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Ramaphosa gives social partners 100 days to finalise ‘new consensus’ for reigniting recovery plan

President Cyril Ramaphosa

President Cyril Ramaphosa

10th February 2022

By: Terence Creamer

Creamer Media Editor

     

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President Cyril Ramaphosa signalled his intention to reignite the underperforming Economic Reconstruction and Recovery Plan (ERRP) through a “comprehensive social compact” that he said labour, business and government would negotiate in the coming 100 days.

Delivering his State of the Nation Address at the Cape Town City Hall, owing to the extensive damage caused to the Parliamentary buildings in January as a result of a fire that was deliberately lit, Ramaphosa said a “new consensus” was needed to address the immediate crisis facing the country, as well as to create conditions for long-lasting stability and development.

“There are moments in the life of a nation when old certainties are unsettled, and new possibilities emerge. In these moments, there is both the prospect of great progress and the risk of reversal,” the President reflected, while adding that there was broad agreement that the current situation of deep poverty, unemployment and inequality was unacceptable and unsustainable.

The ERRP would remain “our common programme to rebuild the economy” but discussions on what trade-offs were needed and what contribution each social partner should make were also required.

The role of the private sector in the recovery was emphasised throughout, with Ramaphosa asserting that the new consensus should recognise that “the State must create an environment in which the private sector can invest and unleash the dynamism of the economy”.

This sentiment found support from the leader of the official opposition, the Democratic Alliance’s John Steenhuisen.

Steenhuisen said he was “delighted” that an ANC President had acknowledged for the first time that a “statist approach” would not deliver growth and that the private sector should drive job creation.

However, Economic Freedom Fighters leader Julius Malema said the President’s emphasis on the role of the private sector in creating jobs was akin to “outsourcing” and Ramaphosa “passing a motion of no confidence in himself” given previous commitments to leveraging public sector resources to create “millions of jobs”.

The President did not outline any new economic priorities, but reiterated those included in his 2021 address, including a massive rollout of infrastructure, the expansion of electricity generation and the auctioning of broadband spectrum.

Speaking only days after Eskom declared the first round of load-shedding for the year, having implemented more cuts in 2021 than in any year since rotational shedding was introduced some 15 years ago, Ramaphosa acknowledged that the country had a 4 000 MW supply shortfall.

RISK MITIGATION PROJECTS TRIMMED

He listed several actions that were being taken to add more capacity but also announced that only 800 MW of the 2 000 MW in projects selected under the controversial Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP) were ready to proceed.

Given that three Karpowership projects comprised about 1 200 MW of the RMIPPPP allocation, there was immediate speculation that the projects, which face legal, environmental and gas-pricing uncertainty, were among those that were not ready to proceed.

Other capacity mentioned included over 500 MW still to enter into commercial operation from Bid Window 4 of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP); 2 600 MW from REIPPPP Bid Window 5, for which the preferred bidders were announced last year; another 2 600 MW from Bid Window 6, bidding for which would “open soon”; as well as 3 000 MW of gas power and 500 MW of battery storage, for which requests for proposals would be released later this year.

The President also estimated that 4 000 MW of embedded generation capacity in the mining sector could also move ahead as a result of a recent reform allowing sub-100 MW projects to proceed without a licence, while another 1 400 MW could be procured by municipalities.

“In addition to closing the energy supply shortfall, we are implementing fundamental changes to the structure of the electricity sector. Eskom has established a separate transmission subsidiary and is on track to complete its unbundling by December 2022.”

To regulate these reforms, Cabinet had approved the release of amendments to the Electricity Regulation Act for public comment. “These far-reaching amendments will enable a competitive market for electricity generation and the establishment of an independent State-owned transmission company.”

PRIVATE PORTS & RAIL

Against the backdrop of a serious decline in service levels across South Africa’s ports and rail networks, the President also signalled an expanded role for the private sector in the country’s freight logistics system, currently monopolised by Transnet.

“Transnet will ask for proposals from private partners for the Durban and Ngqura Container Terminals within the next few months, which will enable partnerships to be in place at both terminals by October 2022.”

The State-owned company would also start the process of providing third-party access to its freight rail network from April 2022 by making slots available on the container corridor between Durban and City Deep.

“Transnet had also developed partnerships with the private sector to address cable theft and vandalism on the freight rail network through advanced technologies and additional security personnel.”

SPECTRUM & WATER REFORM

Meanwhile, on the much-delayed release of broadband spectrum, Ramaphosa announced that the Independent Communications Authority of South Africa would, within the coming three weeks, initiate an auction for the high-frequency spectrum.

“This will unlock new spectrum for mobile telecommunications for the first time in over a decade. In addition, we will facilitate the rapid deployment of broadband infrastructure across all municipalities by establishing a standard model for the granting of municipal permissions.”

Institutional reforms were also being prioritised for the water sector in an effort to ensure future water security through higher levels of investment and maintenance.

“We have embarked on the process of institutional reform in capacitating the Department of Water and Sanitation and reviewing water boards in as far as their mandates are concerned and ensuring that they serve municipalities in terms of the District Development Model.”

A comprehensive turnaround plan was also being implemented to streamline the process for water use license applications, with a target of clearing the backlog by June 2022.

Legislation had also been prepared for the establishment of the National Water Resources Infrastructure Agency, and this would be published for public comment within the next month.

Other business-friendly interventions announced, included:

  • a review of the policy and regulatory framework to unlock industrial hemp and cannabis production;
  • a review of labour market regulations for smaller businesses;
  • A new, redesigned loan guarantee scheme to enable small businesses to bounce back from the pandemic and the July unrest;
  • The appointment of respected business personality Sipho Nkosi to lead a task team to cut red tape;
  • The unlocking, through the Infrastructure Fund, of a R96-billion project pipeline in student accommodation, social housing, telecommunications, water and sanitation and transport; and
  • plans for the start, this year, of construction on several catalytic projects valued collectively at R21-billion.

The President also reiterated his intention to take advantage of the offer of $8.5-billion in climate finance made to South Africa at COP26 by the European Union, France, Germany, the UK and the US.

“This first-of-its-kind partnership will involve repurposing and repowering some of the coal plants that are reaching the end of their lives, and creating new livelihoods for workers and communities most impacted by this change.”

Former reserve bank deputy governor Daniel Mminele was appointed earlier in the week to head the Presidential Climate Finance Task Team, which would lead the effort to mobilise funding for the just transition.

“Properly managed, the energy transition will benefit all.

“Renewable energy production will make electricity cheaper and more dependable, and will allow our industries to remain globally competitive.

“Investments in electric vehicles and hydrogen will equip South Africa to meet the global clean energy future.

“We will be able to expand our mining industry in strategic minerals that are crucial for clean energy, like platinum, vanadium, cobalt, copper, manganese and lithium.

“We also have a unique opportunity in green hydrogen, given our world-class solar and wind resources and local technology and expertise.”

Edited by Creamer Media Reporter

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