South Africa's Zuma under pressure in major policy speech

CAPE TOWN Tue Jun 17, 2014 8:43am EDT

President Jacob Zuma addresses supporters at a victory rally of his ruling African National Congress (ANC) in Johannesburg, May 10, 2014. REUTERS/Mike Hutchings

President Jacob Zuma addresses supporters at a victory rally of his ruling African National Congress (ANC) in Johannesburg, May 10, 2014.

Credit: Reuters/Mike Hutchings

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CAPE TOWN (Reuters) - South African President Jacob Zuma delivers the first State of the Nation address of his second term on Tuesday, under pressure to outline plans for reviving growth and creating much-needed jobs in Africa's most advanced economy.

A double blow from ratings agencies last week underlined the precarious state of the economy, which contracted in the first quarter. South Africans will also be closely watching Zuma himself after he was hospitalized this month with fatigue.

The 72-year-old 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.

Zuma's African National Congress (ANC) won a 62 percent majority in the vote, the fifth since the end of apartheid in 1994, but the ruling party has had little to cheer about since the result.

A five-month strike in the platinum mines 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.

Hitherto, Zuma had relied almost exclusively on a National Development Plan (NDP) drawn up in his first term as his broad blue-print for promoting long-term growth.

Analysts said the president also needed to address the deep mistrust that exists between the government, unions and the private sector if the NDP - which requires the cooperation of all three entities - is to have any chance of 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 on Tuesday.

Standard & Poor's downgrade means South Africa could even lose its coveted investment grade credit rating if growth fails to pick up. S&P's outlook is stable for now, indicating it is not looking at cutting its rating again soon but investors will want reassurance that 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.

"Much of the debate wants to hear an address that does not 'waffle' about policy but promises to 'get things done'. But if that is all we hear, we are likely to remain stuck where we are," said Friedman.

Zuma's address to parliament in Cape Town is due to start at 1700 GMT.

(Reporting by Ed Cropley; Editing by Susan Fenton)

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