Implementation of structural reforms critical to igniting long-term economic growth is gaining momentum, but their effects will probably not be immediate, says finance minister Enoch Godongwana.
Godongwana firmly committed to fiscal consolidation and reducing the budget deficit to 4.9% of GDP by 2024/2025, down from 7.8% of GDP in 2021/2022. This consolidation is expected to be supported by structural reforms such as additional spectrum, energy security and decarbonising in a bid to unlock private-sector investment and job creation.
The Treasury said that in the context of limited fiscal space, reforms that require little budgetary support — including regulatory reforms that enhance competition — are being given priority.
Operation Vulindlela, a joint initiative of the presidency and the Treasury, oversees implementation of structural reforms.
The economy is forecast to grow 5.1% in 2021 from a contraction of 6.4% in 2020, having recovered faster than expected due to the easing of Covid-19 restrictions along with increased demand and higher commodity prices.
However, GDP is expected to average 1.7% over the next three years, reflecting structural weaknesses in the economy such as electricity supply.
“All of our efforts over the past 13 years have been to fix Eskom, instead of addressing security of supply by adding additional capacity to the grid,” Godongwana said.
Electricity supply shortages, flagged by the Treasury as a drag on economic growth, are expected to be eased as the country moves away from its reliance on coal for power by diversifying its energy sources to include renewables and more private-sector participation in electricity generation.
“Over the longer term, creating a competitive energy market will help contain the costs of generating electricity,” Godongwana said on Thursday during the medium-term budget policy statement.
Other reforms mentioned by Godongwana are:
- Releasing broadband spectrum, with the auction process starting on March 1 2022;
- Opening third-party access to the freight rail network by the end of 2022 to increase capacity;
- Starting the eVisa system rollout by March 2022 to promote tourism;
- Reviewing the legal regime governing skilled migration; and
- Accelerating infrastructure investment.
“Also of importance is a need to strive for policy coherence and policy certainty across government. We must also continue to strengthen the capacity of the state to implement policy and intervene in the economy in a manner that enhances and not inhibits growth,” said Godongwana.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.