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The 2020 South African State of the Nation address (SONA) by President Cyril Ramaphosa finds him in a difficult time as South Africa is characterised by numerous pressing challenges including struggling state-owned enterprises, poor economic performance and outlook, high levels of corruption, regular disruptive and violent forms of protest action, and unacceptably high levels of unemployment, inequality and poverty.  

An unenterprising state of affairs

Among state-owned enterprises, Eskom’s inability to maintain the national grid probably represents the predominant concern at present. This enduring electricity crisis has contributed significantly to South Africa’s deteriorating economic circumstances. Yet the situation with other state-owned enterprises is also critical.  South African Airways (SAA) was placed under business rescue in late 2019, while military technology and defence company Denel had to receive a R1.8 billion injection from government in August 2019 in order to pay salaries and suppliers (Khumalo, 2019). In October last year, National Treasury provided a R2.1 billion bailout to assist the battling South African Broadcasting Corporation (SABC), with another R1.1 billion scheduled to be released once the broadcaster complies with certain preconditions.  

There are various reasons for the dismal situation of the state-owned entities. According to the Presidential State-Owned Entities Review Committee (PRC) Report (2012), the South African legislative and policy framework under which SOEs operate is fragmented and often contradictory. The current legal framework ‘does not facilitate the execution of the fiduciary duties of these entities satisfactorily’. Arguably, the current legislative and policy framework constrains many SOEs from performing their developmental, strategic and socioeconomic functions’. Eight years later, however, the SOE landscape has not improved because the critical legislative framework and policy challenges confronting SOEs remains to be addressed (Kanyane, 2018). Arguably, ff the Presidential Review Commission on State Owned Entities recommendations had been given timely and serious consideration, some governance failures and the extent of state capture may have been more limited.                                                                                                                                               

Civil society and political commentators argue that continued corruption and lack of skilled leadership continue to be significant contributors to the poor performance among SOEs. For instance, the Ahmed Kathrada Foundation lobbied late last year for the government to extradite the Guptas from their self-imposed exile and hold them to account for their alleged role in state capture, notably of several socio-economically strategic SOEs. Against this backdrop, the President’s SONA must express clear support for law enforcement agencies’ to bring the Guptas before the Commission of Inquiry on State Capture (Mavuso, 2020) and the courts.  Mkhwanazi (2020) believes that “Eskom, the economy, corruption and crime will top President Ramaphosa’s to-do-list”. There is an urgent need to increase the fight against corruption and to come up with concrete plans to fix the economy. The President’s appointment of Andre de Ruyter as Eskom’s new CEO, based on the Board’s recommendation, is acknowledged. It remains to be seen whether de Ruyter will be able to successfully rescue the power utility, especially in the face of strong union opposition. Further efforts by the President include talks about the controversial proposed agreement between government, business and labour to use funds from the Public Investment Commission (PIC), the Development Bank of Southern Africa and the Unemployment Insurance Fund to pay Eskom’s debt (Mkhwanazi, 2020). While the government debates the merits of this proposal, many South Africans’ and businesses have to confront the far-reaching economic and social impacts of load shedding.

This unfavourable situation has resulted in public protest action across South Africa. On 11 February, Klipspruit residents in Soweto barricaded roads with burning tyres and rocks, making roads inaccessible to motorists (Lindeque, 2020). The police indicated that the demonstration is related to electricity problems. This type of protest action is not new and many scholars have argued that these protests are a result of organisational failure to provide satisfactory basic services, while others maintain that citizen satisfaction is also a function of expectations of government’s performance (Davids, Roberts & Struwig, 2016; Masiya, Davids & Mangai, 2019). Government must therefore address the concerns of citizens to prevent escalating protest actions.

The enduring triple bind

Unemployment, inequality and poverty are other major challenges of the South Africa government in its quest to create a better life for all. For instance, South Africa’s unemployment rate increased from 29 percent in June 2019 to an all-time high of 29.1 percent in September 2019 (Stats SA, 2019b). It is unlikely that the economy will grow fast enough to create the necessary jobs to reduce unemployment. This is indeed a disconcerting prospect for the many young South Africans entering the labour market in search of decent employment to improve their lives. Available data indicated that youth unemployment stood at 38.6 percent in the third quarter of 2017. This was 10 points higher than the national average. The level of youth unemployment is extremely worrisome, despite the President confirming in 2018 that job creation for the youth would form a central pillar of national policy (SAHRC, 2018). Growing numbers of retrenchments – such as Telkom - will also lead to an increase in unemployment rates.

South Africa continues to rank as one of the most unequal countries in the world, despite a decline of the per-capita expenditure Gini coefficient of 0.67 in 2006 to 0.65 in 2015. According to the most recent household expenditure survey produced by Stats SA, the Living Conditions Survey (LCS) 2014/15, the Gini coefficient of household per capita income is well above 0.6 and this high level of inequality has been characterised since 1993 (Stats SA, 2019). The Gini coefficient for wealth inequality in South Africa is incredibly high at approximately 0.95, largely a consequence of structural injustices inherited from apartheid-era law and policy. An average black African household holds about 4% of wealth held by an average white household, while an average coloured household holds about 6% of the wealth held by its white counterparts. Moreover, wealth inequality appears to be increasing at a much faster rate than income inequality (South African Human Rights Commission, 2018: 28).

Large proportions of the South African population are still characterised by high levels of poverty. Stats SA published a suite of three national poverty lines: 1) the food poverty line (FPL), 2) the lower bound poverty line (LBPL), and 3) the upper bound poverty line (UBPL).[1] However, according to the World Bank, between 2011 and 2015 poverty rates rose from 36.4% to 40.0% at the national LBPL. In addition, in 2015 almost half of the population could be considered chronically poor at the national UBPL of R992 per person per month in 2015 prices (World Bank, 2018: 6). There is also a close connection between race and poverty. In 2015, 47% of the households headed by black Africans were poor (i.e. living below the LBPL). This was very high compared to 23% for those in households headed by coloureds, a little more than 1% for the population in households headed by an Indian South African, and less than 1% among those in households headed by white South Africans. The poverty rate increased for black Africans by 3.7% and for coloureds by 2.5% between 2011 and 2015 (World Bank, 2018: 13).

Full Statement Attached

Issued by The Human Sciences Research Council