President Cyril Ramaphosa has put economic growth and investment in infrastructure at the centre of his opening of parliament speech.
Speaking in Cape Town on Thursday, the president said there would be a review of administered prices, including the formula used to determine fuel prices, and the expansion of the basket of essential food items exempt from Value Added Tax.
He also outlined the transition of state-owned companies into a centralised ownership model via a holding company which will be used to facilitate the creation of a sovereign wealth fund for the country.
“The establishment of a state-owned SOE holding company will give us greater capacity to build a sovereign wealth fund. This has been done successfully by other countries whose sovereign wealth funds have built up capital from the high performance of state-owned enterprises rather than from the fiscus.”
State-owned enterprises have, until now, been managed by the department of public enterprises which has now been abolished.
The National State Enterprises Bill, which is before parliament, aims to create a state asset management company that will manage more than 13 strategic SOEs including Eskom, Transnet, Sanral, the Airports Company of South Africa and South African Airways. It will have its own board of directors and CEO who will be responsible for oversight of these assets.
South Africa’s SOEs have been mismanaged for decades and have had to rely on the fiscus for bailouts. However, finance minister Enoch Godongwana has repeatedly stressed that government will no longer provide bailouts for SOEs and will demand that they operate off their balance sheets.
Among the National Treasury's interventions to stabilise SOEs was a debt relief programme for Eskom whereby government agreed to take over R254bn of Eskom’s R423bn debt over the next three years. The entity was at risk of default of about R350bn of this debt.
As part of promised reforms, Transnet — the state-owned ports and rail company — is bringing in private players to help manage its ports and rail infrastructure.
“To drive inclusive growth, we need an efficient freight rail network to carry our minerals, agricultural produce and manufactured goods to market. Through the implementation of the Freight Logistics Roadmap, we will continue with reforms to transform South Africa’s freight logistics system.
“The work we are doing with business and unions through the National Logistics Crisis Committee has already contributed to improvements in the operational performance of freight rail and ports,” he told MPs.
The president also stressed the need to increase investment in infrastructure, ramp up maintenance and improve service delivery at local government level. He said this would be driven via the second phase of Operation Vulindlela — a government initiative located in the Presidency and Treasury to drive reform and economic growth.
“In its second phase, Operation Vulindlela will focus on reforming the local government system and improving the delivery of basic services, and harnessing digital public infrastructure as a driver of growth and inclusion. It will also focus on accelerating the release of public land for social housing and redirecting our housing policy to enable people to find affordable homes in areas of their choice.”
The president also announced plans to tackle poverty and the high cost of living. This includes expanding the basket of essential food items exempt from VAT, reviewing administrative prices — including a recalculation of how the fuel price is set — and providing title deeds and subsidised housing so people can use these assets to improve their economic status.
He said the R350 monthly Social Relief of Distress Grant would be used as a basis for the introduction of permanent income support for the unemployed.
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