Five thoughts on the 2020 State of the Nation Address
So after all the build-up and conjecture, SONA happened. President Ramaphosa gave a good speech. He demonstrated understanding of the country’s deep anger and frustration at the effects of a decade (and counting) of economic stagnation and decline. He appeared engaged, compassionate and knew when to throw in a smile, joke or personal touch. Statesmanlike. What a contrast with his predecessor who went through the motions, giggling, while his administration betrayed the hopes and dreams of our people with self-serving, lethargic, incompetent and corrupt maladministration.
A brief note on the EFF’s antics. What began as an urgent, imaginative and effective protest of an illegitimate President Zuma, is now a mere opportunistic attempt to steal the spotlight at the highest value hour on the annual political calendar. I don’t condemn the EFF for this opportunism. As the political David to the ANC’s Goliath – referencing the size disparity only, not their respective virtues – it is an understandable tactic. Speaker Thandi Modise scored a small tactical victory in denying the EFF the symbolic martyrdom of being forced to leave.
This week’s debate in Parliament on the President’s state of the nation address will be interesting. Now to the speech.
Are we thinking big enough?
I don’t think the President or his speechwriter’s read my letter last week. Committing to stop bungling energy policy – while a welcome development – and to taking forward the economic reforms proposed by Minister Mboweni are the minimum set of efforts which should be expected. They are hardly the aggressive set of economic interventions required to address our structural problems.
We structurally underperform relative to our developing country peers on economic growth, inequality, labor absorption and youth participation. This will not, I’m afraid, be fixed by apps matching youth to non-existent job opportunities.
To illustrate the scale of ambition, Duma Gqubule from the Centre for Economic Development and Transformation, reminded us recently that the NDP calls for us to raise the level of annual fixed investment from the current 18% to 30% of GDP. This implies over R600bn of additional investment from public and private sources annually. Even acknowledging one cannot make this up in one or two years, it puts in perspective the scale we need to aim for.
Question marks around our infrastructure delivery architecture
It was heartening to hear the President talk about prioritizing infrastructure investments, and the cranes that will soon become an everyday sight.
That said, public investment in infrastructure has declined from close to 6.5% of GDP in 2014, to 5.1% in 2019/20 according to the last year’s Budget Review. It is forecasted to remain at this level until 2021/22, the last year in which Treasury gave estimates. This is partly a consequence of shrinking fiscal space due to low growth, and government spending dominated by salaries and consumption, rather than investment.
As I listened to the President refer to the Infrastructure Fund and the project pipeline of R700bn over 10 years, I wondered about the Presidential Infrastructure Coordinating Commission (PICC). What happened to it?
Founded in 2011, it released a summary of the National Infrastructure Plan in 2012 – the 18 Strategic Infrastructure Projects (SIPs) – but seemingly few public updates since then. I would love to see a detailed update on progress made on the SIPs. Clearly a lot of work went into designing them, including spatial mapping to identify which infrastructure was needed to unlock and catalyze inclusive economic growth. The Budget Review tracks spending per SIP, but not progress.
The PICC, despite its name, was housed in the Department of Economic Development, which has now merged with DTI. It is important to remember that its raison d’etre was to create visibility, improve coordination and speed up delivery. With the Infrastructure Fund being set up in the Presidency, the PICC’s status unclear, and Treasury’s Budget Facility for Infrastructure also seeking to improve infrastructure project preparation, one hopes the institutional architecture for delivering infrastructure is clearer within government than it is from outside.
Have we learned lessons from our electricity own goals?
It is remarkable to me the amount of economic damage that had to take place, for government to come around to sensible positions on energy policy. Government adopted a White Paper on Energy Policy in 1998 among the provisions of which was a commitment to open up electricity generation to competition and private investment.
It is worth briefly recounting the own goals. Despite acknowledging in the 1998 white paper that we would run out of power by 2007 if we didn’t invest, government then neither allowed Eskom to invest, nor created the conditions for private players to build generation capacity. Once the supply crisis was imminent, and despite not having built a major power station in years, government then decided Eskom should build two of the biggest, most complex coal-fired power stations in the world at the same time. The initial cost was estimated at R163.2 billion, and the cost is now estimated at R451 billion and counting. The indirect costs of this calamity must be orders of magnitude higher.
The President said that “load-shedding is the inevitable consequence of Eskom’s inability over many years – due to debt, lack of capacity and state capture – to service its power plants.”
More accurately, load-shedding is the inevitable consequence of this government’s insistence – based on ideology and vested interests in and around the ruling party – on pursuing a state-led economic programme, despite its simultaneous acknowledgement that we do not have a capable state.
Some counterfactuals are difficult to prove; this one isn’t. If the state had implemented its own policies, and opened electricity generation to competition from independent power producers in the early 2000s, we don’t have 13 years of electricity supply shortages, the economy grows significantly faster, and we are all significantly better off than we are today.
I will explore this further, and address the role of state-owned enterprises, in a future post.
Increasing the metabolism of government
Whether or not the many plans and projects listed inspire confidence, depends in large part on whether you believe they will be implemented timeously. In my experience, government moves at a glacial place. Urgency does not seem to exist in the bureaucratic culture. In 2017, attempting to respond to the recession, Minister Gigaba – in whose ministry I was working at the time – announced a 14 point action plan on behalf of government.
Auctioning of telecommunications spectrum was promised within 18 months, by December 2018. (We consulted the relevant DG’s to sign off on all dates before announcing them.) President Ramaphosa promised the auction will now take place by December 2020, with wireless open access network (WOAN) licensing “likely” completed in 2021.
National Treasury, despite being one of our highest functioning departments, is still promising a Public Procurement Bill to improve the transformative impact of government procurement, more than three years after then Minister Gordhan promised it during the MTBPS in October 2016.
With legislation, policy and regulations in particular, the delays come from the lengthy and iterative process of consulting key stakeholder groups, drafting the legislation/policy and then circling back to secure buy-in. That is before submitting to Parliament, in the case of draft legislation, where further consultation and processing by the relevant portfolio committee occurs. Political jockeying happens, and powerful interest groups have another opportunity to propose changes, or simply kill legislation they don’t like.
Parliament’s capacity to process legislation, especially complex legislation, is worth scrutinizing.
Education remains our Achilles heel
“They schools ain’t teaching us, what we need to know to survive…” – ‘They Schools’ by Dead Prez.
Despite all the talk of smart cities, the fourth industrial revolution, tablets for learners and coding and robotics, we continue to obscure the simple fact that for most of our learners, as Dead Prez sang, “they schools can’t teach us shit.”
The Department of Basic Education’s self-serving propaganda about the increasing matric pass rate is meant to distract us from the fact that the half of the learners who enter the school system do not pass matric (a cohort with a 46% unemployment rate, compared to 21% for matriculants according to my analysis of Q4 2019, Quarterly Labour Force Survey data by Statistics SA.)
Further, 78% of our Grade 4’s can’t read for meaning, 61% of learners don’t learn basic mathematics by Grade 5, and half of SA primary schools are “cognitive wastelands”. This is the real state of education according to research from Nic Spaull from Stellenbosch University. We currently set up the majority of our children for failure. This is the single biggest ongoing policy failure in our politics.