The Financial and Fiscal Commission takes an interest in the State of the Nation Address and the budget implications of any announcement in the address. The State of the Nation Address looked at how to improve the living conditions of South Africans. The 2023 SONA focused on four broad themes, namely energy crisis, reducing unemployment, cost of living and crime and corruption.
Energy Crisis
The President acknowledged that persistent load shedding is impeding the economy's recovery. It was highlighted that without a reliable electricity supply, businesses cannot grow, assembly lines cannot run, crops cannot be irrigated, and basic services are interrupted. Load shedding means households and supermarkets cannot keep food fresh, the water supply is often disrupted, traffic lights need to be fixed, and streets need to be lit at night. Without a reliable electricity supply, our efforts to grow an inclusive economy that creates jobs and reduces poverty will not succeed.
[1]The President announced that National Treasury is finalising a solution to Eskom’s R400 billion debt burden that is equitable and fair to all stakeholders, enabling the utility to make necessary investments in maintenance and transmission. The government will support Eskom to secure additional funding to purchase diesel for the rest of the financial year. This should reduce the severity of load shedding as Eskom can use its diesel-run plants when the system is under strain.
The President also announced that National Treasury is working on adjustments to the bounce-back loan scheme to help small businesses invest in solar equipment and to allow banks and development finance institutions to borrow directly from the scheme to facilitate the leasing of solar panels to their customers. The design and conditions of the loan scheme should make it easy for small businesses to take up the loan.
The energy crisis has prompted the government to look for a viable solution to the crisis in the short and long term. The President announced that Minister of Cooperative Governance and Traditional Affairs Nkosazana Dlamini Zuma had gazetted the declaration of the State of Disaster, which began with immediate effect. Moreover, the president will expand his Cabinet by appointing a minister of electricity to the Presidency. The role of the minister would be to take full responsibility for overseeing all aspects of the electricity crisis response, including the work of the National Energy Crisis Committee.
The expansion of the cabinet by establishing a minister of electricity may result in the duplication of duties and coordination challenges. The Department of Public Enterprises and the Department of Energy have functional responsibilities relating to Eskom and energy. The addition of another Minister of electricity will result in duplication if there is no clarity on functional responsibilities.
Reducing Unemployment
The challenge of unemployment continues to be persistent and impacting on the youth more than other sections of society. The President highlighted efforts to mobilise greater levels of investment, which is essential to growing the economy and creating jobs. To address the challenge of youth unemployment, the Employment Tax Incentive has been expanded to encourage businesses to hire more young people in large numbers.
The Social Employment Fund was recruiting 50,000 participants in its next phase of undertaking work for the common good. The National Youth Service would create 36,000 opportunities through nonprofit and community-based organisations.
Labour market interventions may be suitable for addressing supply-sided challenges and preparing job seekers to enter the labour market. Still, their effect will only be limited if there is a corresponding increase in the supply of jobs through improving economic growth. Conventional labour market interventions centring on education, training, and wage subsidies are necessary but are inadequate to address today's youth unemployment challenge.
Cost of Living
The rising cost of living is deepening poverty and inequality. The President highlighted that approximately 60 per cent of the budget is allocated to the social wage, providing various forms of support, basic services and assistance to households and individuals to combat poverty and hunger. The President announced that to counter the rising cost of living, we will continue the Social Relief of Distress Grant, which currently reaches around 7.8 million people.
Furthermore, the President announced that the existing social grants would be increased to cushion the poor against rising inflation. The Minister of Finance will set out the quantum of the increases in the budget. He further announced that work is underway to develop a mechanism for targeted basic income support for the most vulnerable within our fiscal constraints.
A basic income grant comes with many economic and social benefits. It will result in the extension of economic opportunity for the poor, an expansion of human capabilities and a reduction in the burden of poverty, hunger and disease. However, it may also worsen the fiscal position of the country, and thus it requires a balanced approach to designing and implementing a basic income grant.
Crime and corruption
Crime and corruption continue to affect South Africa. The President announced the strengthening of the South African Police Service to prevent crime and improve the capacity of the National Prosecuting Authority and courts to ensure perpetrators are brought to justice. It was announced that more than 10,000 new recruits graduated from police academies and a further 10,000 will be recruited and trained this year.
[2]Furthermore, the President announced that the government is working towards capacitating the Witness Protection Unit and would introduce amendments to the Protected Disclosures Act and Witness Protection Act to strengthen protections for whistle-blowers. In response to the State Capture Commission and in line with the framework for the professionalisation of the public service, integrity assessments would become a mandatory requirement for recruitment to the public service and entry exams would be introduced.
[1] The R400 billion debt will increase the public debt and debt servicing costs. This will place pressure on fiscal sustainability and the ability to stabilise the debt-to-GDP ratio. The additional funding to purchase diesel will require reprioritising the budget to accommodate the additional funding
[2] In the reecent annual submission, the commission recommended that the prerequisite for any measure to fight corruption and move towards support for anti-corruption reforms is consistent political will for good governance and accountability. Political leadership and a commitment to fight corruption should therefore come from the highest office and the top levels of a country’s political system, with understanding of accountability