- President Cyril Ramaphosa will deliver his State of the Nation Address (SONA) on Thursday, which is expected to provide an update on responses to the Covid-19 pandemic.
- There are two other crises, however, which the president must address. They predate Covid-19 and will likely remain beyond the pandemic.
- An economist has described Ramaphosa's task as the "most difficult" SONA since 1994.
When President Cyril Ramaphosa delivers his State of the Nation Address (SONA) on Thursday, without a doubt he is expected to make announcements related to the country's response to the Covid-19 pandemic.
The pandemic is the most immediate crisis and it must be dealt with before any plans for the future can be pursued. Just this week government announced that it will hold off on using the one million doses of Oxford/AstraZeneca vaccine, that were recently delivered to the country – this after a trial found it was less effective than the Covid-19501Y.V2 variant which has been most common amid the second-wave infections.
Government is in discussions with Johnson & Johnson to procure 20 million doses of its vaccine which is considered more effective against the variant, Bloomberg reported.
Late last year government had to introduce adjusted lockdown Level 3 restrictions to curb the second wave - the bans on alcohol sales and curfews dealt a blow to the hospitality and tourism industries. Labour unions, economists and business bodies alike have stressed the importance of the country procuring vaccines so that as many people can be inoculated to keep economic activity going.
'House is on fire'
Naturally, the pandemic will dominate the SONA. "The house is on fire and the priority is to put the fire out," noted NinetyOne strategist Michael Power. In an interview with Fin24 on Wednesday Power said that thinking about what to do once the fire is out, is difficult at this moment. "It's not easy to do at the moment because the fire is so fierce, the fire is so all consuming that you don't really have the time to think about what comes after," he said.
However, the president's speech may give "hints" of what might follow the Covid-19 crisis – but they can't be acted upon now while all efforts and resources are going toward putting out the fire, he explained.
Investec chief economist Annabel Bishop described this as the "most difficult SONA since 1994". Bishop expects the president to give more insight into the vaccine rollout. "The SONA will also likely emphasise that SA remains at risk of a third and even fourth wave but that South Africa is expected to begin administering vaccines this month, if in limited quantities …" she said. Bishop said the progress toward achieving herd community is generally slow.
Government intends for about 67% of the population to be vaccinated by the end of the year.
More generally the president would likely address the impact of the pandemic on the economy. Key areas include job creation, inclusive economic growth and improving the living conditions of the poor, the fight against corruption, repair of embattled state-owned enterprises and improving the capacity of the state, Bishop said.
The SONA will likely highlight that production has probably not returned to levels recorded in the first quarter of 2021. "The deep scarring the domestic economy has already experienced from the regulated shutdown of economic activity during lockdowns is likely to be persistent until 2024 in real terms, and longer if lockdown restrictions on economic activity are tightened materially this year," said Bishop.
When it comes to planning during uncertain times, Bishop pointed out the International Monetary Fund's World Uncertainty Index had come down by 60% from the peak observed at the onset of the Covid-19 pandemic. Global uncertainty is still 50%, according to the IMF. "However, the job of the SONA and the president is also to instil hope and look through the clouded uncertainty, by outlining the plans to resolve South Africa's problems …" she said.
Pre-Covid normality was 'lousy'
The SONA will have to be more than just a rehash of what government is planning to do – in vague terms. "We want the flesh around the bones," said chief economist of the Bureau for Economic Research, Hugo Pienaar.
The country will want to know where we will get vaccines from and when they will be delivered. "Planning is always uncertain, the world is an uncertain place. Now it is just so much more so," Pienaar said. There will likely be more waves of the Covid-19 virus as well as variants. South Africans would want government to move with speed, to get people inoculated before there are new variants, he added.
Ramaphosa also has to speak to the economic recovery and the delays in implementing structural reforms such as energy security and the releasing of broadband radio spectrum, Pienaar said. "In the decade before Covid-19 hit SA (2010 to 2019) real GDP was growing by less than 1% on average. The economy was poor before Covid. Even if we get vaccines 100% right, and [hypothetically] if in 18 months Covid-19 is something of the past, then what economy do we go back to?" Pienaar asked.
"Our normality pre-Covid was a pretty lousy one," he said. To get to a better economic and a sustainable, higher-growth environment post-Covid-19, the ball should not be dropped on structural reforms, he said. Apart from addressing the issue of the virus, government concurrently must address what measures will be put in place to ensure there is a more resilient and labour-absorbing post-Covid economy, he added.
During a webinar on the economic outlook for 2021, Standard Bank chief economist Goolam Ballim said the president may provide more "colour" and detail on vaccine procurement at this week's address. Even with the AstraZeneca vaccines being delayed, he said it was a mere "bump in the road" and that the vaccine rollout will likely still be a positive injection in the economy.
Fiscal dynamics also appear to be a second positive element, especially with revenue overruns. Some economists expect the tax shortfall to be R100 billion less. The effectiveness of fiscal dynamics depends on expenditure restraint in the near term, as opposed to "lumpy revenue extraction", said Ballim. In the medium term, there must be a focus on encouraging growth and thereby revenue, he explained.
Investors would also be likely interested in updates on energy. Ballim sees electricity remaining a challenge. Over the past two years, load shedding has shaved off one percentage point in GDP – Ballim sees it remaining the case in 2021. They would also be curious about political stability, Ballim expects institutional reforms to continue under Ramaphosa's leadership. Although, South Africans may become increasingly less confident as more revelations of state capture surface - as was the case in Brazil, Ballim said. However, this is part of the "healing curve", he added.
Beyond Covid-19
Looking beyond the pandemic, Dr Nthabiseng Moleko of the Stellenbosch University Business School said that there are two other crises plaguing the nation – that of gender-based violence and the economic downturn. If anything, the pandemic has shown that government is capable of pulling together a coordinated response to a crisis - the same level of importance must be placed in tackling gender-based violence and the economic crisis, Moleko explained.
"These other crises require the equal weight, and equal importance and emphasis," Moleko said. They require the same level of efficacy and coordination provided to the pandemic, she added.