SA should focus on quick wins that can be easily implemented if it is to have any meaningful growth in economic activity and employment, Momentum Investments economist Sanisha Packirisamy says.
Packirisamy called on the government to prioritise five economic reforms which, if properly implemented, will not only create an enabling environment for more private sector participation but will also increase the country’s competitiveness and restore its institutional integrity.
“These include stabilising electricity supply, enhancing freight transport efficiency, improving water supply and quality, reducing data costs and improving access, and attracting skills and encouraging tourism,” Packirisamy said.
She said efforts were already under way under the government’s Operation Vulindlela programme despite ongoing political uncertainty and a widening trust deficit between the private sector and the state.
Operation Vulindlela is a joint initiative of the presidency and the National Treasury to accelerate the implementation of structural reforms and support economic recovery. It aims to modernise and transform network industries, including electricity, water, transport and digital communications.
“Even though the private sector is reluctant to partner with the state, there has been an easing of investor anxiety towards SA in some areas where radical economic transformation proposals have been vastly watered down,” Packirisamy said.
“Nevertheless, government could still do itself a favour by spelling out its goals more clearly to further reduce policy uncertainty and to reignite confidence in the long-term sustainability of SA as an investment destination.”
SA has had a difficult start to the year. The economy has been hobbled by a series of adverse domestic supply shocks including disruptions to rail and port operations, weather events and the ongoing electricity shortages.
These setbacks have resulted in highly volatile economic activity, with quarterly GDP shrinking in three of the past seven quarters. More recently, the dramatic escalation in the intensity and frequency of load-shedding, particularly from the second half of 2022, has been the primary risk to economic activity.
According to Absa, one of SA’s four largest banks, about 15,300GW of electricity was lost to load-shedding in the first half of 2023.
“This is about 30% worse than in all of 2022 and higher than all the load-shedding implemented in the nearly 15-year period between the first incident of load-shedding in 2007 and the end of 2021,” Absa senior economist Miyelani Maluleke said.
GDP expanded by 0.4% quarter on quarter in the first three months ending in March. While this number was welcome by analysts, most of whom expected zero growth to a recession, the positive quarterly growth will not have any meaningful effect on the country’s high unemployment rate that sits at 32.9%.
“The quick wins will not only help arrest the increasing lawlessness, they will also encourage accountability,” Packirisamy said.
“They are vital in stimulating private sector activity. In turn, this has the potential to ease socioeconomic pressures and reduce joblessness, inequality and poverty through an increase in employment, boosting living standards and advancing social inclusion.”
The presidency issued its long-awaited update on the progress of reform under Operation Vulindlela in June. The presidency said of the 35 reforms on the to-do list, 11 were complete, compared to just three earlier, and five were said to be “on track”.
The update report showed reforms in the energy sector made significant progress in the past six months, most notably the recent steps taken to include the formal lifting of the 100MW limit on private distributed generation projects in December.
This saw a handful of utility-scale projects above 100MW registered with the National Energy Regulator of SA, taking total registered projects to 4,225MW.
Economic reforms highlighted as big challenges where major intervention was needed included the government’s inability to arrest the deteriorating quality of municipal electricity and water distribution services, as well as the inability to fix the country’s logistics system that has resulted in the loss of significant export revenue.
Other challenges mentioned include reducing the cost of data and improving access to internet to low-income households in outlying areas.
Packirisamy said this will drive new investment in telecommunications infrastructure and unlock gains in the knowledge economy.
She said the successful implementation of the eVisa system would facilitate growth in the tourism sector.
“Tourism is a quick and easy way to create jobs for relatively unskilled persons. Growing this industry can establish a strong multiplier effect on the economy,” she said.
Packirisamy said the government needs to know how best to use available resources and implement interventions that are most feasible technically, politically and administratively.
These are actions that will likely have the greatest positive impact on economic growth and employment, she said.
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