President Ramaphosa’s State of the Nation Address this year was a subdued affair, and many commentators have been left unimpressed by his policy announcements. However, the President shared some glimmers of hope that can boost private sector growth in the coming years.
Here are five key takeaways from SONA 2021 that are likely to affect your business.
1. Covid-19 vaccines are coming, and business will need to assist in the rollout
Following the news last week that the much-anticipated AstraZeneca vaccine is barely effective against the 501Y.V2 variant of the virus first identified by South African scientists, government has procured the Johnson & Johnson vaccine which is understood to be more suitable. A total of 9 million doses have been procured; 80,000 doses will arrive in the country next week and a further 420,000 will arrive over the next month.
While the President assured us last night that all provinces have plans in place for vaccine roll-out — at least for the initial stages — it is unlikely that most provinces currently have capacity to distribute vaccines at the scale required to achieve herd immunity. The state will almost certainly have to rely on the private sector to assist in the storage and transport of vaccines at the correct temperatures, the management of vaccination sites, and clear communication to manage the public’s concerns and expectations.
2. Inclusive growth and sustainable job creation top the agenda
Massive New Deal-type public works projects have been planned worth R340 billion. These include housing projects, highway construction and rehabilitation, energy projects, and telecommunications infrastructure rollout. Again, since the state lacks capacity to undertake public works at this scale, private sector expertise and experience will be essential. Industries related to these projects, construction in particular, could enjoy a much-needed shot in the arm.
Although the President emphasised state-led job creation, he also recognised that the largest number of jobs will be created by the private sector as the economy recovers. As such, government has committed to creating a more conducive environment for the private sector to flourish. Although the speech avoided going into detail on what this entails, businesses may be reassured by the President’s acknowledgement that a thriving private sector is essential to sustain the South African economy.
Women-owned private businesses received a special mention, following Ramaphosa’s policy to economically empower women. Last year, cabinet approved measures that will see a minimum of 40% of public procurement going to women-owned businesses. An acceleration on the long-standing policy of black economic empowerment has also been announced, with renewed vigour directed towards policies on black ownership, control and management of the economy.
3. Local producers and manufacturers will benefit from a renewed commitment from government, business and organised labour
Various stakeholders in government’s Economic Reconstruction and Development Plan have agreed to reduce the country’s reliance on imports by 20% over the next five years. This commitment is expected to boost local businesses involved in the production and manufacture of over 40 types of goods — from metal products to agricultural produce, personal protective equipment, and furniture. Efforts are also underway to assist small, medium and micro-enterprises through favourable procurement policies and manufacturing support.
4. ‘Master plans’ are creating favourable conditions for certain industries to thrive
Various ‘master plans’ have been agreed to and negotiated in key sectors to rejuvenate and grow key local industries. The poultry, sugar, and clothing and textile industries have already benefitted from these strategic interventions. This followed in-depth analyses of their respective needs and constructive engagement between industry and government. Given the noteworthy early success of these interventions, government will likely be looking to secure similar plans across other industries. Businesses that will be looking to expand their export opportunities through more favourable trade policy will need to navigate these waters carefully.
5. A reliable supply of energy remains a priority
Promises about securing a constant and reliable supply of power have featured in every SONA speech in recent memory. This year, weary business owners — especially in energy-intensive industries — may be encouraged that there finally seems to be a tangible plan on the table. Emergency procurement of extra power under the Department of Mineral Resources and Energy’s Risk Mitigation Independent Power Producers Procurement Programme (RMIPPPP) will soon be finalised, and regulations have been amended to allow municipalities to procure power from independent power producers in addition to that generated by Eskom. Various other legislative amendments are planned to allow the entry of private generators into the currently monopolised market.
The President promised more detail in the coming weeks on the specific plans and pipelines for inclusive growth that were announced. But, in the meantime, businesses may be reassured by a seeming recognition that a thriving private sector industry is essential. Businesses looking to engage with government and play their part in rebuilding our economy would be well-advised to look for opportunities that support government’s task of delivering jobs and growth in key sectors.
Image credit: Ashraf Hendricks/GroundUp