President Cyril Ramaphosa’s State of the Nation Address (SoNA), delivered on February 6, has been met with cautious optimism.

The Bureau of Economic Research (BER) commended the SoNA’s focus on the Medium-Term Development Plan (MTDP), which aims to boost economic growth to over 3% through large-scale infrastructure investment.

“With all the global uncertainty at present, we must ensure our economy is resilient and well-structured at home. The recognition of the importance of economic growth and the private sector, and the ambition to raise GDP growth above 3%, is refreshing, as is the importance of greening our growth.

“Also important is the strengthening of existing trade relationships and the full implementation of the African Continental Free Trade Area. The business community has frequently advocated for greater alignment between foreign policy and domestic policy interests to enhance the economic well-being of our country, with growth and jobs central,” Business Unity South Africa CEO Khulekani Mathe said.

The Steel and Engineering Industries Federation of South Africa (Seifsa), meanwhile, said that it was critical that government focus on the execution of a single framework rather than parallel plans.

“All too often, parallel plans are developed by different ministries and ad hoc structures, which confuse and complicate the operating environment for the business community.

“While grand and ambitious plans are noble and welcome, the success of this administration will hinge on action and execution,” it added.

Under the MTDP, the government plans to spend R940-billion over the next three years on roads, bridges, dams and waterways. Water infrastructure alone is set to be allocated R23-billion for seven major projects.

“The South African economy is indeed eventually capable of even much higher economic growth than 3% if the right choices are made. The present slow and uneven economic recovery nonetheless illustrates the extent to which accelerated structural reforms are urgently needed if South Africa is to even reach a 3% GDP growth by 2027,” North-West University Business School's Professor Raymond Parsons said.

He stated that achieving the socioeconomic targets outlined in the SoNA would, therefore, heavily depend on the accelerated implementation of growth-friendly policies and projects, better governance and less corruption at various levels, and ensuring that the country’s vulnerable public finances were properly stabilised.

Seifsa was sceptical, however, saying the SoNA was “filled with big and ambitious plans” but that “the country too often has been left trading on hope and promise and less on action”.

Consulting Engineers South Africa CEO Chris Campbell was also sceptical, stating: “Years have passed, and despite numerous policy frameworks and statements of intent, we have not spread our wings to achieve the development our nation desperately needs.”

Ironically, Business Leadership South Africa (BLSA) CEO Busisiwe Mavuso said the organisation was disappointed at Ramaphosa’s lack of ambition regarding infrastructure development.

“Nothing new was announced to accelerate the process, and he stuck with the existing R100-billion infrastructure financing target,” she said, referencing Ramaphosa’s previously stated private-sector investment target for infrastructure construction.

“It was noteworthy that the SoNA referred to the parallel approach of repairing existing infrastructure while keeping equal attention on new infrastructure. This is a point that Seifsa has repeatedly been calling for in working towards re-industrialising our economy.

“Equally important is the acknowledgement of the role that the private sector can contribute in the execution of this infrastructure development. However, Seifsa’s concern is that these are not new but rather plans that have been repeated in previous SoNAs without the necessary follow-through,” Seifsa agreed.

The federation noted that one of the most pressing challenges facing the metals and engineering sector was a lack of demand, which was a function of a lack of delivery on infrastructure spending.

“Seifsa continues to call for urgency in this regard in order to stave off further loss of companies and capacity in the sector,” it said.

Mathe believes that the proposal to revitalise South Africa’s industrial policy is an important consideration, but that it must “represent a break from the past and accord with the broader sentiments of this SoNA”.

Mavuso also criticised Ramaphosa’s mention of the project preparation bid window launched to fast-track investment readiness, which she said would include revised regulations for public-private partnerships (PPPs) to unlock private-sector expertise and funds.

“This has been promised in years gone by, and BLSA urges the government to conclude these reforms to unlock much more private-sector investment into infrastructure,” she said.

However, Public Works and Infrastructure Minister Dean Macpherson welcomed Ramaphosa’s commitments to infrastructure development.

He praised Ramaphosa’s commitments to revitalising small harbours to attract greater economic activity, thereby unlocking economic opportunities for coastal communities across the country.

Macpherson also supported the acceleration of Strategic Integrated Projects, with 82 projects worth R437-billion currently under construction and 19 already completed in sectors such as transport, water, energy and housing.

He also welcomed the implementation of the Project Preparation Bid Window to ensure infrastructure projects worth more than R1-billion were successfully delivered with meaningful State support.

Additionally, Macpherson supported the revision of PPP regulations to facilitate greater private-sector involvement and financing of construction projects.

“We welcome [Ramaphosa’s] public support for the work we have been doing in the Department of Public Works and Infrastructure to turn South Africa into a construction site, which will undoubtedly help us grow the economy and create much-needed jobs.

“His support for the work we have done with the National Treasury to reform PPP regulations will go a long way in attracting additional infrastructure financing, in line with our commitment to secure an additional R100-billion in infrastructure investment over the next four years,” he said.

PRIVATE-SECTOR PARTICIPATION

“It was particularly important for the President to consolidate the work needed to deliver 3% economic growth by the end of this year. His emphasis on ‘finishing what we started’ is encouraging, and business will continue to work with government as a partner to help deliver the outcomes we both seek, especially the strong economic growth that will generate to reduce unemployment and increase the tax revenue needed to support government’s social programmes,” Mavuso said.

Parsons added that, although the SoNA recognised that it would be essential to harness the participation of the business sector on an even bigger scale to reach much higher jobs-rich growth, stricter timelines would help expedite the delivery of the much higher infrastructural spending emphasised in the speech.

“It is important for the government to do all it possibly can to give private-sector companies an even level to compete,” Agricultural Business Chamber (Agbiz) chairperson Sean Walsh said.

Agbiz CEO Theo Boshoff highlighted the importance of structural reforms and a well-defined framework for PPPs in driving economic competitiveness.

Mavuso said the BLSA welcomed Ramaphosa’s commitment to finding innovative ways to attract private investment. However, she said there was not far to look to find such ways.

“The private sector is ready to invest in rail and port infrastructure, for example, through appropriate concessions that allow private operators to manage public infrastructure on clear and legally sound terms, including an appropriate PPP framework. Already, billions have been invested into electricity generation thanks to reforms that enable the private sector to develop energy plants and to sell to Eskom,” Mavuso said.

MUNICIPALITIES

The BER also found Ramaphosa’s mention of the review of a funding model for municipalities to improve service delivery on a local level, and the implementation of a digital identity system, encouraging.

“The fact that he spent much of his speech emphasising the importance of getting municipalities up to standard in terms of their management of the key areas of water and electricity signals that government recognises how important it is for the economy to have more efficient local government capacity,” Mavuso said.

Walsh also welcomed the focus on local government, highlighting its critical role in economic development.

“Agribusinesses operate in rural areas where poor service delivery and infrastructure decay are often the biggest stumbling blocks to job creation and talent retention. The current situation is untenable, and we have been calling for greater accountability, from a fiscal point of view, for some time now. The White Paper on local government must address this issue,” he said.

Ramaphosa focused heavily on initiatives for municipal reform, where his promise to undertake extensive consultation to develop an updated White Paper on local government was welcomed by Mavuso. She said that this needed to address an array of problems, not only financial mismanagement but also the high levels of debt – both owed to and by municipalities.

“The fact that the President specifically mentioned that the funding model for municipalities would be reviewed in the White Paper is important. The debt issue has been left for too long and has become a significant albatross, preventing many municipalities from being able to deliver services,” Mavuso said.

“The important focus of the SoNA on the need to overhaul the local government framework is an absolute must, long overdue, and requires urgent attention. The deterioration of service delivery and the financial condition of municipalities presents one of the most significant risks to the country, businesses, and residents in these respective municipalities.

“The last-mile nature of local government services risks undoing all the work being done to resolve the network industries at the national level,” Seifsa added, calling for urgency with regard to the release of the White Paper.

However, Consulting Engineers South Africa said it cautiously welcomed Ramaphosa’s recognition of the poor state of the country’s municipalities, the breakdown of essential municipal services and infrastructure and the country’s water challenges.

“However, these are not new revelations – the private sector has been sounding these alarms for years, offering solutions that have often, at times, gone unheeded,” Campbell said.

He noted that the solution to municipal problems lay in professionalising the public sector.

“[This] must extend beyond local government to all spheres of public service. It is about creating a competent, technically skilled workforce capable of delivering sustainable services and managing complex infrastructure projects. We need decisive action to strengthen institutional capabilities across all levels of government,” Campbell said.

However, Mathe warned that, while partnerships were crucial, they could not substitute for the development of effective State capacity.

“We believe the measures announced by [Ramaphosa], such as establishing a graduate recruitment programme and strengthening the role of the Public Service Commission in the appointment of senior personnel, are essential building blocks for a capable public service. However, much more needs to be done,” he said.

NATIONAL HEALTH INSURANCE

Ramaphosa reaffirmed his commitment to the National Health Insurance (NHI) despite opposition, stating that it would reduce healthcare inequality. However, he only referred to preparatory work for the NHI and not its imminent implementation.

Considering this, the BER said it was unlikely that the National Treasury would make room for the NHI in its February budget.

The NHI, however, remains an area of concern for BLSA.

“BLSA fully supports the goal of reducing inequalities in healthcare and ensuring medical treatment is available for all citizens. However, Ramaphosa still made no mention of how it will be funded. Until that is clarified with feasible options, we cannot support this legislation,” Mavuso said.

REFORM AGENDA

In the SoNA, Ramaphosa gave impetus to the reform agenda, particularly those being addressed by Operation Vulindlela in its second phase, focusing on water system reforms and addressing dysfunctions at the local government level.

Mathe said it was pleased to hear Ramaphosa reaffirm and reinvigorate the government’s commitment to the reform agenda.

“We are pleased to hear that the recommendations made by Operation Vulindlela continue to receive political support. We have made great strides towards creating a competitive market for freight rail and require the same efforts in relation to our ports. We are already seeing the benefits of these efforts in the energy sector and need to stay the course for our logistics framework to be turned around.

“Agbiz and industry partners are actively engaged in PPPs, but some uncertainty still exists around contracting models and cost recovery mechanisms. The President’s focus on creating an enabling environment for PPPs is welcomed, and we look forward to engaging on these changes,” Boshoff said.

Mathe said that the success of the reforms and partnerships, which had opened energy, freight rail, and ports to private-sector participation, demonstrates the vital role business can play in addressing the country’s most pressing challenges, provided the right conditions are established.

“While reforms are advancing, the SoNA made it clear that we must keep the end goal in mind as we progress through complex change,” he said.

“With an urgent need to address energy security, accelerate private-sector participation, and enhance grid infrastructure, policy certainty and streamlined procurement processes will be key,” renewable-energy company Scatec sub-Saharan Africa GM Alberto Gambacorta added.

He said the renewable-energy sector stood ready to support South Africa’s ambitions by delivering sustainable, cost-effective power solutions.

“By enabling faster deployment of projects through regulatory efficiencies and investment-friendly policies, we can unlock the full potential of solar, wind, and battery storage to drive economic growth and energy resilience,” Gambacorta said.

The South African Photovoltaic Industry Association (SAPVIA) also announced its support for the reforms that drive growth in the renewable-energy sector.

“The focus on energy reform and infrastructure investment, particularly in grid infrastructure, aligns with our mission to accelerate solar PV and drive broader renewable-energy adoption.

“We share the vision of positioning South Africa as a leader in renewable energy and green manufacturing. With abundant, affordable green energy, we can produce globally competitive products and create more jobs in the process,” SAPVIA noted.

It also commended the progress made in energy policy, particularly the Electricity Regulation Amendment Act, which paves the way for a competitive electricity market.

“We need to outline clear action plans for acceleration of private-sector investment and the development of transmission infrastructure to integrate increased numbers of renewable-energy projects.

“SAPVIA also supports the commitment for skills development and localisation of renewable-energy components where the country has comparative and competitive advantage, leveraging other economic benefits of the growing renewable-energy sector.

“To secure a sustainable energy future, we call for decisive action to implement reforms, incentivise rooftop solar adoption, and strengthen public-private collaboration. Now is the time to unlock South Africa’s full renewable-energy potential,” the industry body said.

Ramaphosa also promised to ringfence revenue from electricity and water services so that water revenue, for example, is used by a municipality on its water systems rather than funding general expenditure.

Mavuso said Ramaphosa’s focus on securing a reliable water supply across the country showed that water reform had made an encouraging start.

She added that Ramaphosa’s recommitment to establishing a competitive electricity market would ensure this investment continued to flow.

Ramaphosa also presented initiatives to strengthen the public service, introducing a graduate recruitment scheme to attract well-qualified personnel.

“This is excellent news because currently, every department recruits separately,” Mavuso said. However, she urged a more widespread acceleration of the plans to professionalise the public service.

SOCIAL

Mavuso also commended Ramaphosa’s statement that visa system would be further enhanced to make it easier for skilled people to invest in South Africa and encourage tourism. He announced that more than 90% of the backlog of more than 300 000 visa applications had been cleared.

“Historically, skills visas have been a severe handbrake on the ability of businesses to operate efficiently,” she said.

Association of Southern African Travel Agents (Asata) CEO Otto de Vries said he was encouraged by Ramaphosa’s commitment to strengthening South Africa’s trade and international relations, which had direct implications for outbound travel.

“The investment in efficient digital identity systems and visa process enhancements will positively impact not only inbound but also outbound travel. Air access and the facilitation of easier business and leisure travel for South Africans remain critical, particularly in strengthening trade connections and ensuring that South Africans can move across the globe with greater ease,” he said.

De Vries added that Asata welcomed the focus on modernising South Africa’s airports and increasing flights to key destinations, both of which were essential to improving connectivity for travellers.

Federated Hospitality Association of South Africa chairperson Rosemary Anderson expressed excitement at the news that a fully digitised electronic travel authorisation system could be implemented within the next year, which she believed would eliminate corruption, increase turnaround times, and remove key barriers to entry.

“It signals a game-changing moment for our industry. Visa reforms, combined with increased flight connectivity and aggressive destination marketing, would reinforce Ramaphosa’s assertion that South Africa is open for business and open for tourism,” she said.

Mathe commended the renewed commitment to provide “digital public infrastructure to give South Africans access to government services” and the “implementation of the digital identity system”, which it said was long overdue.

“Evidence from other countries clearly demonstrates that digital identity systems enhance economic inclusion. The adoption of appropriate digital technologies is essential for improving service delivery to businesses and citizens and closing loopholes that facilitate corruption,” Mathe said.

Mavuso also welcomed the announcement of phase one of a comprehensive funding model to address the needs of the missing middle in tertiary education, promising that business will take heed of Ramaphosa’s call to try to accommodate more students in the workplace to build their work experience.

The BER noted Ramaphosa’s confirmation that the Social Relief of Distress (SRD) grant would be used as the basis for the introduction of a grant to support unemployed people.

However, trade union UASA spokesperson Abigail Moyo was unimpressed.

“Ramaphosa could have done better regarding the more than 28-million unemployed and vulnerable people who depend on social grants. Although the SRD grant is essential to combat poverty, the country spending around 60% of the national social wage is clearly unsustainable,” Moyo said.

She also said UASA questioned the so-called ‘graduate recruitment scheme’.

“What happened to the previously promised two-million jobs and presidential youth employment programmes? Introducing new programmes with pretty words and a nice ring to them will not make the substantial unemployment disappear. South Africans deserve much more than a President who gets away with empty promises time and again,” Moyo said.

Mathe believes that the redesign of housing subsidies and directing more funding towards programmes that enable people to purchase or rent homes in areas of their choice are vital policy shifts, alongside the release of more underused State properties for affordable housing.

“This will unlock private investment in affordable housing, revitalise our cities, and reduce barriers to entry into the labour market,” he said.

ANTICRIME AND CORRUPTION

Mavuso added that BLSA was pleased with Ramaphosa’s assurance that the Zondo Commission’s recommendations on the anti-corruption architecture that needed to be developed, were moving forward.

However, she said that his announcement of an anti-corruption advisory agency to coordinate between different departments and agencies was still a far cry from the independent anti-corruption agency that Judge Raymond Zondo recommended.

Mavuso added, however, that the establishment of “a world-class digital lab” to support the fight against corruption and commercial crime was encouraging, but that more detail was needed. She said that BLSA was ready to assist wherever it could.

Moyo was not so positive.

“What difference will the new world-class digital forensics lab make to support the investigation of complex corruption and financial crimes? What will this new lab do for our people that the current structures and law enforcement agencies have failed to do? Why are we introducing fancy solutions draining taxpayers’ funds instead of delivering a return on the investment?” she asked.

Mavuso said Ramaphosa’s promises to strengthen whistleblower systems and systems to deal with terror financing would complement the reforms already undertaken to have South Africa removed from the Financial Action Task Force grey list, with 16 out of 22 action items fully addressed.

“While the speech did not introduce many new ideas, it served an important purpose by reassuring the public that successful government programmes will continue under the new administration. It was also useful to remind the country that a huge amount of change is being effected, even if there is frustration at the pace,” Mathe said.