NOMVUYO GUMA | Operation Vulindlela’s challenge is making reform irreversible

The latest assessments of Operation Vulindlela tell a familiar story. Reform continues to progress, but unevenly, prompting criticism that implementation remains too slow. These concerns are understandable.

South Africa’s weak economic growth, deteriorating infrastructure and exceptionally high unemployment leave little room for delay. In a country facing challenges of this magnitude, calls for faster reform are not simply understandable, they are essential.

But to the extent that the debate centres on the pace of reform there is a risk that we overlook a more consequential question: have South Africa’s structural reforms advanced far enough to become difficult to reverse?

South Africans often compare our reality with an idealised version of advanced economies rather than the untidy reality of how institutional change actually happens. That can leave us with two equally misleading conclusions: that South Africa’s state is uniquely incapable or that progress must be a perfect, linear trajectory to be meaningful.

Neither is true. Looking at structural reform comparatively offers an important reminder: institutional change is rarely linear. Governments change. Political priorities shift. Implementation stalls. New problems emerge before old ones have been resolved.

The World Bank’s review of three decades of electricity reform found that only a handful of developing countries fully implemented the textbook reform model. Most adapted it, implemented it selectively or followed hybrid institutional pathways as political and practical realities intervened.

That broader perspective lies behind the Bureau for Economic Research’s (BER) new interactive data story, Operation Vulindlela: How fast does reform happen?, which compares South Africa’s electricity reform programme with international experience. In this exercise, benchmarking helps distinguish delays that are inherent to structural reform from those that arise because governments fail to sustain momentum.

The chart illustrates the point. South Africa is just under seven years into its electricity reform journey — a far shorter period than every comparator except Uganda, and broadly within the range observed internationally.

More revealing, though, is where that time has been spent. Almost five of those years elapsed before the Electricity Regulation Amendment Act established the legislative framework for reform. By contrast, the period since legislation has been relatively short. International experience suggests this is precisely the point at which reform becomes more, not less, challenging.

In most comparator countries the longest phase was not developing and enacting legislation but translating it into new institutions, competitive markets and sustained private investment.

The international comparison also helps identify where accountability should properly lie. Establishing an independent transmission company or introducing competitive electricity markets is inherently complex. But complexity should never become an excuse for inertia. Once we understand what is normally difficult, we can more clearly identify delays that result from institutional weakness, governance failures or insufficient political urgency.

In most comparator countries the longest phase was not developing and enacting legislation but translating it into new institutions, competitive markets and sustained private investment.

The evidence suggests that South Africa has broadly kept pace in establishing the legal foundations for reform. The real test now lies beyond legislation. Every comparator country spent considerably longer embedding new institutions and market arrangements than passing the enabling laws.

South Africa is now entering that same phase. Whether the country moves through it with urgency or allows reform to stall will depend less on policy design than on institutional capability, governance and political leadership.

Our analysis also reinforces the point that reform milestones should not be confused with reform outcomes. Passing legislation, establishing regulators or creating new institutions does not immediately produce faster economic growth. International experience consistently shows that improvements in investment, infrastructure performance and productivity follow only once those institutions begin functioning effectively.

Finally, and perhaps most importantly, our analysis concludes that structural reform should ultimately be judged not only by how quickly it progresses but also by whether it becomes durable.

Complex reforms are rarely completed within a single political cycle. What is important for building confidence is that the direction of travel becomes credible. As reforms become embedded in legislation, institutions, regulatory frameworks and market structures, reversing them becomes progressively more difficult. The political, legal and economic costs of undoing reform begin to outweigh the costs of continuing it.

That threshold matters because confidence grows when reforms become institutionalised — with the ability to survive elections, cabinet reshuffles and changes in political leadership. Viewed through that lens, South Africa may have progressed further than is sometimes recognised.

In electricity, reform has moved well beyond policy announcements. New legislation has been enacted. The National Transmission Company South Africa (NTCSA) has been established. Market rules continue to evolve. Private investment decisions are increasingly being made within the institutional framework these reforms have created.

None of this means reform is irreversible. Recent intervention by the president to reaffirm the government’s commitment to the independent NTCSA demonstrates that the policy direction still requires active stewardship. Nor does it mean criticism should cease — the country’s weak economic performance makes continued urgency imperative — but it does suggest we have begun to cross an important threshold.

The public debate has understandably focused on whether Operation Vulindlela has delivered enough: enough growth, enough investment and enough jobs. Those remain the ultimate tests of success.

But what is not always appreciated is that structural reform begins to change an economy before it changes the data. It changes expectations. It creates institutions that outlast the governments that established them. It reduces uncertainty about the direction of policy, and in doing so it lays the foundations on which investment, productivity and growth are eventually built.

None of this means reform is irreversible. Recent intervention by the president to reaffirm the government’s commitment to the independent NTCSA demonstrates that the policy direction still requires active stewardship.

Recent commentary has observed that reform now appears to be moving faster than business confidence. That should not surprise us. Confidence, investment and growth are themselves lagging indicators. They emerge only after reforms have been translated into functioning institutions, operational markets and private investment decisions. In the meantime, reforms should be judged by whether they are progressively becoming embedded in the state’s institutions and the economy itself.

Has legislation been enacted? Have new institutions been established? Are regulatory frameworks becoming operational? Are implementation responsibilities shifting from reform programmes into permanent institutions? Is the cost — political, legal and economic — of reversing course increasing over time?

Granted, these features are not substitutes for growth. They are the leading indicators of whether growth-enhancing reforms are taking root. Until those outcomes appear in the economic data, institutional progress provides the best measure of whether South Africa is moving towards success.

• Guma, the former co-head of Operation Vulindlela, is an independent economics consultant and BER research fellow.