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SONA: Emphasis on rebuilding a democratic state and growth initiatives

11 February 2022 Momentum Investments

Highlights

• The rand strengthened into the State of the Nation Address (SONA) but weakened again after the speech. The local unit was likely swayed on higher-than-expected inflation data from the United States.
• The SONA emphasised the importance of the country’s vaccination drive, job and growth initiatives and the need to rebuild a democratic state, improve state capacity and fight state capture and corruption.
• The speech also addressed a continuation in social support measures following the concluding report of an expert panel deliberating on basic income support, which was published in December 2021.
• The importance of rebuilding a social compact among government, business, labour and civil society was once again highlighted as necessary to reduce polarisation and create an enabling environment to promote a national vision. A 100-day deadline was announced to find solutions to boost growth, create jobs and combat hunger.
• In our view, garnering positive consumer, business and investor sentiment requires political buy-in, progress on the execution of the economic development and reconstruction plan and a reduction in political and policy uncertainty. The president’s plan to accelerate South Africa’s (SA) growth trajectory to solve the unemployment quagmire remains heavily reliant on the ability and willingness of the top leadership to execute on the economic plans proposed.

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