Structural reforms being implemented under Operation Vulindlela (OV) will have to be carried over to the seventh administration of government and accelerated for South Africa to realise economic growth higher than 3%, no matter which parties form the Government of National Unity (GNU).
This was expressed by outgoing deputy finance minister, David Masondo, yesterday at the opening day of the National Treasury’s conference about the second wave of reforms.
Masondo said the seventh administration had a unique opportunity to accelerate implementing structural reforms and turning the economy around without any pressure of wanting to win an election.
“Reforms may be painful in the short term, but in the medium term and long term, they may be beneficial,” Masondo said.
“So this is the right moment to really think on important reforms that need to be undertaken in the context of the political cycle that we are right at the beginning of the administration. I’m very hopeful that whatever government is going to be put in place, there will be an acceleration of these reforms.”
Operation Vulindlela was established in October 2020 as a joint initiative of the Presidency and National Treasury to accelerate the implementation of structural and economic reforms to drive growth and job creation.
Its five initial priorities were stabilising the supply of electricity, reducing costs and increasing the quality of digital communications, stabilising water supply to meet demand, boosting competitiveness and efficiency in freight transport, and transforming the visa regime to attract skills and grow tourism.
Masondo said the sixth administration had not had an easy task implementing these reforms as it met with resistance from both the government and the private sector since 2019, but the government has seized the opportunity presented by the advent of the Covid-19 crisis.
“The second thing is that to undertake reforms, you need alliances in the state and outside the state. You need a political strategy to identify your allies, including your opponents, to carry out those reforms,” Masondo said.
“The last thing is learning from the OV, is that a crisis is a good opportunity to undertake reforms. Sometimes I think if we didn’t have load shedding, we probably would not have moved with speed in so far as some of the reforms in the energy space.
“Because a crisis also enables us to push back some of the vested interests in certain sectors and industries. We have an economic crisis in South Africa. Our economy is not growing at the pace at which we all desire in order to reduce unemployment and poverty.
“So this crisis also presents us with a great opportunity to undertake serious reforms. If we don’t, the rise of populism of different sorts is going to be the order of the day and none of us will be saved from those kinds of populism.”
Saul Musker from the private Office of the President said 94% of reforms had been completed or progressing well with R500 billion new investment unlocked.
Musker said there was 22 500 megawatts in the pipeline of private investment in renewable energy projects, a 51% reduction in the cost of data for a 1.5 GB bundle, while the number of days to obtain a water use licence had been reduced from 300 to 90 days.
“By alleviating load shedding, improving the performance of the logistics system, reducing the cost of data, improving water supply, and enabling the country to attract the skills it needs, the reforms already under way through OV Phase I will provide a significant boost to the economy in the medium term,” Musker said.
“However, while these reforms are a necessary condition for growth and job creation, they are not sufficient to drive structural transformation in the economy. To achieve not only higher, but more inclusive long-term growth, additional reforms will be required in the next phase of OV.
“More than three years since the Economic Reconstruction and Recovery Plan was introduced, an opportunity exists to outline a new, action-oriented growth strategy for South Africa to take forward these reforms.”
FNB senior economist Koketso Mano said continued progress in structural reform and improved local growth over the medium term was paramount, particularly to employment creation.
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