Comments and snippets following President Jacob Zuma’s State Of The Nation Address

Key executives from Grant Thornton South Africa, provide commentary and snippets following President Jacob Zuma’s State of the Nation Address this evening, Thursday 11 February 2016:

General comments

Kaya Mfono, Associate Director: Public Sector Advisory at Grant Thornton

“The indication from President Jacob Zuma during the 2016 State of the Nation Address is that the economic growth is going to remain stagnant and only grow by 1% in 2016/17 financial year. This directly contradicts with the nation’s urgent need to curb growing unemployment.”

Terry Ramabulana, Director: Advisory Services at Grant Thornton

“It is disappointing to note that the President omitted to mention any significant programmes or developments regarding the drastic state of unemployment in the country. As growth may be associated with increased income inequality – we note that there are no specific measures to assist with poverty alleviation in this time of a battling economy.”

On infrastructure

Christelle Grohmann, Director: Advisory Services, Grant Thornton Johannesburg

“Outside of a brief mention at the outset regarding the National Development Plan and the Infrastructure Development Programme, the SONA this year did not address any new measures or focus for future infrastructure plans. All plans mentioned by the President in Ports, Water and Energy infrastructure have been long in progress. No new focus, no new plans is very concerning.”

On two capitals in SA

Gillian Saunders, Head of Advisory at Grant Thornton

“There is a lot more to the costs associated with two capitals in one country. Sadly, South Africa has a massive cabinet and if we were able to reduce the number of ministries significantly, it would then cost a lot less to move parliament around.”

On cost cutting

Kaya Mfono, Associate Director: Advisory Services at Grant Thornton

“We are pleased that the President announced a policy directive to cut-off fruitless and wasteful expenditure. In the State Of The Nation Address, President Zuma said that issues such as overseas trips by office bearers will be cut and there would also be a restriction on glamourous catering, entertainment, while budget vote dinners will no longer take place. Unfortunately these cuts will not have a big impact on the growing budget deficit. We hope that the Minister of Finance will add further detail to this topic during his National Budget Speech later this month regarding the reduction of fruitless and wasteful expenditure within government.”

Cashmore Muchaonyerwa, Director: Advisory Services at Grant Thornton

“It is encouraging that the president emphasised the need to reduce government spending and specifically fruitless and wasteful expenditure. Although measures such as cutting on overseas trips and conferences as announced by the president will assist, the real focus has to be on ensuring value for money is realised on procurement of goods and services as this is where billions are wasted every year due to poor programme management and fraud.”

On VISA amendments

Lee-Anne Bac, Director: Advisory Services at Grant Thornton

“We welcome the President’s acknowledgement that the visa regulations have been reviewed and changed in order to remove impediments to tourism development.”

On SOEs

Kaya Mfono, Associate Director: Public Sector Advisory at Grant Thornton

“It is encouraging from the President that there will be a greater focus on phasing out inactive state-owned companies. In recent years, the financial and operational performance of several state-owned companies has weakened. These state-owned companies are large contributors to the economic activity and account for 20 per cent of the gross capital formation. However, where an unfavourable financial exists such as in Eskom and SAA, state-owned companies often turn to government for a lifeline. We hope that the policy announcement in 2016 SONA will improve the performance of state-owned companies.”

On FDIs

Kaya Mfono, Associate Director: Public Sector Advisory at Grant Thornton

“We applaud the policy acknowledgement by the President that South Africa is open for business to foreign investors. We hope that this could encourage Foreign Direct Investment (FDIs) though a lot of additional effort needs to be made to assist here – a good example is to properly tackle the energy challenges in our country.”

On energy issues

Grant Penrose, Director: Infrastructure Advisory at Grant Thornton

It is encouraging to hear the President stating that the Gas, Renewables and Nuclear programmes are to continue ahead, building on the almost R200bn that already has been invested in the Renewables programme so far. We do note that little mention was made in relation to the other energy programmes such as Coal, Co-Gen and Inter-African Hydro programmes such as Grand Inga in the DRC – this is disappointing.

Grant Penrose, Director: Infrastructure Advisory at Grant Thornton

We applaud the President for formally stating that nuclear power investments would only be made at a scale and pace in accordance with what the country can afford. His admission to this massive cost and South Africa’s current state of economy, is laudable. We hope this process will open and transparent going forward.

On water and drought

Loshni Naidoo, Director: Sustainability at Grant Thornton

“Given the expected impact of the drought on agriculture and the economy, we are disappointed that the President did not mention more drastic government interventions to give much-needed aid.”

On a potential new government pharmaceutical company

Gillian Saunders, Head of Advisory at Grant Thornton

While the establishment of the state-owned pharmaceutical company might be seen as a positive step in improving health care in South Africa, the private pharmaceutical sector is likely to see it as a blow with possible loss of FDI in this sector as they lose the massive public sector market.

On government’s new 10-point plan for municipalities

Kaya Mfono, Associate Director: Public Sector Advisory at Grant Thornton

“It is surprising that the Back-to-Basics strategy for municipalities of five-building blocks of good governance, public participation, financial management, infrastructure services and institutional capacity has changed to a ten-point plan this evening as announced by the President. This is disappointing as the strategy has just been recently introduced to municipalities. The shift in this goal post will negatively affect municipalities.”