MESSAGE FROM THE TREASURER GENERAL - Paul Mashatile
Earlier this month, government released the update report on the work of Operation Vulindela for the first quarter of 2022. Launched in October 2020, as part of South Africa’s Economic Reconstruction and Recovery Plan, Operation Vulindela seeks to accelerate the implementation of structural reforms in network industries. These include electricity, water, transport and telecommunications. Ultimately, the goal is to build efficient and competitive network industries, necessary to support sustained and inclusive economic growth as well as inspire business, investor and consumer confidence.
Essentially, Operation Vulindlela is in recognition of the reality that problems in the South African economy are deep and structural. These structural problems have long been cited as some of the main constraints on economic growth. Equally, inefficiency and the high cost of network services militate against the goal of reducing the cost and improving ease of doing business. Operation Vulindlela has been able to focus government on a limited number of high impact priority reforms to accelerate economic reconstruction and recovery.
The progress registered so far in driving the reform agenda is a clear demonstration of the ANC government’s commitment to implementing reforms that are fundamental and transformative in nature – reforms that will change the trajectory of our economy. It is estimated that implementing reforms will add bout 2% to South Africa’s economic growth.
What do these reforms mean to ordinary South Africans? Reforms in the electricity sector will stabilise South Africa’s energy supply, reduce the risk of load-shedding and accelerate the transition to renewable energy sources. Raising the licensing threshold for embedded generation projects is expected to unleash new investment in energy generation by independent power producers. It will enable the procurement of new generation capacity to the grid and thus strengthen South Africa’s energy security. In addition, work is ongoing to restructure Eskom into separate companies for generation, transmission and distribution. Through all these interventions in the electricity sector the aim is to build a world class, modern and efficient energy system, without which our economy will not grow.
Reforms in the digital communications sector will reduce the cost of data and broadband, expand internet access to low-income households and unlock new investment in telecommunications infrastructure. This offers significant benefits especially to small businesses who cannot thrive without reliable access to high-speed internet or if the cost of data is too expensive. Households too will benefit from reduced prices of data.
Reforms in the transport sector aim to improve the efficiency of South Africa’s logistics infrastructure, helping to make our exports more competitive on international markets. These reforms will also help lower the cost of imported goods. Allowing third party access to the freight rail will enable massive new investment in freight rail by private companies. It will also increase the volume of goods that can be transported via rail instead of roads. This will in turn reduce congestion on major highways, improve our road conditions and contribute towards reducing road fatalities. Fixing passenger rail is an integral part of the reforms in the transport sector. A more efficient passenger rail system will contribute to higher productivity and will reduce the amount of time and money spent by workers travelling to and from their places of work; enabling them to spend more time with their families.
Reforms in the water sector aim to increase investment in the maintenance and construction of water infrastructure and improve water quality. Strengthening regulation in the water sector will improve accountability by municipalities and water boards on the quality of water, and ensure that prices are set correctly to enable adequate investment in water infrastructure. The envisaged establishment of a national water resource infrastructure agency will enable South Africa to expand bulk water infrastructure and improve the management of existing water assets to ensure water security over the next decade.
The Vulindlela work also extends to the implementation of visa reforms. The aim is to create a more conducive environment for attracting skills, enabling companies to invest in South Africa and supplying the skills that the economy needs. Our visa reforms are also aimed at making it easier for international tourists to visit South Africa.
Government has indicated that it is working on addressing all of the bottlenecks preventing the speedy implementation of the reform agenda. These include the sometimes cumbersome regulatory requirements preventing the realization of the full impact of the reforms. As President Ramaphosa wrote in the article: From the Desk of the President of 9 May 2022; “Many of these reforms are complex, involving new ways of working and even the establishment of new institutions. In some cases, it will take time for us to see their full impact. Yet they are the only way to shift our economy from stagnation to dynamism.”
What is clear is that the reform agenda is gathering momentum. It is irreversible.