Government just released a plan to create 1 million jobs and save the economy – here’s what you need to know
- A new National Treasury document, "Economic transformation, inclusive growth, and competitiveness: towards an economic strategy for South Africa", makes some bold proposals about how to revive GDP growth.
- It proposes reviewing regulations on everything from fuel to banking, a dramatic overhaul of the electricity system, and means to attract tourists and skilled immigrants.
- Treasury also wants to encourage more competition everywhere from ports to supermarkets.
- For more stories go to www.businessinsider.co.za.
On Tuesday, the South African National Treasury released a discussion document which outlines steps that could bolster growth and address unemployment.
The proposed interventions, which include plans to make petrol cheaper and encourage new banks and supermarkets, could raise average GDP growth by 2.3 percentage points over ten years and create just over one million jobs, Treasury says.
Even more jobs and stronger economic growth could be expected if SA relaxed immigration measures to attract more skilled workers, it added.
Here are some of the key proposed interventions from the paper "Economic transformation, inclusive growth, and competitiveness: towards an economic strategy for South Africa":
Lowering the fuel price
Treasury wants regulation of the petrol price to be reviewed, “particularly in terms of spot price benchmarks and where regulation has purposefully supported incumbents such as Sasol”.
Currently, the basic fuel price is calculated based on costs associated with shipping petroleum products to South Africa from the Gulf states, and Singapore. This means that Sasol gets paid a price for its fuel equal to how much imported fuel would cost, even though Sasol manufactures locally.
Households and businesses should be able to sell electricity
Households and companies should be allowed to sell the excess electricity they generate through rooftop solar PV systems, the paper suggests.
Treasury also wants companies to get access to the electricity grid by allowing more “wheeling of electricity” – this means that companies can build their own power stations and then use the national grid to transport the electricity.
A new independent operator of the electricity grid
More than twenty years ago, government planned to remove the operation of the electricity grid from Eskom and place it in an independent, state-owned entity. Legislation to set up the entity was abandoned in 2015, due to the load shedding crisis.
Given that electricity supply is far more stable and that Eskom is approaching a crisis, the discussions around setting up the entity should be revived, Treasury says – and this grid operator should be able to buy electricity transparently from independent power producers.
Treasury also wants to ring-fence Eskom’s investments in the grid and have it monitored by the national electricity regulator. This will remove “the incentive for Eskom to underinvest in the grid”. Alternatively, a concessioning model for the transmission network may be implemented.
The sale of Eskom’s coal-fired power stations
Government could take a decision that Eskom should sell coal-fired power stations, possibly through a series of auctions, Treasury says.
This could earn the state R450 billion.
Eskom would sell the power station itself, all its power-station-specific obligations (including staff contracts, coal-supply contracts, supplier contracts, and environmental obligations), together with an agreement to buy power at a predetermined tariff.
More private competitors to Transnet
Transnet can remain the owner of all rail infrastructure, but private companies need to be granted access to the core rail network, the document suggests.
Treasury also proposed that separate accounting divisions, or separate audited ring-fenced financial statements for the various operating divisions of Transnet, be introduced to ensure that “cross subsidies are made explicit”.
An independent water regulator
This will improve the overall efficiency and effectiveness of water provision and help to set appropriate water prices, says Treasury.
Local-loop unbundling and spectrum auction
Immediately unbundling the local loop would force Telkom to give competitors access to the last-mile copper lines that connect business and homes to the telephone network, and has been under discussion since before Telkom's monopoly was ended.
Also, Treasury wants to see that critical broadband spectrum – which mobile operators are begging for – is released through an auction with a "small set-aside for a government-controlled network".
New competition at ports
Treasury wants to increase competition between port terminal operators and in other areas such as warehousing and logistics.
Metros should take control of rail and subsidised bus contracts
Public transport, including the management of rail and subsidised bus contracts, should be assigned to local government in large cities and metros to ensure the integration of public transport with land use planning.
Formalising the taxi industry
Like the Gautrain "midibus" service, which is run by the taxi industry at a number of Gautrain stations, Treasury wants to see more creative models that will bring taxis into "the subsidy net".
Small businesses should be exempted from industry wage agreements
Treasury says it is worth considering full or partial exemptions for small and medium-sized businesses from certain kinds of labour regulation (e.g. the extension of bargaining council agreements).
This means that in future, smaller businesses would not have to offer the same wage hikes agreed to by big businesses and unions in the same industries.
Encouraging newcomers in banking, telecoms
“Large and old firms continue to dominate the economy as well as employment dynamics,” says Treasury.
It is demanding that “the regulatory provisions in network industries such as telecommunications and banking should be changed to favour rivals".
Banking licences should be made less onerous and banking regulations should be more flexible to new developments, such as the growth of mobile money in the rest of Africa.
Also, it should be much easier to switch between banks and telecom companies.
“The South African Reserve Bank (Sarb) should consider a process where consumers are not liable for interest, penalty fees and other charges incurred due to delays in switching bank accounts,” Treasury suggests.
More supermarket rivalry
Treasury wants to encourage new rivalry and upstart supermarkets, and says exclusive leases for retailers in malls must be banned.
This is where stores sign rental agreements with shopping centres that guarantee that they will be the only supermarket in the mall.
Where such agreements already exist, the leases have to be changed, the document suggests.
Government must pay interest on late payments to small businesses
Small businesses continue to complain of late payments by government departments, Treasury notes. A relatively simple solution here would be to allow for automatic addition of interest on outstanding balances after a certain period.
Companies who abuse the system – with the late of incomplete submission of invoices – will be blacklisted.
One government fund for small businesses
Treasury proposes consolidating existing funds for SMME support into a single fund with a clearly defined mandate.
“The focus of this fund must be in the start-up or ideation phase of a business where the market failure in SMME finance is most binding.”
The creation of a subcontracting ombud
Acting as a sub-contractor to a large firm is one way for a small business to get ahead, Treasury says. But many small businesses have complained that the subcontracting relationship is often exploitative.
Treasury wants to set up a dispute resolution mechanism in the Chief Procurement Office or a separate ombudsman that can improve oversight and monitoring of subcontracting relationships.
Reducing red tape by 25% over five years
Treasury says the Red Tape Impact Assessment Bill, which was rejected by Parliament on procedural grounds, should be revisited.
The Bill proposed that a new Red Tape Impact Assessment Unit would review all new legislation. The new legislation would also require all departments and self-regulatory agencies to evaluate existing regulation and reduce red tape by 25 percent over five years. This approach has yielded great benefits in Mexico.
Interventions to help exporters
Among other measures, Treasury wants government to work with companies to set up an automated licensing system for key export documentation.
Better financing and insurance for farmers
Treasury wants to see better credit products for farmers, and wants the Land Bank to expand its agricultural insurance products to help give farmers cheaper protection against natural disasters, like drought.
It also wants to focus on trade promotion, market access, and access to water for irrigated agriculture to boost labour-intensive crops such as apples, table grapes, citrus, avocados, and macadamia, and pecan nuts
Skilled workers should be encouraged to immigrate to SA
Treasury wants to see friendlier immigration regulations for individuals with tertiary qualifications from accredited institutions
Other proposed measures include:
- Mechanisms to facilitate the resale of social housing, fast-tracking the provision of title deeds to beneficiaries, and leveraging private-sector finance for low-income housing developments.
- Friendlier visa regulations to boost tourism.
- Highly visible policing in tourist hotspots.
- Using Special Economic Zones (SEZs) to experiment with policies on a small scale, before rolling them out to the wider economy.
- Smarter government procurement to boost businesses.
Treasury is asking for feedback on the document by 15 September.
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