SUMMARY OF THE STATE OF THE NATION ADDRESS BY PRESIDENT RAMAPHOSA: 10 FEBRUARY 2022

Preamble

The State of the Nation Address (SONA) is an important political and economic statement by the President which outlines the Government’s economic and social investment programme, and is a precursor to the National Budget, which this year will be delivered on 23 February 2022.

This year’s SONA has been presented against the background of the following: nascent economic recovery from the impact of intermittent lockdown restrictions, the highest unemployment in 82 countries surveyed by Bloomberg, revelations of widespread corruption and malfeasance in SOES released in the first two instalments of the Zondo Commission into State Capture, poor Government response to the civil unrest in July 2021 in parts of Gauteng and KZN which cost 354 lives and damage and destruction to the economy of over R50 billion, and electoral defeat of the governing party in the November local government elections which has relegated the party to the opposition benches in key metros of Johannesburg, Tshwane and Nelson Mandela Bay.

Introduction to SONA

The President referenced the impact of the Covid-19 pandemic on the economy, admitting it had further exposed the deep social and economic divide in SA. He also spoke of the impact of the civil unrest in July 2021. Government will take steps to strengthen democracy and revitsalise the economy to end inequality and injustice. This includes ensuring those responsible for corruption will be criminally charged.

The present situation of deep poverty, unemployment and inequality is not sustainable as it is unacceptable, requiring fundamental reforms and change to revive the economy and create conditions for long-term stability and growth. Spoke of a common consensus born out of current challenges and recognition of the current unemployment, inequality and poverty.

State has to create conditions for private sector investment and an environment in which people can lead a better life. Announced a 100-day deadline to create a social compact to create jobs, end hunger and poverty based on the economic and reconstruction programme. Focus will be on overcoming impact of Covid-19, infrastructure investment, economic stimulus, energy and creating job opportunities.

SONA HIGHLIGHTS
National State of Disaster

Government intends to lift the National State of Disaster as soon as other supplementary legislation has been aligned to enable the government to respond to the pandemic and other health disasters. Currently, virtually all restrictions in response to Covid-19 have been lifted.

Creating Conditions for Private Sector Investment

Load shedding and high cost of doing business continue to affect the economy, investment promotion and job creation. Government has to create the environment for businesses to invest, grow and employ more people. SA’s problems are structural and also being affected by lack of broadband spectrum, power shortages, poor infrastructure. Government to implement far reaching reforms to unlock investment, reduce cost of doing business and increase competitiveness. Electricity crisis one of the greatest threats to economic revival and growth.

Ports and Railways

Transnet is addressing port and rail challenges and is currently focused on improving operational efficiencies at the ports through procuring additional equipment and implementing new systems to reduce congestion. Transnet will ask for proposals from private partners for the Durban and Ngqura Container Terminals within the next few months, which will enable partnerships to be in place at both terminals by October 2022. Transnet will start the process of providing third-party access to its freight rail network from April 2022 by making slots available on the container corridor between Durban and City Deep in Gauteng.

Telecoms

Government will facilitate the rapid deployment of broadband infrastructure across all municipalities by establishing a standard model for the granting of municipal permissions. These reforms will revolutionise the country’s technological development, making faster broadband accessible to more people and reducing the costs of digital communications.

High Frequency Spectrum Auction

ICASA will commence with the auctioning of the high frequency communications spectrum in about three weeks from now. This will unlock new spectrum for mobile telecommunications for the first time in over a decade.

Immigration

Government to further streamline immigration laws to attract skilled immigrants, and this includes streamlining and modernizing the visa application process to make it easier to travel to South Africa for tourism, business and work. The revised Critical Skills List has been published for the first time since 2014, following detailed technical work and extensive consultations with business and labour. The updated list reflects the skills that are in shortage today, to ensure that our immigration policy matches the demands of our economy. A comprehensive review of the work visa system is currently underway, led by a former Director-General of Home Affairs, Mr Mavuso Msimang. Government also exploring new visa categories to enable economic growth, such as startup and remote working visa.

Water Infrastructure

Government to prioritise institutional reforms to ensure future water security, investment in water resources and maintenance of existing assets. Government has also embarked on the process of institutional reform in capacitating the Department of Water and Sanitation and reviewing water boards in as far as their mandates are concerned and ensuring that they serve municipalities in terms of the District Development Model. These reforms are being championed by the Minister of Water and Sanitation, who has visited every water source in the country.
A comprehensive turnaround plan is being implemented to streamline the process for water use license applications. The target is to clear the backlog of applications by June 2022 and to process 80% of all applications within 90 days during the next financial year. In addition, legislation for the establishment of the National Water Resources Infrastructure Agency will be published for public comment within the next month.

SMME Growth

Government to implement measures to unleash the potential of small businesses, micro businesses and informal businesses. Has also started discussions with social partners as part of the social compact process to review labour market regulations for smaller businesses to enable them to hire more people, while continuing to protect workers’ rights. A new, redesigned loan guarantee scheme is being introduced to enable small businesses to bounce back from the pandemic and civic unrest. Red tape team led by ex Exxaro CEO Sipho Nkosi being established to review red tape affecting the SMMEs and recommend on how these can be streamlined.

Infrastructure

Energy, road, water management projects to be prioritised under the R100 billion Infrastructure Fund, focusing on water, sanitation, and student accommodation among other projects. The Infrastructure Fund is now working with state entities to prepare a pipeline of projects with an investment value of approximately R96 billion in student accommodation, social housing, telecommunications, water and sanitation and transport. Several catalytic projects worth R21 billion

are expected to start construction this year. Of this, R2.6 billion is contributed by government and the balance from the private sector and developmental finance institutions. Government will make an initial investment of R1.8 billion in bulk infrastructure, which will unlock seven private sector projects valued at R133 billion.

Social Infrastructure Mechanism

Focus will be on school infrastructure and speed up delivery of infrastructure including building new schools in rural areas. Government is introducing an innovative social infrastructure delivery mechanism to address issues that afflict the delivery of school infrastructure. The mechanism will address the speed, financing and funding, quality of delivery, mass employment and maintenance. The new delivery mechanism will introduce a Special Purpose Vehicle, working with prominent DFIs and the private sector, to deliver school education infrastructure.

Hydrogen Capability and Hydrogen Road Map

Government has built on its successful Hydrogen SA strategy to make major strides in positioning South Africa as a global leader in this new market. This includes the development of a Hydrogen Society Roadmap for the next ten years as well as a Green Hydrogen Strategy for the Northern Cape, supporting the development of a green hydrogen pipeline worth around R270 billion.

Localisation Plans

An important pillar of our Economic Reconstruction and Recovery Plan is to revitalise our manufacturing base and create globally competitive export industries. In the past year, we launched new master plans in the steel industry, furniture and global business services. Through these plans, business, government and labour are working together to increase production and create more jobs in the sector.

Investment Conference

Investment conference to be held on 24 March 2022 in Johannesburg to showcase the many investment opportunities available as South Africa continues its recovery from the COVID-19 pandemic, and report back on the progress of previous commitments. By the time of the third South Africa Investment Conference in November 2020, SA had reached R776 billion in investment commitments.

AfCTA

Following the resolutions of the African Union Summit over the past weekend, trading can now begin under the African Continental Free Trade Area agreement. South African companies are poised to play a key role in taking up the opportunities that this presents for preferential access to other African markets.

Global Business Sector

SA placed to attract companies keen to open call centre and business facilitation offices in SA. Cannabis Industry

Government to streamline regulations to attract investment in cannabis which has the potential to create 130 000 jobs. The hemp and cannabis sector has the potential to create more than 130,000 new jobs. Government to streamline the regulatory processes so that the hemp and cannabis sector can thrive like it is in other countries such as Lesotho.

Mining Sector

To attract investors into the mining minerals needed in the new global economy, government to finalise the mining exploration strategy. I will also continue to support the development of the upstream gas industry, as it holds huge potential for job creation and broader economic development.

Energy

New energy generation projects will be coming online over the next few years, including several renewable energy projects, among them the 2,600 MW from Bid Window 5 of the renewable energy programme, for which the preferred bidders were announced last year; 2,600 MW from Bid Window 6 of the renewal energy programme, which will soon be opened and 3,000 MW of gas power and 500 MW of battery storage, for which requests for proposals will be released later this year.

In addition, Eskom has established a separate transmission subsidiary, and is on track to complete its unbundling by December 2022. The utility has continued with its intensive maintenance programme, to reverse many years of neglected maintenance and underperformance of existing plants. To regulate all of these reforms, Cabinet yesterday approved amendments to the Electricity Regulation Act for public

Public and Social Employment

A revitalised National Youth Service will recruit its first cohort of 50,000 young people during the next year, creating opportunities for young people to contribute to their communities, develop their skills and grow their employability. The Department of Higher Education and Training will place 10,000 unemployed TVET graduates in workplaces from April 2022

Social Grants

As reported, the government is extending the R350 monthly social grant introduced in response to the impact of Covid-19 for another year to March 2023.

Expropriation of Land

Expanding access to land is vital for efforts to reduce hunger and provide people with meaningful livelihoods. Government will move ahead with land reform in terms of the Constitution, and anticipate the approval of the Expropriation Bill during this year. The establishment of the Agriculture and Land Reform Development Agency will be finalised this year. The Department of Public Works and Infrastructure will finalise the transfer of 14,000 hectares of state land to the Housing Development Agency.

State Capture

The first two part of the Zondo Commission there was indeed state capture, with SOEs infiltrated by a criminal network. The report details devastating impact on SOEs and this had a direct and concrete negative impact on SA, especially poor and vulnerable people, weakened state ability to deliver services. Government to make sure it will never happen again and act on the commission’s recommendations. By no later than June, plan of action will be presented to Parliament, and meanwhile it will strengthen whistle blowers who are a vital safeguard against corruption. Detailed review of legislation underway to strengthen and protect whistle blowers.

SOEs

Government has embarked on several immediate measures to restore SOEs stability and also implement far-reaching reforms to make SOEs more efficient, competitive, accountable and sustainable. The Presidential SOE Council has recommended that government adopt a centralised shareholder model for its key commercial state-owned companies. This would separate the state’s ownership functions from its policy-making and regulatory functions, minimise the scope for political interference, introduce greater professionalism and manage state assets in a way that protects shareholder value. As part of this, preparatory work has begun for the establishment of a state-owned Holding Company to house strategic SOEs and to exercise coordinated shareholder oversight. To ensure that state-owned enterprises are effectively fulfilling their responsibilities, the Presidential SOE Council is preparing recommendations on state-owned entities to be retained, consolidated or disposed of.

Civil Unrest in 2021

Cabinet accepts responsibility for security lapses which were exposed during the July 2021 unrest in parts of KZN and Gauteng. The security services have been tasked by the National Security Council to urgently develop implementation plans that address the range of recommendations made by the expert panel. These measures will go a long way to address the serious concerns about the breakdown of law and order in society

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