“Even in these trying times, it is hope that sustains us and fuels our determination to overcome even the greatest of difficulties”.
– Cyril Ramaphosa, SONA 2023
Thursday’s State of the Nation Address (SONA) was greatly anticipated, as the country seeks real solutions to the ongoing energy crisis and its billion-rand effect on our economy.
President Cyril Ramaphosa began his address by highlighting good news and success stories to celebrate in South Africa before delving into the pressing issues facing our country at the moment.
The Daily Maverick’s Janet Heard created a tally of words used by the president in his address. Business (17), Eskom (14), Loadshedding (13) were of course the most prominent. Not accounted for in this tally, and one, that we are particularly focused on at Step Advisory is that of growth – mentioned eight times throughout his address.
To address the most prominent issues facing the country, the President has imposed a State of Disaster. It is difficult to fully predict whether the newly imposed State of Disaster will provide the practical solutions desperately needed to remediate the effects of the energy crisis on South African businesses. However, there are some promises of conditions to enable growth that are worth highlighting.
In this article, we reflect on SONA and the potential implications on growth for businesses, both big and small.
A transformed and competitive energy sector
There was almost a palpable collective sigh of relief as the President highlighted plans to transform the energy sector and create a competitive electricity market.
Lifting the embedded energy ceiling through the proposed Electricity Regulation Amendment Bill not only creates further electricity capacity (an estimated 9000MW of new capacity) but provides a growth opportunity for independent power producers (IPPs) to supply power to the country. This is, of course, a great growth opportunity for IPPS but also for smaller businesses who are generating surplus energy to feed back into the grid.
Greater and more consistent power supply also means that businesses can keep the lights on and operations running for longer – enabling sustainable revenue generation. In an economic climate of rising costs, alleviating the sunk costs of non-productive hours due to loadshedding will help businesses switch from survival mode to growth mindsets.
Emergence of new, green sectors for growth
In a similar vein to the lifting of the energy ceiling, and aligned to the country’s Just Energy Transition Plan, the President committed to investing R1.5 trillion in new and emerging sectors in the economy aligned to renewable and clean energy. These “new frontiers” include renewable energy, green hydrogen, manufacturing of electric vehicles and fuel cells.
This presents a growth opportunity for businesses already exploring these products and revenue streams and potentially for companies looking to expand into these sectors, through diversification or acquisition.
Further, there is a specific growth opportunity for businesses within the manufacturing sector to start playing in these clean energy value chains, producing the various components for solar panels, fuel cells and electric vehicles.
Good news for SMMEs – the drivers of our economy
The President acknowledged the importance of SMMEs in our economy and has committed to assisting this key sector in three ways:
- Firstly, by reducing regulatory requirements for entrepreneurs to start businesses.
- Secondly, by creating a R10 billion fund to support SMME growth (fuelled in partnership with the private sector).
- Finally, through the commitment that government will provide tax incentives to encourage businesses to invest in solar equipment, and beyond that, through the bounce-back loan scheme, enable smaller businesses to invest in solar equipment.
Should these commitments come into effect, starting and growing small businesses can be realised.
“We are, at our most essential, a nation defined by hope and resilience.”
– President Cyril Ramaphosa, SONA 2023
While South Africa has a long road ahead to recovery and stability, there are clear commitments from government, which if realised, can provide growth opportunities for businesses – if businesses are proactive and ready to leverage them. As strategic growth advisors, Step Advisory helps businesses identify opportunities for growth and our team of experts is ready to support your businesses in navigating market conditions and positioning your business for growth and sustained success.
“Strategy is important, but execution is everything.”
– Jeff Haden
At Step Advisory we also deeply understand the importance of execution and that a strategy – or in the government’s case, policy – can only be successful with effective implementation. For long-term growth to be achieved, both for businesses and for our country, execution is critical. It will, therefore, be interesting to see just how the government plans to execute these plans for improvement.