeni-Abrahams (who earned an F symbol). She was appointed to complete the task and travelled all over the country to get it completed. For a long time, nothing happened, but now we are making rapid progress.

The minister invited stakeholders to make submissions on the planned date for final migration by January 27. One will have to see who objects to it, but I think we can still finish it this year, says Cull.

Promise 4: Progress with SA Connect:

2022 state speech: We will develop a standard model so that municipalities can get permission for the implementation of broadband infrastructure. This will mean faster broadband that people can access and reduce the cost of digital communications.

2021 Sona:

Another approved project is SA Connect, a programme to roll out broadband to schools, hospitals, police stations and other government facilities.

In October last year, the department of communications told Parliament that funding for phase 2 of SA Connect had yet to be obtained from National Treasury. It's not officially launched yet.

Cull says that SA Connect has been around for 10 years, but it has not yet been implemented on a large scale. Government has only introduced connections at about 1000 locations. Plans to finally incorporate Broadband Infraco, the state provider of broadband internet, into a new state-owned digital infrastructure company are supposed to happen soon. I expect there will be more action when that happens.

Despite the delay with SA Connect, many provinces and municipalities have already established their own infrastructure. It's not as if nothing happened with broadband internet. But now, all these initiatives must be brought together as part of SA Connect, says Cull.

Shaheen Vawda, sales manager at BCX, says there are plans for the role of operators to help with the network in places where it is required, but it is behind the Cabinet's schedule. Implementation plans for the core network and provincial transmission have been issued and are being assessed or waiting for operators to respond.

He says the full roll out runs alongside decisions on spectrum allocation, policy on open access and allocation to network operators.

Promise 5: Auction of high-frequency speakers:

2022 Sona:

Our communications regulator, Icasa, will start auctioning off the high-frequency spectrum three weeks from now.

A Telkom court application regarding the process that was followed with the auction of the radio frequency spectrum has halted Icasa's plans to meet Ramaphosa's deadline.

Telkom was unhappy about Icasa's limitation on the amount of spectrum – the raw network capacity that operators use to communicate between cellular towers and mobile devices – that each operator could get.

However, the parties were able to reach an out-of-court settlement on April 11 last year, with the telecommunications industry finally getting a new spectrum for the first time in over a decade.

READ: Mmusi Maimane | This year's Sona is about SA's very survival

A higher frequency spectrum means that network providers of data, such as mobile phone services, can provide better, faster and more bandwidth. This should result in cheaper data costs in the long run.

Promise 6: Progress with the multi-billion-rand Mzimvubu Water Project to get the economy going in the very poor north-east of the Eastern Cape:

2022 Sona:

Government has started the process of delivering the Mzimvubu Water Project. The first of the two phases in the procurement process is due to conclude later this month, with the preferred tenderer likely to be announced in September 2022.

Tenders for the project were issued in February 2022, but there was no indication yet when the successful bid would be announced with funding shortages delaying the project.

The project had been delayed since 2014 when former president Jacob Zuma announced it. The dams to be built for this project will hold over 700 million m³ of water, which is badly needed in the drought-stricken Eastern Cape.

Senzo Mchunu, the fourth minister of water and sanitation to oversee the project, announced in September that the project was one of many in his portfolio plagued by mismanagement and that he hoped to start implementing the project at the beginning of the next financial year.

READ: Nelson Mandela Bay suffers crippling water crisis

Mchunu also outlined that financing was currently the biggest challenge. It will apparently cost R15 billion.

Finance Minister Enoch Godongwana indicated to the SABC in December that the project would resume this year with an expected announcement about it during Thursday's state of the nation address.

What should Ramaphosa say in this year's state of the nation address?

Sona is an important platform for the president to restore confidence and set the tone for the economy in 2023, says Professor Raymond Parsons.

It must be recognised to what extent the economic boom has deteriorated in the past month as the Eskom crisis deepened.

Continually beating the system like a dead horse will no longer work. Reform is the key. By the time of the state of the nation speech, there may already be a state of emergency in force to deal with the electricity situation and the Cabinet has been shuffled.

All this must be combined in support of an urgent national programme with implementation at the forefront, in collaboration with the private sector.

Meyer says green energy must be at the top of the agenda for infrastructure development. We also need to know when and how the private sector will be allowed to supply power to the grid urgently.

Water is also a big problem and we want to hear how the government is going to ensure water security.

According to Meyer, attention must be paid to the condition of rural roads, which comprise about 80% of the country's roads. Everything is falling apart and is detrimental to the successful agricultural sector and holds back development in rural communities.

Ansara says Eskom is a major threat to the economy, but also offers opportunities for the private sector's involvement in power generation and distribution.

However, this will not happen automatically. The state should step in and relax licensing requirements for private providers. Firms must also be allowed to do business directly with each other in an open energy market, without government interference.

Municipalities that are under the control of opposition parties must be able to purchase more private power, he says.

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