Zuma’s missed opportunity
IT IS not often that President Jacob Zuma speaks about the economy outside formal engagements such as the state of the nation address. In fact, it is not often he calls an urgent media briefing, especially on the economy.
That he did so yesterday shows the level of concern in Pretoria at the deteriorating state of SA’s economic prospects. Monday’s gross domestic product figures were alarming. Strip out the contribution made by mining, and the picture looks even more dire. And the outlook isn’t optimistic either, with growth in the second quarter likely to remain subdued.
Already mining’s contribution will be under pressure after further work stoppages this month. Not a great start, and wage negotiations have not even begun in earnest. Hopes are now being pinned on the manufacturing sector coming to the party as a result of a weaker rand, although whether it can is doubtful given continued weak global growth and possible blackouts by Eskom.
It is no wonder the Treasury tried to prepare the markets earlier this week by saying it expects growth to be closer to 2% this year than to its initial forecast of 2.7%. Such a pullback has negative consequences. The Treasury’s fiscal projections will be under threat; as a result, SA’s credit rating is likely to be downgraded; and borrowing costs will rise, forcing the government to either cut back spending or raise taxes. It is in a sense a perfect storm. So it is no surprise Mr Zuma was forced to address the matter. But the problem he faces is that it is just more of the same. People have become inured to the rhetoric. Foreigners have sold R12bn in bonds over the past 10 days, and the rand slipped to more than R10 to the dollar yesterday.
To call on everyone to work together as he did yesterday will not change the outlook. The government needs to deliver. Next year is the 10th anniversary of the Accelerated and Shared Growth Initiative for SA, which promised to halve unemployment and get growth rates above 6%. Like many other plans, nothing has come of it. Whether the National Development Plan is different remains to be seen, but the markets are more interested in what they know than in promises. In this light, yesterday’s briefing was a missed opportunity. Mr Zuma should have used it to greater effect given that he is in charge of a R1.1trillion budget and a public service of more than 1-million people.