Godongwana is upbeat about the pace of structural reforms
• Energy supply and logistics failures are being addressed through accelerating private investment in infrastructure
Finance minister Enoch Godongwana commended progress made in the implementation of structural reforms, which he says have addressed challenges that have held back growth and will improve SA’s economic performance in 2024.
Godongwana, who presented his Budget
Review in parliament on Wednesday, said the progress made on a range of economic reforms would support investment and job creation.
“Energy supply and logistics failures are being addressed through measures to accelerate private investment in infrastructure and stabilise Eskom and Transnet,” he said.
“The government is working closely with Transnet to ensure it implements changes needed to improve operational efficiency and achieve financial sustainability.
“Other reforms encompass a range of operational and regulatory functions affecting key aspects of the economy, such as faster processing of water licence applications for large water users, which supports agriculture and tourism.”
Godongwana said the Eskom debt relief arrangement remained on schedule to conclude in 2025/26, subject to strict conditions.
It would support the utility’s ability to restructure operations and conduct critical maintenance, he said.. Meanwhile, improved electricity regulations had led to more than R100bn in new private energy generation projects, he said.
Treasury director-general Duncan Pieterse said Transnet had been granted a guarantee of R47bn in 2023/24 to meet its borrowing requirements.
“The use of the guarantee is conditional on the implementation of a comprehensive turnaround plan recently approved by the board of directors,” he said.
The Treasury revised down its growth projections for SA to 0.6% due to widespread power cuts, operational and maintenance failures in freight rail and at ports, and high living costs.
In 2023, Moody’s and S&P maintained SA’s sovereign credit rating at subinvestment grade with a stable outlook. In January 2024, Fitch affirmed the country’s long-term foreign and local currency debt ratings at BBand maintained its stable outlook. Fitch cited the constraints of low real GDP growth, high inequality, a high and rising government debt-to-GDP ratio and a modest fiscal consolidation path.
Godongwana said that over the medium term, the government would focus on raising GDP growth through structural reforms, stabilising debt and debt-service costs.
“Load-shedding is a problem that confronts all South Africans. It disrupts production, operations and livelihoods. The negative impact of power cuts, the poor state of ports and freight rail, and inflation have taken a toll,” Godongwana said.
The Treasury upgraded its 2024 GDP outlook from 1.4% to 1.6% as the frequency of power cuts declines, and due to lower
inflation that will support household consumption as well as the recovery in credit extension.
Godongwana said reforming the energy sector would result in long-term energy security. “We took the necessary decisions in the past five years and these are bearing fruit. To promote further investments in renewable energy, this budget proposes an increase in the limit for renewable energy projects that can qualify for the carbon offsets regime, from 15MW to 30MW.” He said Eskom continued to be a key role player in the electricity sector and that the debt relief plan allowed the entity to focus on its core business.
“We will release the report on the independent review of
Eskom’s coal-fired power stations in the coming week. The review was done to inform part of the conditions attached to the debt relief plan,” he said.
He said cabinet approved the freight logistics road map in December 2023, outlining immediate steps needed to improve equipment and locomotive availability and network security. It also set out structural reforms required in the logistics system, including the introduction of third-party access to the freight rail network by May 2024.
Pieterse said Transnet was expected to finalise its partnership with a private company by April to upgrade Pier 2 of the Durban Container Terminal.
“The Port of Durban handles 46% of SA port traffic, and this joint venture will increase private investment for equipment, technological capability and higher operational efficiency.”
According to the Budget Review, in terms of the water sector, the National Water Resources Infrastructure Agency Bill was introduced in June 2023, with plans to establish the National Water Resources Infrastructure Agency by March 2025. It adds that Godongwana is set to agree on the updated raw water pricing strategy in 2024.
“Comments on the Water Services Amendment Bill, which allows for interventions by the department of water & sanitation in failing municipalities, closed in mid-January,” the review read.
In terms of telecommunications, according to Treasury the auctioned spectrum that had been made available to licensees was expected to attract more than R40bn in investment.
In December 2023, the cabinet approved the Next Generation Radio Frequency Spectrum Policy, which would increase spectrum availability and promote competition, it said.
Investments after the auction of high-demand spectrum in March 2022 enhanced network quality and reduced data costs. Since 2021, 100MB data bundle prices have dropped 25%.