Fundamental economic reforms are gathering pace

Dear Fellow South African, 

Although it may not be apparent right now, South Africa’s economy is undergoing a fundamental transformation that will make it more competitive, inclusive and capable of growth. 

Since the start of this administration, we have been pursuing far-reaching reforms in ‘network’ industries like electricity, telecommunication, water, ports and rail. We have focused on reforms that are sustainable and transformative rather than temporary solutions that won’t last. 

It is understandable that the severity of the challenges the country is facing at this time give rise to frustration and impatience. Given the persistence of load shedding, for example, few people are able to contemplate the impact of a transformed energy landscape. 

While we are making progress towards ending loadshedding, transforming the electricity market to make it more competitive and cost-effective is critical to the country’s future.

The latest report from Operation Vulindlela, a joint project of the Presidency, National Treasury and key departments, outlines progress in implementing these reforms. Many of these reforms are being brought about by legislative and regulatory changes, which may not inspire many people, but which have a substantial impact on people’s lives and the performance of the economy.

To date, we have achieved several milestones in key areas. For example, in energy:

- The licensing requirement for generation projects of any size has been removed. As a result, more than 100 projects are now in development, representing over 10,000 MW of new generation capacity and R200 billion of private sector investment.

- A new Ministerial determination has been issued for the procurement of over 14,000 MW of new generation capacity from wind, solar and battery storage. 

- Tax incentives for rooftop solar are being implemented for businesses and households, which will drive a significant increase in rooftop solar installations. 

- Eskom is being unbundled into separate entities for generation, transmission and distribution. The Electricity Regulation Amendment Bill is being finalised for tabling in Parliament. These developments are part of establishing for the first time in our country a competitive market for electricity generation.

- Eskom’s debt burden is being addressed through R254 billion in debt relief, subject to strict conditions. This will enable the company to make necessary investments in its infrastructure.

The poor performance of South Africa’s freight logistics system is the biggest immediate constraint on growth after the electricity shortfall. Progress has been made to address the challenges in ports and rail:

- Transnet Freight Rail is establishing an independent infrastructure manager to enable transparent and accurate pricing of slots on the freight rail network and create a level playing field between public and private rail operators.

- Partnerships with private terminal operators at the Durban and Ngqura container terminals will be finalised soon.

- A National Logistics Crisis Committee has been established to improve the performance of ports and rail in the immediate term and drive the implementation of a Freight Logistics Roadmap into the future. Importantly, key industry players and other stakeholders are involved in this work.

On reforms in telecommunications:

- The completion of the spectrum auction in April 2022 has unlocked significant new investment and will enable expanded network access and reduced data costs.

- The gazetting of a Rapid Deployment Policy and Policy Direction as well as a standard draft by-law for wayleave approvals will help to accelerate the rollout of telecommunications infrastructure such as fibre and towers.

- A final date for the switch-off of analogue transmission will soon be gazetted to complete the digital migration process across the country. Five provinces – Free State, Northern Cape, North West, Limpopo and Mpumalanga – have already undergone the migration and are receiving television broadcast on the digital platform.

Reforms in the water sector aim to improve water quality while ensuring security of water supply in the long term:

- The proportion of water use license applications processed within 90 days has increased to 70% from 35%, and we are now targeting a further improvement to 80% of all applications. This is helping to speed up investment in sectors like mining, agriculture, forestry and infrastructure.

- The Blue Drop, Green Drop and No Drop water quality monitoring system has been reinstated. This enables intervention where municipalities are failing to meet minimum norms and standards for water service delivery.

- A Water Partnerships Office has been established to support private sector involvement in areas such as water re-use, improving wastewater treatment, desalination projects and improving rural water services.

On immigration reform, the Department of Home Affairs is implementing far-reaching reforms that will make the work visa system more agile and responsive to the realities of the new world of work and attract higher numbers of tourists.

The reforms being implemented now will have a real effect. For example, when we concluded the successful spectrum auction last year, the country’s biggest telecom operators noted that this would ‘supercharge’ efforts to expand coverage to the population and grow the economy. The GSM Association, an international telecoms industry body, estimates for instance that by 2030, over 90% of South Africans will have 4G or 5G access.

Structural reforms are often indirect. As a 2004 paper from the International Monetary Fund rightly notes, they are hard to sell: “The gains from reform are never as clear to the wider public as they are to economists.”

Reforms are nonetheless critical if we are to achieve the scale of economic growth that is needed by our country at this difficult time.

We are committed to stay the course on structural reform. We need consistency and perspective – not temporary, unsustainable solutions – if we are to improve the lives of South Africans, create jobs, attract higher levels of investment and build an economy of the future.

With best regards,