In the 2022 SONA delivered in the past week by President Ramaphosa, he outlined critical interventions that can positively impact and boost the real economy.
Addressing the 4 000 MW shortfall in electricity supply, he announced programs to introduce 6 500 MW of additional electricity capacity. However, of this total, only 3 900 MW of the electricity supply programs are at ‘’advanced”, “announced” or “ready to proceed” stages; leaving 2 600 MW at “soon to be opened’’, or “soon to be released’’ stages. The electricity supply shortage represents a significant threat to economic and social progress, driving up both the cost of living and of doing business in South Africa and must be treated with the utmost urgency.
The President announced that the Infrastructure Fund will receive R100bn from the fiscus over the next 10 years, and that the fund is now working to prepare a pipeline of projects with an investment value of R96bn. However, only R21bn of these projects are expected to start construction this year. Given the lack of meaningful infrastructure development and or maintenance in the previous decade or more in SA, the urgency to ensure that the Infrastructure Fund delivers on its mandate cannot be underplayed.
An important component to economic growth is creating an enabling environment for businesses to access and enter new markets. Last year, South Africa’s green Hydrogen strategy got a commitment of circa R700m in grant funding from the German government. Development of this sector over the next 10 years has the potential to unlock a pipeline worth R270 Billion to South African business. There is a separate commitment of R3.5 Billion in concessional loan finance for public and private sector green hydrogen projects made available by the Development Bank of KFW. #SONA2022
All of this is good and well if executed according to plan, but it does very little to help those severely impacted by the Covid-19 crisis and subsequent economic turmoil. The President approved an extension of the R350 Social Relief grant until March 2023 and is still working to finalise the details of the best options to replace the grant. The extension of the R350 grant is below the food poverty line of circa R624 and likely to be fiscally neutral. It will, however, provide much-needed social and political stability while work on structural reform continues.
Significant progress in the fight against corruption is pivotal to unlocking economic growth. In response to the first two parts of the report by the Zondo Commission, the President committed himself to present a plan of action by the 30th of June this year.
Are these interventions sufficient to trigger the significant structural reforms the economy so desperately needs? Will they lead to inclusive economic growth and employment creation opportunities for those who need them most? The jury is still out.
