Economist lauds govt’s Operation Vulindlela drive to accelerate structural reform

A leading economist has lauded government’s Operation Vulindlela – President Cyril Ramaphosa’s drive to accelerate structural reform by addressing inefficiencies in South Africa’s key industries – as a step in the right direction to grow the local economy.

In what Ramaphosa has referred to as a vehicle to drive structural reform, the Presidency and National Treasury released the much-awaited Operation Vulindlela quarterly progress report, which details how much progress government has achieved in loosening impediments for economic growth.

Set up in 2020, Vulindlela is an initiative to accelerate structural reforms in industries regarded as the bedrock of economic growth – overseen by Finance Deputy Minister David Masondo, reporting directly to Ramaphosa.

It aims to modernise and transform network industries, which include electricity, water, transport and digital communications.

Out of the 19 projects listed in the Vulindlela milestone dashboard, the seven completed projects were the:

• Increase in the role of independent power producers.

• Restructuring of Eskom into generation, transmission and distribution entities.

• Increase in the available digital spectrum.

• Improving the water use licensing process.

• Strengthening the regulation of water pricing and service standards.

• Implementation of e-Visa and visa waivers.

• Corporatisation of the Transnet National Ports Authority.

Projects flagged on amber, included the improvement of energy availability in Eskom plants and addressing institutional inefficiencies in municipal electricity distribution management.

University of Johannesburg associate economics professor Peter Baur concurred with Ramaphosa that structural reform was “one of the key areas in turning South Africa around – bringing the country onto a progressive and sustainable growth trajectory”.

“For South Africa, structural reform is critical.

“However, given many economic challenges such as fiscal capacity and changing global economic environment – due to international pressures, such as Covid and the Russian presence in the Ukraine – progress is there, but unlikely to be as ambitious as we would like it to be.

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“Solving issues such as rising unemployment, growing inequality and getting further investment into the country, sustainable growth is required.

“Without the growth, many key factors such as reducing unemployment or closing the income gaps, will not be achievable,” said Baur.

He added: “The message brought about through Operation Vulindlela to investors and international financial lenders, is likely to be positive.

“Furthermore, by having to report back directly to the president, creates a sense of accountability and with such reports been released, gives us a sense of transparency and accountability.

“Yet, I believe that for such an operation to reach its full potential, other policies within the national policy framework structures, should be brought further in line with such a programme.

“These include reducing business and labour regulation, removing any restrictions to market participation and furthering the rights of all to economic inclusivity.”

Writing in his Monday letter to the nation, Ramaphosa said the SA economy could not function or grow without efficient and competitive network industries, he described as “the arteries through which the oxygen of the economy runs”.

“Structural problems in these areas have long been cited as some of the main constraints on South Africa’s economic growth.

“Inefficiency and the high cost of network services are an impediment to doing business in the country.

“A factory can only operate effectively with a reliable and affordable supply of electricity.

“A farm with irrigated farmlands, can only produce food if its application for a water use license is processed timeously.

“A mine can only transport its minerals for export, if the railways are functioning properly.

“A small business cannot thrive if it lacks access to the internet or if the cost of data is too expensive,” maintained Ramaphosa.

While responsible government departments and entities drove the reforms, Ramaphosa said Operation Vulindlela monitored and identified challenges and blockages.

Said Ramaphosa: “Where needed, it facilitates technical support to departments.

“Across government, our focus is on reforms that are fundamental and transformative – reshaping the way our economy works.

“This includes the auction of high-demand spectrum for mobile telecommunications, which was delayed for more than 10 years and finally completed in March.

“The release of new spectrum will improve connectivity and bring down broadband costs.

“The establishment of the National Ports Authority as a separate subsidiary of Transnet last year, had been delayed for more than 15 years.

“This was the necessary first step towards enabling private sector participation and increasing the efficiency of our port terminals.”

Through Operation Vulindlela, government has also been able to “take a more focused and holistic approach to reforms – ensuring better coordination where multiple departments and entities are involved”.

“The best example of this is in the energy sector, where a number of important, interconnected reforms are underway to change the way that we generate and consume electricity.

“Milestones include the raising of the licensing threshold for new generation projects to 100MW – allowing these projects to connect to the grid and sell power to customers.

“We have revived the Renewable Energy Independent Power Producer Procurement Programme through the opening of new bid windows.

“Changes to the regulations on new generation capacity have allowed municipalities to procure power independently for the first time.

“Legislative reforms will ultimately give birth to a new competitive electricity market, supported by the publication of the Electricity Regulation Amendment Bill and the work underway to amend the Electricity Pricing Policy,” he explained.

brians@citizen.co.za