New perspective on economic transformation needed

Wednesday, February 22, 2017

Cape Town - South Africa needs a new perspective on economic transformation, Finance Minister Pravin Gordhan said on Wednesday.

“To achieve sustained higher growth, there are also more fundamental, more radical transformation measures that are needed. These relate, in particular, to economic power,” said Minister Gordhan, who tabled the 2017 Budget in Parliament.

He said the relationships between labour and capital, rich and poor, black and white, men and women, town and townships, among others, still reflect the entrenched legacy of colonialism and apartheid.

“Wealth is produced and allocated along lines that remain fundamentally unjust. The ownership of assets and the distribution of income is captured by a minority of the population – a situation that is morally wrong and economically unsustainable.

“We agree with President Zuma that a new perspective on economic transformation is required,” said Minister Gordhan.

Minister Gordhan spoke of principles that should guide the agenda. These include that:

  • The litmus test of the country’s programmes must be what they do to create jobs, eliminate poverty and narrow the inequality gap.
  • Transformation must be mass-based, benefiting the most disadvantaged South Africans through the creation of new assets, capabilities and opportunities to build livelihoods.
  • We have to mobilise both private and public investment in social and economic infrastructure, new technologies and new activities that help build a modern and diversified economy.
  • We must continue to confront cartels and collusion robustly and provide new opportunities for access to markets.
  • Transformation must reshape cities and build linkages across the rural and urban landscapes, where fragmentation and separation are characterised by past patterns.

He said transformation must achieve a more balanced structure of ownership and control of the economy.

Transformation in the energy sector

The 2017 Budget Review noted that the independent power producer programme has boosted power generation, attracted R194.1 billion in private investment and created thousands of jobs.

“IPPs have helped to reduce South Africa’s carbon emissions and fostered the development of new renewable energy firms, some of which have become exporters.

“On average, black South Africans hold 31% of shares across the IPP supply chain. Local communities own 11% of the projects and are expected to receive R29.2 billion in income over 20 years,” the review noted.

Contracts under negotiation have the potential to generate over R500 billion in investment and create more jobs.

Government plans to continue the IPP programme and extend the successful model to other sectors. Lack of clarity on Eskom’s plans to connect new IPPs to the electricity grid, however, has prompted concerns that some renewable energy equipment manufacturers could go out of business.

“The 2017 State of the Nation Address addressed an important aspect of this policy uncertainty, noting that Eskom will sign outstanding power purchase agreements for renewable energy in line with procured rounds,” the review said.

When delivering the State of the Nation Address (SONA) on 9 February 2017, President Jacob Zuma said government remains committed to the IPP programme. –