CAPE TOWN— South African President Jacob Zuma put the need to boost the economy at the center of the first major policy speech of his second term on Tuesday, saying he hoped to lift annual growth to 5 percent by 2019.
Promising “radical socio-economic transformation” 20 years after the end of apartheid, Zuma also said he would take direct responsibility for improving conditions in the mining industry, which has been beset by two years of crippling strikes.
“We have set this target during a difficult period. The economy has grown below its potential over the last three years and many households are going through difficulties,” he said in his first State of the Nation address since a May election.
“The slow growth has been caused in part by the global economic slowdown and secondly by domestic conditions, such as the prolonged and at times violent strikes, and also the shortage of energy,” he said.
Zuma's focus on growth and tackling 25 percent unemployment followed a double blow last week from credit-rating agencies that underlined the precarious health of Africa's most advanced economy, which contracted in the first quarter.
South Africa had long been the continent's biggest economy, but Nigeria claimed that title earlier this year.
The rand firmed slightly after Zuma spoke. Although the 72-year-old's delivery was at times faltering, it was no worse than usual, allaying concerns about his health after being hospitalized this month with fatigue.
Zuma was quickly discharged after “routine tests”, his office said a week ago. However, he handed over the reins to his deputy, Cyril Ramaphosa, for five days to give himself time to recover from the rigors of preparing for the May 7 election.
The African National Congress (ANC) won a 62 percent majority in the vote, its fifth but also its narrowest victory since the end of white-minority government in 1994.
A five-month platinum strike is dragging the economy towards recession and the impact on broader growth and government finances prompted Fitch to put South Africa on a negative outlook and Standard & Poor's to cut its credit rating on Friday.
Zuma, whose new mining minister stepped in to mediate wage talks, said he would take personal charge of efforts to address poor living conditions in the mines, one of the more acute legacies of white-minority rule.
“The process will now be led by the president. We will implement the undertaking to build housing and other services to revitalize mining towns, as part of the October 2012 agreement between business, government and labor,” he said.
Open for Business?
Overall, the speech expanded on Zuma's previous reliance on a National Development Plan (NDP) drawn up in his first term as South Africa's sole blue-print for broad long-term growth.
His comments about economic growth are likely to encourage those who had been waiting for signs that the ANC would try to ease the mistrust between the government, unions and private sector that are threatening the plan's success.
“Does the government want to bargain with the business sector and other interests to chart a new path for the economy, or does it believe it can fix its problems on its own?” political analyst Stephen Friedman wrote in the Business Day newspaper ahead of the speech.
Standard & Poor's downgrade means South Africa could even lose its coveted investment grade credit rating if growth fails to pick up.
Its outlook is stable for now, indicating the agency is not looking at cutting its rating again soon but investors will want reassurance the government is committed to steering the economy back to health.
The economy has been further strained by a cold snap at the start of the southern hemisphere winter and outages at some power generation units, which led to temporary rolling blackouts to prevent the already stretched national grid from collapsing.