• Government says eight of its 26 Operation Vulindlela reforms are completed.
• The aim of the reforms is to improve the investment environment.
• But business warns that even successful reforms are still tied up in red tape.
Operation Vulindlela - the joint delivery unit in the Presidency and National Treasury established to speed up economic reform - has made some progress, says Business Unity SA (BUSA), but the impact is limited as reforms remain trapped in red tape.
There is a broad consensus that the business environment requires structural reforms to encourage new investment. The unit has five objectives, with specific reforms linked to each.
The objectives are to:
• Stabilise the electricity supply;
• Reduce costs of digital communication;
• Create a sustainable water supply;
• Introduce competitive and efficient freight transport; and
• Establish a visa regime that attracts skills and grows tourism.
The unit published a report on Monday showing that of the 26 reforms it tracks, eight are complete, 11 are on track, five are a cause for concern, and two are facing serious implementation problems.
But organised business has warned that ticking off reforms on the list does not mean the blockage has been resolved.
CEO Cas Coovadia in a statement on Monday said:
`We believe Operation Vulindlela has done excellent work and we note the reforms marked as `completed`…However, Operation Vulindlela is not mandated to ensure different departments in government use the reforms to implement necessary actions to enable the private sector to drive business.`
Coovadia pointed to the lifting of the licensing threshold for embedded electricity (or self-) generation projects from 1 MW to 100 MW as one where - despite the change to the regulators - projects were still stuck in the works due to red tape imposed by the National Energy Regulator of SA (Nersa). As an alternative to licensing, Nersa has registration requirements that are so onerous that projects cannot move ahead.
Since August last year when regulations changed, only four of 58 projects, mainly from the mining industry, have been registered.
`We welcomed the announcement by President Ramaphosa of the raising of the ceiling to 100 MW. However, private sector generators of power are still hampered by inappropriate processes and regulations in Nersa, which make it difficult to act on the reform. We find similar issues with the critical skills list and other reforms. The issue is thus the capability and commitment of government departments to clear red tape hampering business leveraging off the reforms,` he said.
The critical skills list is issued under the Immigration Act and provides people with `critical skills` to apply for a visa. But the list has been criticised for being very limited, for instance, it does not acknowledge a shortage of medical skills.
The list approach is also highly restrictive and skilled immigration is unlikely to open up based on this policy approach. Vulindlela has on its list a complete overhaul of skilled visa policy, a reform that the progress report says is `in progress and on track`.
On the list of completed reforms are:
• The raising of the licensing threshold to 100 MW;
• The successful adjudication of a new round of bids from independent power producers in bid window 5;
• The announcement of bid window 6;
• Preparations by municipalities to procure their own independent power;
• The establishment by Eskom of an independent power transmission company;
• The publication of the Electricity Regulation Amendment Bill to enable the emergence of a competitive energy market;
• A successful auction of broadband spectrum; and
• The reinstatement of reports that monitor water quality.
The two biggest problems are in the energy sector. The first is the so-called emergency power procurement or risk mitigation procurement, which is bogged down in litigation and compliance issues around local content. The second is Eskom’s goal to reach a 70% energy availability factor, which has not come close to materialising.
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