Discussions
Comment on the State of the Nation Address
Colin McCarthy, tralac Associate, comments on the 2014 State of the Nation Address by South African President Jacob Zuma
During the first half of the year the South African economic and political scene has been dominated by a general election, comfortably won by the ruling ANC, and two state of the nation addresses by President Jacob Zuma. The last address on 17 June 2014, at the opening of the fifth parliament since 1994, was delivered amidst signs that the South African economy could be in a recession and shortly after the country had been down-graded by two rating agencies. Consequently, the address was keenly observed and commented on by analysts and journalists, more often than not in negative terms.
The purpose of this Discussion Note is to consider the state of the nation address from a different angle by briefly focusing on elements of the address that are relevant for the Southern African region.
The first point to note is that the address correctly identifies a number of problems that exist in the South African economy which poses serious challenges for government policy. These range from a growth rate and level of investment that are too low to the demand for energy that exceeds the capacity to supply. A number of policy initiatives to face the challenges have been identified in the address, mostly rather vague as one would expect of a wide-ranging state of the nation address.
The health of the South African economy is not only important for the welfare of citizens of the country but also for the wider region. South Africa may no longer be the largest economy in Africa, having recently been surpassed by Nigeria, but it remains the largest economy in Southern Africa and the most developed and industrialised on the continent. If prosperous and fast-growing, South Africa can through intra-regional trade, cross-border investment, efficient regional transport links, and employment opportunities facilitate economic growth and development in the wider region.
Employment opportunities and labour relations deserve, as second point, attention in their own right. In his February 2014 address President Zuma early on noted the importance of the mining industry and observed that results were achieved in stabilising labour relations in this important sector, and also that “(S)trikes in the sector were fewer and shorter than last year”. Within the space of five months the record-breaking strike at the platinum mines created a radically different situation. In the June address the President identified “the prolonged and at times violent strikes” as a problem that contributes to slow economic growth. He furthermore stated the following: “Given the impact of the untenable labour relations environment on the economy, it is critical for social partners to meet and deliberate on the violent nature and duration of the strikes”. The concern of the government is justified since fast investment-driven economic growth that creates jobs can only materialise if labour relations are stable in a business friendly environment.
From a regional perspective it is important to bear in mind that a significant number of the striking mine workers are citizens of neighbouring countries, notably Lesotho, with families back home that depend on income remittances. The direct negative impact of lost income because of strikes is transferred across borders. Furthermore, should untenable labour relations in South Africa have the likely effect of curtailed growth in the mining industry the negative impact on jobs will not only be felt in South Africa but in neighbouring countries as well.
But in an integrated regional economy, which in a process of deepening integration will bring an even greater extent of intra-regional labour migration, a regime of labour relations is not something that can be confined to a single economy. In the case of footloose industries, which mines typically are not, labour unrest and increasing wage cost will prompt South Africa businesses to relocate to neighbouring states, and should this become a significant movement, it is unlikely that South African trade unions will not “export” their approach to industrial relations to neighbouring labour markets.
A final point that deserves emphasis as far as the region is concerned is the reference by President Zuma to Sub-Saharan Africa as an important trade partner for South Africa and destination of foreign direct investment. The President expanded on this theme by stating that “South Africa will continue to champion regional integration through the Southern African Customs Union, SADC and the envisaged Tripartite Free Trade Area that spans Eastern and Southern Africa”. Mention was also made of importing energy from the region and in this regard the signing in October 2013 of the Grand Inga Hydro Power Project Treaty with the Government of the Democratic Republic of Congo.
In considering South Africa’s role as a champion of regional integration and linking this to the implementation of the Industrial Action Plan noted in the address, which is to entail the promotion of government procurement that will increase domestic production by having the state buying 75 per cent of goods and services from South African producers. This begs the question of why the government of the region’s economic hegemon, by agreement committed to the development of common industrial policies within the Southern African Customs Union (Article 38 of the 2002 Southern African Customs Union Agreement), could not expand the sources of procurement to include the SACU member states. This would have been an unambiguous sign by the South African government of leadership and commitment to regional integration and development.
Sources:
The state of the nation addresses were accessed at the following websites:
Address of 13 February 2014: http://www.thepresidency.gov.za/pebble.asp?relid=16910
Address of 17 June 2014: http://www.thepresidency.gov.za/pebble.asp?relid=17570