The upcoming national budget, to be presented later this month by finance minister Enoch Godongwana, is likely to include plans by the Treasury to ramp up fiscal instruments and guarantee frameworks for the second phase of Operation Vulindlela.
New reform areas in the joint initiative of President Cyril Ramaphosa’s office and the Treasury created in 2020 include strengthening local government service delivery, leveraging digital public infrastructure and driving urban densification and spatial integration.
The budget will also focus on infrastructure spending, with a commitment to spend up to R1-trillion in the medium term. Godongwana is scheduled to table the budget on May 21.
The budget would differ from those of past years, Ramaphosa said at the launch of the second phase of Operation Vulindlela on Wednesday.
“It’s a budget that is going to make us look forward,” he said.
“The budget is going to commit a lot of money, also to infrastructure. And we could say for the first time in many, many years, we are now going to be able to spend up to a trillion rand on infrastructure over the medium term,” said the president.
“That is why, as the government of national unity, we’ve committed ourselves to sustaining the momentum, which was achieved by Operation Vulindlela on the economic reform agenda.
The budget is going to commit a lot of money, also to infrastructure. And we could say for the first time in many, many years, we are now going to be able to spend up to a trillion rand on infrastructure over the medium term.
— President Cyril Ramaphosa
“We need bold and far-reaching reform initiatives to revive and reshape our economy. Our immediate priority is to follow through on the reforms that we have initiated and the reforms that are already under way so that they can realise their full impact.”
Reforms in the energy sector for the second phase of Vulindlela include establishing an independent transmission system operator and addressing grid capacity. Local government reforms focus on improving service delivery and administration, while digital transformation aims to drive government efficiency and public infrastructure.
Operation Vulindlela’s first phase ticked off more than 90% of the items on its original list, among them the auction of digital spectrum and regulatory changes to enable private electricity generation and create a competitive energy market as well as clearing the water licences backlog and reforms to the rail and port system and visa regime.
Outstanding reforms in energy include expanding the country’s transmission network, streamlining projects through the Energy Security Bill, restructuring Eskom and establishing an independent transmission system.
In logistics, outstanding reforms include completing the restructuring of Transnet and establishing an independent National Ports Authority and Rail Infrastructure Manager.
The additional reforms, approved by the cabinet in March, require mobilising the state’s full capacity, engaging the private sector and creating an environment for effective markets, with the Treasury enhancing fiscal instruments, Treasury director-general Duncan Pieterse said on Wednesday.
“Our challenge is execution at scale. We need to mobilise the full capacity of the state, crowd in the private sector and create the conditions for markets to work more effectively. This means creating an enabling environment for investment into key sectors of the economy,” Pieterse said.
The second phase of Vulindlela aims to balance public debt and economic growth by focusing on increasing the rate of economic growth, which is essential for stabilising the fiscal trajectory. It involves implementing structural reforms to remove constraints such as inefficient infrastructure and high costs, Godongwana said.
“The immediate priority is therefore to sustain the momentum already developed and follow through on the implementation of existing reforms, in order to realise their full impact,” said the minister.
“This will require completing the reforms under way as well as deepening those reforms which have already been initiated — in the energy, logistics and water sectors and visa regime. However, [as] other structural constraints to growth remain thus, additional reforms will be prioritised in the next phase of Operation Vulindlela to promote higher and more inclusive long-term growth.”
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