State of the Nation Address: Economic outlook and government plans for South Africa

President Cyril Ramaphosa will deliver the State of the Nation Address (Sona) to Parliament later this week on 12 February. 

The country will be watching with a close eye as Ramaphosa will layout government's plan to move the country forward. 

Frank Blackmore, Lead Economist at KPMG South Africa, told Business Report that in the Sona this yearm he expects the President to begin by referring to some of the wins that came in as far as the country was concerned towards the end of last year.

Blackmore said, "The fact that they remained with the primacy of fiscal consolidation, reduced the inflation rate target to the benefit of all South Africans and had the consequence sovereign debt upgrade as well as the higher growth rate was a positive. 

Looking ahead, Blackmore said that he thinks the president will also sketch the environment within which this took place. 

"In other words, the geopolitical environment had a lot of uncertain outcomes and my hope is that he continues in the same vein as we left off in the medium term budget policy statement with intelligent policies to move the country forward and create higher growth opportunities. With that, I think the fiscal consolidation will probably be mentioned as well as a lot of emphasis on infrastructure development and maintenance in order to underpin that economic growth in future years to come," Blackmore said.

"I don't think we'll see too many radical ideas such as nationalisation of the South African Reserve Bank, NHI, etc, because at this point, we just don't have the physical capacity for such ideas. I think we'll just build on what was said in the medium term budgets policy statement and prepare for the budget speech later this month, which I think will echo the same continuation of that fiscal consolidation and focus on growth but also obviously the social wage and the amount that needs to be done in terms of job creation, in order to alleviate unemployment and poverty in the country," the KPMG economist said. 

"I think we'll get progress on the private sector initiatives within certain elements of the logistics sector as well as energy. We'll have an update on all those areas because they are the ones that are holding us back in terms of growth. So, all in all, I expect a positive sign that will come at the beginning of this year followed by positive budget as well," Blackmore added. 

Annabel Bishop, lead economist at Investec said that the Budget speech later this week is expected to be under pressure from the 2025’s MTBPS proposed additional expenditure, while monthly SARS debt collection data showed collections are currently -R24bn under target for the first nine months of 2025/26. 

Bishop said, "The MTBPS also saw GDP growth forecasts lowered for 2026. Sona will give further insight on growth initiatives and updates, however, the Sona also has a degree of blandness as the same topics resurface."

"Business and investors will focus on updates and plans to reduce or eliminate the freight constraints, poor governance and crime and corruption. In addition, with load shedding seen to be largely eradicated, load reduction, however, remains a key problem for security of electricity supply," Bishop addded. 

"The water and sanitation crises still persist, along with high unemployment (poverty and weak growth), still insufficient progress on reducing red tape and bureaucratic process to further improve the ease of doing business.A quicker turnaround on the water crises and a quicker turnaround at Transnet, particularly better enabling PPPs are key themes investors remain  focused on still from a year ago," Bishop said.

BUSINESS REPORT