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So many questions and so few answers arise from the State of the Nation Address

So many questions and so few answers arise from the State of the Nation Address
Zimbali Mncube and Liso Mdutyana
By Zimbali Mncube and Liso Mdutyana
14 Feb 2024
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President Ramaphosa’s statements about development seem all the more hollow when we consider the aggressive budget cuts unilaterally instituted by the National Treasury. These hamstring economic growth and reduce access to essential services in health, housing, education and social assistance.

The Institute for Economic Justice (IEJ) is disappointed by President Cyril Ramaphosa’s recent State of the Nation Address (Sona). The speech contained almost no plans to address the deep economic and social crises South Africans face. It simply listed existing, often failed, approaches. The Sona also exaggerated the achievements of post-apartheid administrations, while understating their failures.

When speaking about our economic success, the President failed to acknowledge that while between 1994 and 2022 our peers grew at an average rate of 4.07%, South Africa’s real GDP per capita has only seen annual average growth of 1.2%. 

More than 11 million people are currently unemployed, 62.6% of South Africans live in poverty, and 66.7% cannot afford a healthy diet.

Budget cuts and policies


The President’s statements about development seem all the more hollow when we consider the aggressive budget cuts unilaterally instituted by the National Treasury. These hamstring economic growth and reduce access to essential services in health, housing, education and social assistance.

Members of Parliament need to hold the President accountable for details of proposed policies, timelines for implementation and how policies prioritised will be resourced. 

The President should also produce the evidence which informs government policies and demonstrates the impact these will have on advancing socioeconomic rights and supporting inclusive economic growth. 

SRD grant


There are a number of questions we believe the President needs to answer.

How will the President ensure that all eligible beneficiaries receive access to the lifesaving SRD grant? And what concrete steps to improve and expand the SRD and transition it into a universal basic income guarantee are being planned?

The President sang the praises of the SRD grant, noting that social assistance is “an investment in the future” and promising to “extend it and improve it as the next step towards income support for the unemployed”. No concrete proposals or timelines followed this commitment.

As it stands, the SRD has been stuck at R350 since 2020 and is set to expire in March 2025. 

The number of SRD grant beneficiaries has decreased from 11 million in 2022 to 8.5 million in 2023, out of approximately 16 million eligible beneficiaries, due to deliberate barriers to access brought in to stay within a lower budget allocation.

Will the proposed improvement include equalisation with the child support grant and improvement of the value of these grants to the food poverty line of R760 per month? 

Will exclusionary regulations be amended and excessively low means tests be increased? 

Will the 2024 Budget address this commitment to improve the SRD, and transition to a permanent system of basic income?

Privatisation


Where is the evidence that private sector-run infrastructure and the proposed mobilisation of private finance for the just energy transition will lead to improved service provision?

The Sona was replete with references to enticing the private sector to finance the just energy transition, climate change responses, housing, water and rail infrastructure. 

As the IEJ has shown before, this is an expensive approach with significant risks to the state and the public. It results in increased fees for the end user – further marginalising those who cannot afford private services, while the rewards disproportionately fall to the private sector.

Privatisation in vital infrastructure such as rail and electricity – under the guise of “increased competition through private sector participation” – has been associated with mass worker lay-offs, and the prioritisation of high tariffs to increase revenue to the exclusion of the marginalised. 

Can the President outline a vision to resource and improve public provision of infrastructure?

Public services


How is the President going to ensure that public services are improved and capacitated?

While he praised the public services from which “Tintswalo” had benefited, he made no mention of the National Treasury’s starvation of public service provision, nor commitments to end this budget butchery. 

As recently as the 2023 MTBPS, R10-billion and R2-billion were cut from vital healthcare and education spending respectively, following many years of cutbacks.

Similarly, at R17 per eligible child per day since 2019, funding for early childhood care remains inadequate. This is despite the President’s acknowledgement that the Constitution obliges the “state to progressively realise the rights of everyone to housing, healthcare, food, water, social security, safety and education”.

What is the plan to expand and invest in public services?

Employment stimulus


What is the future of the Presidential Employment Stimulus (PES)?

After the story of “Tintswalo”, the policy first mentioned by the President was the PES. He noted that it had provided more than 1.7 million employment and livelihood opportunities. This included opportunities for one million school assistants in 23,000 schools.

Yet he failed to mention that the programme is without a medium-term budget and that the National Treasury is attempting to kill it. How will this be turned around, and is there a commitment to properly resource public employment?

Women’s empowerment


How will the President ensure the economic empowerment of women?

The President claimed progress is being made in the empowerment of women and the battle against gender-based violence and femicide (GBVF). 

It remains unclear whether the R21-billion for the National Strategic Plan on GBVF is sufficient, and no mention was made that far greater cuts have been made in key areas of support in health education, and social grants, whose reduction will increase the unpaid care work of women.

Is there an integrated plan by the Presidency and the ministry to ensure the social and economic empowerment of women?

Hunger crisis and climate change resilience


Where is government’s coordinated, well-resourced and capacitated plan with clear targets and time frames to address the urgency of the hunger and nutrition crisis, and transform the food system for equity and sustainability?

The President included food in his mention of critical constitutional rights the state has to progressively realise. Yet, apart from the impact of Russia’s invasion of Ukraine on food prices, nothing was said of the food and nutrition insecurity crisis in South Africa and government’s plan to deal with it.

The crisis is a stark sign of how the economy is not working for ordinary people or the planet. 

The crisis will only get worse with intensifying climate impacts as the food system currently has low adaptive capacity. 

Coordinated public policy that directly addresses the hunger crisis, tackles private interest and profit motivation across the food system, and builds climate resilience are therefore critical.

Is there a plan to address the crisis of hunger?

Just energy transition


What policy interventions are planned to ensure local employment, gender equality, SMME development, increased local manufacturing and skills transfer and learning in the just energy transition?

In his speech, the President boasts of bringing on board more than 2,500MW of solar and wind power to the grid, with three times this amount already in procurement or construction.

However, the IEJ has cautioned that the narrow focus on independent power producers’ (IPPs) financing excludes developmental industrial finance for the nascent local renewables energy manufacturing sector, and encourages IPPs to resist the state’s attempt to localise renewable energy manufacturing.

Is there a plan for public provision of renewable energy and a transition to new forms of energy which addresses the multiple developmental challenges arising from this necessary but complex transition?

Contingency fund


How does the government intend to leverage funds from the Gold and Foreign Exchange Contingency Reserve Account (GFECRA) to realise constitutional rights and inclusive development progressively?

The President was silent on potential uses for the almost R500-billion GFECRA fund sitting with the South African Reserve Bank (Sarb) despite ongoing discussions between the National Treasury and the Sarb regarding this account. 

No mention was made of the proposed ways in which this could assist the government in resource policy priorities, including expanding the SRD grant, supporting capital expenditure and growing development finance.

The IEJ, having exposed the existence of this fund, has made concrete proposals for harnessing these resources to address critical needs. Is the Presidency seriously looking at these proposals, or will the Treasury again be allowed to unilaterally determine the priorities?

State Capture accountability


If State Capture is a story of the past, then why has there been such slow progress in holding those who were responsible for it accountable, as recommended by the Zondo Commission? 

It is encouraging that the President noted the progress made by the SA Revenue Service (SARS)  to recover unpaid taxes following its revitalisation. However, SARS remains an exception. 

Despite claims that the government has won the fight over corruption and State Capture, this cannot be the case when high-profile individuals implicated in State Capture have yet to be held accountable.

What measures are being taken to ensure that people in the state (including those in Cabinet), public enterprises and the governing party who were or are implicated in State Capture are not able to continue abusing their access to power and resources?

Constitutional rights


Is the President confident that the maximum available resources are being used to progressively realise constitutional rights and advance inclusive development?

The President noted that the state is constitutionally obliged to progressively realise the rights of everyone to housing, healthcare, food, water, social security, safety and education. At the same time, he did not indicate the measures that the state will undertake to raise the necessary resources to achieve this.

Instead of raising the maximum available resources, recent budgets have cut taxes on corporations, provided hundreds of billions of rands in tax breaks for the wealthy, and failed to adequately tax wealth. The President offered no alternative.

Civil society, in an open letter from more than 100 economists and experts, has proposed multiple ways to mobilise domestic resources. Has the President considered these proposals, and will he engage with them? DM

Zimbali Mncube is a tax and budget policy researcher at the Institute for Economic Justice. Liso Mdutyana is an IEJ tax and budget policy junior researcher.

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