What Cyril’s speech means for business

ANALYSIS

What Cyril’s speech means for business

FANIE CRONJE, risk analyst at Approach Profit Managers, analyses President Ramaphosa's opening of parliament speech to see where he breaks with the past.

© JEFF RANKIN
© JEFF RANKIN

AT last week's opening of parliament, Cyril Ramaphosa continued the trend of previous state of the nation speeches, especially the one in 2022. This time, however, there was an important difference: he spoke as leader of the government of national unity (GNU), not just as leader of the ANC. Economic growth and job creation were among the key themes.

The president indicated that job creation driven by the private sector is much more effective than government efforts. This indicates an important policy change. Familiar themes such as economic growth, eliminating red tape and eradicating corruption were repeated. In the past, these efforts have come to nothing, mainly because of significant opposition from the ANC's alliance partners, the South African Communist Party (SACP) and Cosatu. This opposition delayed the implementation of policy and ultimately caused it to fail.

With the GNU at the helm, there is hope that these initiatives will receive effective attention. Here, the media and civil society organisations will play an important role in ensuring accountability. It is essential that influences from outside and within the ANC alliance are limited so these policy initiatives can be promoted and carried out.

Private sector’s influence 

The private sector's influence on the economy has been emphasised since the beginning of the “new dawn". In the past, Ramaphosa valued the ANC's unity higher than large-scale privatisation of the economy. He acted as the spokesperson and president of the ANC rather than the president of South Africa. The SACP influenced him to support the ideology of the national democratic revolution, which prioritises state control of the economy. Cosatu also subscribed to the ideology of a state-driven economy, and its statements that trade unions cannot afford to have profits wiped out confirm this approach.

It is likely that the two alliance partners, as in the past, will push back against the proposed economic direction. The big difference is that Ramaphosa now acts as leader and president of the GNU. The influence of the SACP and Cosatu may be more limited. If the president and his GNU partners implement fundamental economic reforms, this could greatly benefit the economy, especially small and medium-sized businesses.

The scale and importance of state-owned companies such as Eskom means careful consideration will be needed if they are to be converted into enterprises driven by the private sector. However, it is crucial that these entities are managed as businesses, and this could usher in a new era of cooperation between the state and the business sector.

This could also lead to a shift from the intellectual and influential role of the SACP and Cosatu to more market-oriented advocates in the GNU. The corporate business sector has been eager to get involved for some time, with the aim of increasing profits by promoting political and economic stability. It could also have a stabilising effect on the markets and currency.

Benefits for businesses

Small and medium-sized businesses, in particular, urgently need a structure in which a competitive environment can be created without government restrictions and with only limited intervention. This could represent the start of a new growth phase in the economy. There is a general feeling, even among advocates of a state-driven economy, that entrepreneurship, as embodied by small and medium-sized enterprises, is one of the most effective ways to promote job creation. This is the most important element in the president's proposed change of economic direction.

The new GNU dispensation may just usher in the era that all South Africans have been dreaming of since 1994, and finally deliver a better life for everyone. This change of direction could also make the informal township economy grow and become part of the formal economy, which would have significant benefits for the South African Revenue Service.

♦ VWB ♦


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