Nokwanda Mathenjwa

In the President's eagerly awaited State of the Nation Address (Sona) on the 6th of February 2025, it was refreshing to hear President Cyril Ramaphosa acknowledge that South Africa is developing state in pursuit of a developmental state.

The late Professor Thandika Mkandawire, a prominent Malawian economist and scholar, has extensively analyzed the concept of the developmental state, particularly in the context of Africa. His work often critiques the capacity and ethical dimensions of African states in their pursuit of development. While Mkandawire does not specifically focus on South Africa in all his writings, his broader framework can be applied to assess whether South Africa qualifies as a capable, ethical, and developmental.

A capable state, according to Mkandawire, has the institutional capacity to design and implement effective policies for economic transformation. South Africa has relatively strong institutions compared to many other African countries, with a well-established legal system, a functioning bureaucracy, and a relatively diversified economy.

However, the country faces significant challenges, including high levels of inequality, unemployment, and corruption, which undermine its capacity to deliver on developmental goals. As South Africa pursues the ambitions of a capable state the Sona captured some of the characteristics, firstly, improving the technical and administrative capacity of municipalities and the restructuring of the local government with the aim of significantly improving service levels for local communities.

Secondly, social anchoring in the inclusion of traditional leaders and community-based organizations in local development programmes. Thirdly, continued reform of State-Owned Enterprises (SOEs) to improve the quality of institutions is vital for the optimal functioning of our economy.

During his recent 2025 Budget Speech on the 12th of March, the Minister of Finance, Enoch Godongwana, tabled R494 million towards water infrastructure issues in 21 municipalities for the 2025/26 financial year and R76 million towards integrated urban development grant.

The proactive and sustainable inclusion of the traditional and local ecosystem is yet to be seen in other government plans, while SOEs were not accounted for citing the crowding-out effect their bailouts have on much needed service delivery programmes aimed at addressing poverty, unemployment and inequality.

An ethical state governs with integrity, transparency, and accountability, prioritizing the welfare of its citizens. South Africa's post-apartheid constitution is often hailed as one of the most progressive in the world, emphasizing human rights and social justice.

However, the country has been plagued by corruption scandals, which have eroded public trust in government institutions. The ethical dimension of the state is thus compromised by these issues, despite a strong constitutional framework.

Ramaphosa pronounced a number of interventions to combat corruption and end our state capture woes, such as Investigating Directorate Against Corruption a permanent entity within the National Prosecuting Authority, recommendations of the State Capture Commission, establishing a world-class digital forensics lab to support the investigation of complex corruption and financial crime, the Whistle-blower Protection Framework and Bill, to name a few.

Budget

In the Medium-Term Budget R119.1 million has been allocated to establish a shared forensic capability at the Financial Intelligence Centre, R150 million to the Directorate for Priority Crime Investigation over a two-year period for forensic accounting services, R300 million for tackling economic crimes such as money laundering, financing of terrorism and state capture, and R812m towards the office of the Chief Justice for operational expenses.

A developmental state is characterised by its commitment to economic growth and social development, often through active state intervention in the economy. South Africa has made significant strides in certain areas, such as expanding access to education and healthcare. However, the country has struggled to achieve inclusive economic growth, sustainably reduce unemployment, poverty and inequality. The state's ability to act as a developmental state is hindered by structural issues, including a legacy of apartheid, high levels of corruption, and a lack of effective implementation of policies.

The Sona reiterated commitments to industrialization, job creation, and addressing inequality, aligning with the goals of a developmental state. Ramaphosa expressed an industrial policy that drives economic growth through localisation, diversification, digitization and decarbonisation. The industries identified being green manufacturing, renewable energy and infrastructure. While South Africa continues to struggle with high unemployment rates (over 30%) and sluggish economic performance; 1.9% projected by the National Treasury and 1.7% by the South African Reserve Bank.

The Ministry of Finance has allocated R46.7 billion towards much needed infrastructure development. Disappointingly the vertical industries identified in the Sona such as technology, energy, agriculture opportunities, beneficiation of critical minerals initiatives, and environmentally sustainable batteries for electric vehicles were not accounted for, however, the investment in infrastructure as a horizontal industry will definitely have broader positive spillovers on firms and industries in the overall economy.

It is rather underwhelming that only 1.9% of Medium-Term Expenditure Framework (a tool used to plan and manage expenditure over a three-year period) has been allocated to industrialization and exports (which should be reported separately as they measure different activities), 1.4% towards agriculture and rural development, 0.9% for innovation science and technology and only 1.1% for job creation and labour.

While the 2025 Sona and Budget Speech demonstrate a commitment to addressing key developmental challenges, the state's capacity to implement these plans is undermined by systemic issues such as corruption, inequality, fiscal constraints and ineffective policy implementation. To move closer to Mkandawire's ideal of a developmental state, South Africa must strengthen its institutions, improve governance, and prioritize long-term, inclusive and sustainable development over short-term political gains.

A Developmental state has nationalist projects, the political will to implement those, does not suffer from "dependency syndrome” that relies on Western capital to solve domestic challenges and is not governed by self-interested individuals.

For South Africa to commence its path of re-industrialisation finance also needs to understand that it takes approximately 20 years for the fruits of industrialisation to yield, therefore, funding terms need to adjust for specified sectors for the country to achieve its industrialization objectives. This is not an automatic process, but one that demands intentional and committed state intervention and private sector collaboration. Where our efforts are focused more on our comparative advantages in natural resources, agriculture, automotive, and financial and professional services and upgrade our competitive advantage in infrastructure, diversified industrial base, and use our skilled workforce to advance our capacity in innovations and research and development.