Reforms to boost the economy

Wednesday, October 24, 2018

Government on Wednesday announced the proposed reprioritisation of R32.4 billion over the next three years as part of reforms to boost the South African economy.

In the Medium Term Budget Policy Statement (MTBPS) on Wednesday, government said that the structure of South Africa’s economy is not conducive to high growth or job creation.

“These include creating policy certainty in the mining and energy sectors by finalising the Mining Charter and updating the Integrated Resource Plan,” said National Treasury.

It added that growth-enhancing policy initiatives are also underway in the telecommunications, electricity and transport sectors.

“To support these reforms within a constrained fiscal framework, government is proposing reprioritisation of R32.4 billion over the next three years,” it said as newly sworn in Finance Minister Tito Mboweni tabled his maiden MTBPS in Parliament on Wednesday.

Of this amount, said the document, R15.9 billion will go towards faster-spending infrastructure programmes (including R3.4 billion for school infrastructure and eradicating pit latrines), clothing and textile incentives, and the Expanded Public Works Programme.

The remaining R16.5 billion will be allocated to various programmes, including recapitalising the South African Revenue Service (SARS), a minimum wage for community health workers, critical posts and goods and services in health, and streamlining the management of the justice system.

In addition, changes to grant structures amounting to R14.7 billion will promote upgrading of informal settlements in partnership with communities.

Meanwhile, housing subsidies amounting to R1 billion will be centralised to better support middle- and lower-income home buyers.

“In the current year, R1.7 billion is added to infrastructure spending (including funding for fast-spending school building programmes), and R3.4 billion is allocated to drought relief, mostly to upgrade water infrastructure.”


Fleshing out progress of President Cyril Ramaphosa’s stimulus package announced in September, the MTBPS further announced a framework for financing infrastructure which will be developed.

The MTBPS noted that a decade of poor economic performance and high unemployment has reinforced the urgent need for a comprehensive programme of reforms to change the underlying structure of the economy.

“Necessary structural reforms include modernising the energy, water, transport and telecommunications industries; lowering barriers to entry and addressing distorted patterns of ownership through increased competition and small business growth; enabling growth in labour-intensive sectors such as agriculture and tourism.”

“National Treasury modelling suggests that such reforms can raise Gross Domestic Product growth by as much as 3% over the next decade.”

Progress has been made in such areas including that the Department of Telecommunications and Postal Services has gazetted a proposed policy for the licensing of high-demand spectrum.

The communications regulator plans to auction spectrum for 4G services by April 2019, and simultaneously establish a wholesale open-access network to lower the cost of data. 

Meanwhile, the departments of Energy and Public Enterprises, and the National Treasury, have begun work to determine how a restructured electricity sector can support long-term growth, a secure energy supply, a sustainable electricity utility and higher investment in electricity generation, transmission and distribution.

“Reviews of administered prices in other sectors, such as energy, are underway. Such reforms can boost long-term growth,” it said.

Rebuilding state institutions

On state institutions, government said while the process of rebuilding these is underway with the Judicial Commission of Inquiry into allegations of State Capture among others, challenges remain.

“While the scale of deterioration in the public sector is serious, key institutions established by the Constitution have proven resilient. Parliament, the courts and the Reserve Bank have helped to uncover corruption, with the support of a robust media.”

Treasury also highlighted its efforts to strengthen financial management which include enhancing public finance capacity-building in local government by deploying skilled professionals to manage and recover revenue. -