Ramaphosa’s big bet to save South Africa
President Cyril Ramaphosa is betting on the success of the seventh administration by making sweeping economic reforms driven by Operation Vulindlela—and business leaders are hopeful it will pay off.
Looking to turn around South Africa’s muted economy by building on previous and spearheading new economic reforms was a focal point of President Cyril Ramaphosa’s Opening of Parliament address on 18 July.
Promising a new era of a “cooperation nation,” these commitments were welcomed by some prominent figures in the country’s business sector and his coalition agreement partners. They say structural reforms are crucial to turning the tide on South Africa’s lacklustre economic performance.
Meanwhile, some, including University of the North West politics lecturer Dr Sysman Motloung, told Newzroom Afrika that it was more or less a “rehash of what we have heard before since Mr. Ramaphosa has taken office.”
However, he said that it is more fine-tuned this time around to accommodate some level of policy positions of coalition partners – showing some give and take of coalition politics.
The speech
Ramaphosa started his speech by outlining that for a decade and a half, South Africa’s “economy has barely grown.”
GDP growth in the country has averaged only 0.8 per cent annually since 2012, which has entrenched high levels of unemployment and poverty.
National Treasury highlights that “power cuts and operational problems in freight rail and ports continue to disrupt economic activity and limit the country’s export potential… [while] household consumption is under pressure from high living costs, and investment remains low due to weak confidence and challenging business conditions linked to structural constraints.”
Ramaphosa said that the administration, which is a co-governing agreement made up of several parties labeled the “Government of National Unity (GNU),” has three strategic priorities.
These include:
- Driving inclusive growth and job creation;
- Reducing poverty and addressing the high cost of living;
- Building a capable, ethical and developmental state.
The President placed economic growth at the centre of it.
“When our economy grows, jobs are created [but] when our economy contracts, there is no job creation, and jobs are lost,” said Ramaphosa.
While these three priorities have been at the top of the government’s agenda since the 2011 National Development Plan, their implementation has left much to be desired.
Acknowledging this, Ramaphosa said that in order to actualise these commitments, there needs to be a continuation and expansion of “far-reaching [structural] reforms that enable growth.”
The key reforms that he is referring to broadly entail the enabling of the private sector to move into areas of state monopoly through investments in hopes of improving efficiency.
Treasury’s 2024 Budget Review economic review said, “To turn the tide and raise economic growth sustainably, the government is prioritising energy and logistics reforms, along with measures to arrest the decline in state capacity. “
Ramaphosa said that on top of these abovementioned sectors, they are also eying reforms to the country’s digital communications and water sectors, as well as visa reforms.
“Successful efforts to improve the fiscal position, complete structural reforms, and bolster the capacity of the state will, in combination, reduce borrowing costs, raise confidence, increase investment and employment, and accelerate economic growth,” the National Treasury previously wrote.
This was music to the ears of big business in South Africa.
Prior to this speech, Business Leadership South Africa (BLSA) and Business Unity South Africa (BUSA) told BusinessTech that the seventh administration’s focus should be the continuation of structural economic reforms that have begun under the previous administration to address the issues facing economy.
BUSA CEO Cas Coovadia said that “the partnership between business and government on energy and logistics,” among other sectors, is key to doing this.
Presenting the ministry’s R33.2 billion budget vote speech on 17 July 2024, Finance Minister Enoch Godongwana hailed the structural reforms in the electricity sector and highlighted that other sectors will follow.
“While these reforms continue, National Treasury is working on signing memoranda of agreement, similar to the agreement that governs the Independent Power Producers Office, in the transport and water sectors,” said Godongwana.
“The aim is to fast track, in a programmatic way, private sector participation in these sectors,” he said.
Motloung told Newzroom Afrika that the emphasis on resuscitating and expanding pubic-private partnerships across various sectors could be a key indicator that South Africa is in full swing of a coalition government.
He said that this focus in the speech, although not entirely new, shows “a more nuanced influence of the Democratic Alliance’s (as well as other parties in the GNU)” towards economic policy.
The push for forms of Private Sector Participation has, however, categorised much of President Cyril Ramaphosa’s tenure.
“Since the partnership began, the private sector has contributed more than R170 million of direct support and has mobilised over 350 technical experts,” wrote Ramaphosa in a weekly newsletter just before the elections.
Operation Vulindlela 2.0
Operation Vulindlela (OV) is a collaborative initiative by the Presidency and National Treasury aimed at accelerating structural reforms to support South Africa’s economic recovery.
According to the Presidency, structural reforms are crucial for reducing costs, encouraging competition, and fostering a more efficient and competitive economy.
Its goal is to improve critical network industries like electricity, water, transport, and digital communications, alongside reforming the visa system to attract skilled workers and tourists – seeing that improvement in these areas will, over time, jumpstart the country’s muted economy.
Martin Kingston, the chair of Business for South Africa, said that OV has thus far “been successful in addressing many of the constraints in the system.”
Ramaphosa said that these earmarked sectors and regimes will be continued in the new administration
During the Opening of Parliament speech, the implementation of the “second phase of Operation Vulindlela” was announced.
The President highlighted that a particular focus will be placed on local government – and the numerous woes within some, including collapsing service delivery, which has hampered business and spooked off investment.
“In its second phase, Operation Vulindlela will focus on reforming the local government system and improving the delivery of basic services,” said Ramaphosa.
“This focus is critical to enable the success of key socio-economic reform objectives,” said BLSA CEO Busisiwe Mavuso.
Ramaphosa said that they would establish an institutional structure and funding model for local government and implement systems to appoint capable individuals to senior municipal positions, with independent regulation and oversight of the process.
This is one of the first times that the ANC has acknowledged that local government challenges are deeply rooted in systemic and structural problems.
“Municipalities are in dire need of assistance to overcome the many challenges they face, from water infrastructure to waste management,” which repels investment, said Mavuso.
“The focus on appointing capable and qualified people to senior positions in municipalities should be applauded [as] we have seen the impact indebted municipalities have on the overall system, including the electricity and water sectors,” she added.
The focus of OV on local government was also welcomed by BUSA’s Khulekani Mathe, saying that “from a business point of view, we are happy with these priorities.”
However, “we now expect the government to get down to work and make these not just priorities on paper, but a lived reality of all South Africans,” said Mathe.
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