ENOCH GODONGWANA: SA’s economic reforms will fuel an accelerated pace of investment

The pace of investment in SA is accelerating as a growing number of international and local investors are recognising the opportunities created by critical reforms initiated by government.

At the core of this is the Economic Reconstruction & Recovery Plan (ERRP), launched by President Cyril Ramaphosa in late 2020, which set out a vision to reshape the economic landscape in the wake of the global pandemic.

The growth plan is driven by huge investment in infrastructure, especially in the core network industries of energy, telecommunications, port and rail. This is bolstered by decisive changes to the regulatory environment and proactive steps to create an efficient state that is committed to clean government.

The success that has already been achieved will be highlighted at this week’s SA Investment Conference 2023, where participants will not only take stock of the use of funds pledged during the previous five years, but also set new targets for the time ahead. Already, government has indicated that it will raise its initial target of R1.2-trillion to R2-trillion worth of investments over the next five-year period.

SA’s recovery and reconstruction 

The ERRP identifies priority interventions, which will ignite SA’s recovery and reconstruction efforts. The objective is to create enabling conditions for growth, which contributes to an inclusive, competitive and thriving economy. It sets a broad macroeconomic framework and creates institutional arrangements that ensure implementation and accountability.

From an investor’s perspective, the ERRP clearly defines the areas that should attract funding, and which attracted the widest interest from participants at the previous SA investment conferences.

There is a strong focus on infrastructure, particularly in the energy, transport and water sectors. This is in line with the broader national infrastructure plan that was launched before the arrival of the pandemic. The aim is to improve the country's economic competitiveness by addressing infrastructure gaps that have long hampered growth.

An infrastructure fund was established with R100bn of seed money over a 10-year period to leverage blended financing from private investors and multilateral banks. Investment SA was established as a single point of entry for infrastructure planning, management and delivery.

A second focus of the ERRP is to drive industrialisation through localisation. It seeks to improve the efficiency of local producers and develop export competitive sectors that can expand the sales of locally made products on the rest of the African continent and beyond.

This initiative is supported through sectoral master plans in key strategic industries such as steel production, the automotive sector, clothing and textiles. Localisation is seen as a catalyst for innovation and a key driver of SA’s economic recovery.

The ERRP recognises that the country will not achieve long-term gains unless it is underpinned by a range of policy actions designed to create the enabling conditions for sustained economic growth.

Far-reaching policy and regulatory reforms will unlock greater investment, lower the barriers of entry and increase competition, which will inevitably lead to a more diversified economy.

This also requires a radical overhaul of the network industries through the streamlining of policies and regulation and the repurposing of state-owned enterprises (SOEs). These processes are gathering momentum and some results are already visible in the steps to unbundle the power utility, Eskom, scrap the restrictions on private sector power generation, overhaul the efficiency of the country’s ports, and introduce a comprehensive “road to rail” strategy for the transportation of freight.

The recent auctioning of high-demand spectrum was seen as a game-changer that will lower communications costs, improve network quality and expand its reach into rural and outlying areas.

This will have a significant knock-on effect in the digital infrastructure space and lead to increased investments in telecommunications and a reduction in market concentration.

High-impact reforms

The implementation of the ERRP is buttressed by Operation Vulindlela, a unit located jointly in the presidency and National Treasury. The aim of this initiative is to fast-track the implementation of high-impact reforms, eliminate bureaucratic or regulatory obstacles and ensure delivery on policy commitments.

It recognises that lower costs and greater efficiency increase the competitiveness of the economy and create new opportunities for investment. These reforms will place SA on a new trajectory of high and sustained growth.

In the first year since its establishment, Operation Vulindlela has identified 19 priority areas for reform. Among its early achievements are the opening up of the electricity-generation sector for private investment, reforming the application system for water-use licences and clearing the way for the private sector to invest in container terminals at the country’s harbours.

An updated critical skills list was published, and the work visa system is being overhauled to remove another barrier that inhibited the country’s ability to attract skills and investments in the past.

These reforms are rooted in a macroeconomic framework that is stable, clear and predictable. Since the launch of the ERRP, government has reached out to all sectors of society and critical players in the economy to reach consensus on common goals for rapid and sustained growth.

The positive responses that were received from investors have strengthened the implementation of the plan and will continue to modernise the economy through investments in projects, skills and technology.

• Godongwana is minister of finance.