Last week Friday, President Cyril Ramaphosa gave his first SONA speech. Twitter and Facebook were bursting with delight – but perhaps because I’d read the speech before I watched the video clips, it felt like I was in the twilight zone. Is “true leadership” defined mostly by the quality of one’s speech delivery, and a quote from a Hugh Masekela song that ends in an artful hashtag?

This feels the same as the public infatuation with Pravin Gordhan. If you take anti-Zuma sentiment out of the mix, his tenures as Finance Minister were fairly mediocre – at best.

So let’s talk about that State of the Nation speech.

SONA: The Main Points

Tributes and Calls For Togetherness

There were many tributes and calls for togetherness. The feel good factor was on point.

The current state of the nation is dire

“We remain a highly unequal society, in which poverty and prosperity are still defined by race and gender.

We have been given the responsibility to build a new nation, to confront the injustices of the past and the inequalities of the present.

We are called upon to do so under difficult conditions.

The state we are in as a nation is that while poverty declined significantly following the democratic breakthrough of 1994, we have seen reverses in recent years.

Poverty levels rose in 2015, unemployment has gone up and inequality has persisted.

For several years our economy has not grown at the pace needed to create enough jobs or lift our people out of poverty.

Public finances have been constrained, limiting the ability of government to expand its investment in economic and social development.”

The economic outlook…

…is somewhat better than it was before. Mainly because of external factors (like the recovery of the commodity markets, and improved foreign investor sentiment now that the political crisis of Zuma’s transition has been resolved).

Unemployment

There’s going to be a summit to discuss it.

Youth Unemployment, specifically

There’s going to be a new government-led initiative for paid internships.

Investment

There’s going to be a summit to discuss it.

Radical Economic Transformation

It must be part of investment.

The Mining Charter

There are going to be more efforts to resolve the conflict between Government and the Chamber of Mines.

Small Businesses

The government promises to set up a small business investment fund, and to reduce red tape.

Agriculture

Expropriation without compensation is going ahead.

Tourism, Telecoms and Technology

These industries exist and should be bigger.

The Tripartite Free Trade Area Agreement

South Africa is part of it.

A National Minimum Wage

This has already happened.

The Drought

More must be done to help.

Free Higher Education

It’s going to happen – and it’s already happening.

National Health Insurance

Universal health coverage is going ahead full steam.

Size and Structure of Government

This is to be reviewed.

State-Owned Enterprises

Government is going to be better about fixing these. Some of them are functionally unsustainable:

“We will need to confront the reality that the challenges at some of our SOEs are structural – that they do not have a sufficient revenue stream to fund their operational costs. These SOEs cannot borrow their way out of their financial difficulties, and we will therefore undertake a process of consultation with all stakeholders to review the funding model of SOEs and other measures.”

Corruption

Less of this, everywhere.

Hashtag

#sendme

Now some of that is nice. I liked the tributes and the hashtag. And the commitment to reducing corruption and fixing things.

However.

When someone admits that “public finances have been constrained, limiting the ability of government to expand its investment in economic and social development”, you don’t follow that by announcing the implementation of two massive social welfare programmes:

1. a National Health Service; and
2. free higher tertiary education.

And you especially don’t say that while simultaneously admitting that the State-Owned Enterprises are structurally loss-making (ie. “they do not have sufficient revenue streat to fund their operational costs”).

Because how is this all going to be paid for?

I am all for stamping out corruption and fixing procurement strategies and SOE board appointments and all those other things. And that should hopefully save some money.

But spending in anticipation of those kinds of savings seems a lot like spending in anticipation of winning the lottery. Because one does not simply “overhaul a government”. Especially when one is, oneself, a branch of government, trying to force another branch of government to overhaul itself.

And more importantly, will that “saved money” be enough to cover even some of that new investment in economic and social development?

It may have been politically expedient, but this SONA felt fiscally rash.

So, yes, it’s great that the tide has turned against State Capture and its agents.

But this “New Dawn” is still attempting to fund a developed world welfare state off a developing world tax base. Which is great on the social and moral fronts – but I just don’t know how one accomplishes it in practice.

I guess we’ll find out when the Budget Speech happens on Wednesday.

#staytuned

Rolling Alpha posts opinions on finance, economics, and sometimes things that are only loosely related. Follow me on Twitter @RollingAlpha, and on Facebook at www.facebook.com/rollingalpha. Also, check out the RA podcast on iTunes: The Story of Money.