Informal Analysis of South Africa‘s National Treasury’s Discussion Paper

On 27 August, National Treasury (NT) released an unexpected discussion paper titled “Economic transformation, inclusive growth, and competitiveness: Towards the Economic Strategy for South Africa” and called for public comments on a set of proposed ‘economic reforms’ aimed at economy competitiveness; economic transformation and inclusive growth. The paper is ambitious, business and foreign investor friendly in its proposals. The paper is an endorsement of an ‘interventionist state’ government policy with palpable benefits for the private sector including the EU business in South Africa.

The ‘interventionist state’ is clearly visible at two levels; (1) competition; industrial and trade policies could play a more direct role in dismantling both public and private monopolies in key industries. (2) Public Procurement and direct government measures will be intensified and leveraged to support SMMEs.

Easing of Immigration

National Treasury is proposing regulations for individuals with tertiary qualifications from accredited institutions to be relaxed and to introduce apprenticeships that facilitate school-to-work transition in cooperation the private sector. It is not clear what easing of immigration would entail in practice. This is a point for immediate action as South African government is already working on easing immigration rules for the purpose of boosting tourism.

Deregulation of Economic Infrastructure

First, the proposed deregulation of Ports and Rail, which is envisaged through the use of PPPs to alleviate balance sheet pressures on State Owned Enterprises (SOEs) such as the various operating divisions of Transnet. EU companies could benefit through this proposed deregulation, but the proposal to bring Port Terminals under regulation via the Economic Regulation of Transport Bill and to conduct regular reviews of administered prices may increase cost of compliance and limit profit margins.

Second, the proposed deregulation of Telkom’s fixed-line broadband infrastructure is a long overdue action, and it opens up greenfield opportunities for EU companies to enter South Africa’s fixed-line broadband market.

Third, the acceleration in deregulating the energy sector by introducing legislation to allow households; firms and industry to sell excess electricity (Solar PV systems) to the grip install of Solar PVs on social housing projects. This widens the scope of opportunity for EU companies already invested in SA energy sector, the IPPs, to expand their businesses. The EU-SA Partners for Growth project is already proposing a programme to support Small Scale Embeded Generation as part of EU initiatives in transformation. There is already an RFP published for Gas-to-Power Programme to produce 3,126 MW and to create a new industry in South Africa.