Zuma fails to appease investors, rating agencies – economist

12 February 2016

Cape Town – President Jacob Zuma’s State of the Nation speech was filled with old ideas, according to Nomura emerging markets economist Peter Attard Montalto on Thursday.

The removal of two centres of government has been considered since 1994, but never happened, said Montalto.

“It would save around R500m to 750m per year, but that would be offset by the likely massive cost of building a new parliament in Pretoria,” he said. “It would also take five to 10 years likely for net savings to be achieved.”

There was no mention of wealth tax, confirming to it won’t appear in the budget, he said.

The ban on foreign land ownership and a bill to this effect were mentioned, which will come forward in the second quarter of 2016 and will be “deeply non-investor-friendly”, said Montalto.

“We were a little surprised that the ban on foreign land ownership was given such prominence, and whilst leasing will be possible, this is a classic example of a policy going in the wrong direction to helping growth,” he said.

There was a lot of mention of historic redress and the need for “radical economic transformation”, said Montalto. This “is not a ratings-friendly phrase”.

“This was tempered by an interesting first; an admission of the need for private enterprises to make profit,” he said.

Regarding parastatals, there was no mention of putting private sector management in place, which was a key suggestion from recent CEO meetings with Zuma.

“There was no mention of privatisation, though ‘defunked’ parastatals would be closed, but we think this is not a new policy.”

Most concerning of all, was that there was a very “conspicuous absence of any mention of tackling corruption, which was very odd”, said Montalto. “It has always been mentioned in previous speeches.”

Montalto said the “new” one-stop shop for investments and an inter-ministerial investment promotion committee were mentioned, but these are not new policies.

“Equally, the need to remove regulatory blockages was mentioned, but no specifics of blockages to be dealt with were given.”

The article first appeared on Fin24, see here.