Use SONA 2019 to Embark on Inclusive Economic Growth and Fix Governance of SOEs

19 June 2019

The Federation of Unions of South Africa (FEDUSA) calls on President Cyril Ramaphosa to use his second State of the Nation (SONA) of the year on Thursday to announce measures that will bring about inclusive economic growth in order to create jobs on a massive scale and create new economic opportunities; and to fix the extensive governance crisis at State Owned Enterprises (SOEs) to avoid the total collapse of affordable public utilities. The country has had to hold two SONAs in the same year because of the general elections in May that formally ushered in a new administration.

Drastic times demand of President Ramaphosa to implement drastic measures and the state of the nation couldn’t be more dire than the present moment just after Statistic South Africa (StatsSA) announced last week that economic growth had dropped by a massive 3.2% in the first quarter of 2019 – the biggest decline in 10 years – in a situation in which the strict rate of unemployment has climbed to 27.6% from 27.1% over the same period. The expanded rate of unemployment – which includes discouraged work seekers – is currently standing much higher at 38% according to StatsSA.

An inclusive economic growth strategy essentially boils down to moving beyond mere rhetoric of economic transformation to tackling real exclusion in tourism, agriculture, manufacturing, mining, energy and transport to name but a few sectors; in order to open up economic opportunities to previously excluded communities. Such an approach would steadily build up a decent rate of economic growth and put money into the pockets of embattled consumers.

However, there is a caveat here, the government needs to concurrently take active steps to assist in opening up secure and profitable routes to markets including strengthening the public preferential procurement policy instrument for the newly empowered economic actors. Such an approach is borne out by the fact that the GDP data released by StatsSA last week also shows that petroleum, chemical products, rubber and plastic products were the main divisions that contributed to the manufacturing industry’s drop of by 8,8% in the first quarter.

Now these are the very divisions of the manufacturing industry into which the state has pumped billions of rands through its Black Industrialists Programme. The link is clear, these newly empowered businesses struggled to access markets for their finished goods, which is dominated and controlled by established conglomerates which often collude to shut out new entrants. The state needs to come in and diffuse this situation as a matter of urgency because of the economic crisis that the country is going through.

The governance crisis at the majority of SOEs illustrated by the billions of rands that have been pumped into the black hole that is SAA, the energy insecurity at Eskom, the crumbling infrastructure at Prasa that has often ended in fatal train accidents and elevated perpetually tardy trains to a new normal and the chaos at the public broadcaster among others; can no longer be allowed to continue. President Ramaphosa’s meeting with CEOs of these SOEs last week to hear their challenges first hand was certainly a good move. Now he needs to follow this up with a presidential proclamation of a reviewed governance structure for all these entities that clearly delineates the oversight role of the Minister responsible, and the executive roles of the Board and of Management.

FEDUSA is also gravely concerned about media reports showing that Parliament is contemplating introducing compulsory investments in prescribed assets which essentially comes down to forcing public pension funds to plough their resources into financially stressed SOEs. The endless pouring of billions of Rands into SAA without being able to turn it around provides a stark illustration of the high level of risk that such a move would entail. The union federation is opposed to the planned top down implementation of this idea without first discussing it with public sector unions at the Public Service Coordinating Bargaining Council.


(653 Words)

For interviews please contact:

Chris Klopper

Acting FEDUSA President

083 708 7733

Riefdah Ajam

FEDUSA Acting General Secretary

079 696 2626

Issued by:

Frank Nxumalo

 FEDUSA Media and Research Officer

 072 637 8096