As part of ongoing efforts to create an enabling environment for sustainable and inclusive growth, government will continue to focus on stabilising debt and debt-service costs, investing in infrastructure, as well as continuing to support the most vulnerable households.
"Our strategy for addressing the enormous challenges of accelerating growth, creating jobs and reducing poverty relies on a clear and stable macroeconomic framework, implementing structural reforms, and investing in infrastructure," National Treasury Director-General (DG), Dr Duncan Pieterse, said on Wednesday.
Pieterse said National Treasury believes these elements are crucial for boosting growth, enhancing inclusivity, and setting the economy on a more sustainable trajectory.
"These efforts will also generate more fiscal space by increasing revenue, enabling private sector participation, lead to more productive public spending on infrastructure and create a virtuous cycle that supports inclusive economic growth," he said.
The DG was reflecting on South Africa's economic landscape from the perspective of the National Treasury during the Bureau for Economic Research (BER) conference, which was held in Johannesburg, on Wednesday.
The BER conference delved into the rich tapestry of South Africa's economic history, drawing from seven decades of survey data.
Since its inception, the BER has been a stalwart in providing critical primary data, economic insights and forecasts, which play a pivotal role in shaping economic discourse and policy decisions.
Government intends to continue with its progress on the implementation of structural reforms to improve productivity and the competitiveness of the economy.
These reforms make it easier and cheaper for businesses to operate and invest in South Africa, employ people and support a growth in government revenue.
"Historically, we have seen strong linkages between microeconomic developments like energy provision and logistical capability and overall growth outcomes. We have witnessed declines in total factor productivity, which encompasses innovation, technological improvements, and more because of these binding constraints to growth.
"To address this, our economic policy has been geared to directly tackle the microeconomic roots of the growth slowdown, particularly focusing on the drivers of productivity decline.
"Network industries like electricity, rail and telecommunications are a primary concern, as productivity shocks within these industries have significantly impacted the rest of the economy," Pieterse said.
Estimates suggest that around 35% of the growth slowdown from 2007 to 2021 can be attributed to these network industries or the utilities sector.
To address this, Phase 1 of Operation Vulindlela, a joint initiative between the Presidency and National Treasury, was launched in October 2020 to accelerate the implementation of structural and economic reforms to drive growth and job creation.
"By the end of phase I of Operation Vulindlela, 94% of reforms were either complete or progressing well. And by our estimates, these reforms have generated investment potential of R500bn. You will all be aware of the BER's own estimates that confirm the large impact that these reforms can have on investment and Gross Domestic Product over time.
"The bulk of this is in the energy sector, where, for example, raising the embedded generation licensing threshold, has catalysed the development of a pipeline of 22 500MW of projects totalling over R390 billion.
"Unlocking investment through reforms in the electricity sector is important to end load shedding and achieve energy security and will be the main driver of economic growth in the decade to come," he said.
Similarly, reforms in the logistics sector, which Phase 1 of Operation Vulindlela has pioneered, will enable greater investment in the rehabilitation of the rail network as well as in rolling stock, as we implement the freight logistics roadmap that will fundamentally change our logistics sector over time.
"We have also implemented reforms in the telecommunications sector to increase network speed and quality, expand broadband access and reduce costs.
"In addition, this first phase of Operation Vulindlela has taught us new ways of working to implement reforms quickly and collaboratively with public and private actors.
"As we move into Operation Vulindlela Phase II, a second wave of reform, it is important that we maintain the momentum already developed across the five key sectors identified in the first phase to realise their full impact as well as to look into new areas that will drive growth going forward," he said.
Investment in infrastructure
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Government is also prioritising investment in infrastructure through improvements in the infrastructure pipeline, the execution of that pipeline and the financing thereof.
"Mobilising private sector resources to augment public sector capability and finances is necessary to fast track the provision of infrastructure and improve effectiveness. Government has initiated various reforms to systematically crowd-in greater private sector participation to improve spending and delivery outcome.
"Work is also underway on capital budgeting reforms; strengthening institutional arrangements and governance across the ecosystem to enable the private sector to co-invest in public infrastructure," Pieterse said.
These include the Public-Private Partnerships (PPPs) regulations, changes to the Budget Facility for Infrastructure, accelerating private sector investment in transmission as well as driving private sector partnerships in several sectors.
"Currently in the fiscal framework, planned infrastructure budgets are expected to increase at 4.9 per cent over the medium-term, driven by energy and transport. And we intend to improve on these efforts going forward," he said.
