Private sector banker Rand Merchant Bank (RMB) CEO James Formby has commended government for “finally taking the steps needed to tackle persistent power outages” by lifting the licensing-exemption threshold for embedded generation projects to 100 MW, from the previous 1 MW.

He says it is an opportune time to capitalise on the move by taking further action on South Africa’s biggest economic challenges.

“South Africa’s future is brighter today than it was last week with government announcing the Electricity Regulation Act would be amended to free up business and industry to invest in their own generation capacity,” he comments.

As such, Formby says, South Africa should see a material increase in new electricity supply within the next 18 months.

“The economic multiplier effects associated with this will also be large. I trust processes around the registration of embedded generators and them obtaining the necessary grid connecting permits won’t get caught up in red tape,” he notes.

The increase in the licensing-exemption threshold, along with further progress in vaccinations, will help lift the national mood and improve investor confidence somewhat, Formby believes.

He points out that the announcement of the sale of a 51% stake in South African Airways to a private sector consortium is another positive development that may result in financial independence for the airline and that its partial privatisation might even serve as a blueprint to help remove the burden other struggling State-owned enterprises (SoEs) have on the State’s coffers.

“It’s a really good time to use this momentum to grasp the nettle of our other key challenges and change South Africa’s growth trajectory,” he says, adding that a renewed policy focus on logistics is currently particularly important given South Africa is riding the commodity price boom, “a rare gift to the South African economy”.

“We need to ensure our exports can get out of South Africa in the most efficient and cost-effective way possible, so we can fully benefit as a country.

“At the moment we are hamstrung by bottlenecks in rail transport and resultant over-reliance on expensive road transport,” he laments, noting that this is still the case in spite of plans to allow greater participation by the private sector in ports and the rail network.

Further, Formby says a much more proactive approach is needed to resolve the vexed broadband spectrum issue.

“All parties should be sitting around a table, not in the courtroom,” he comments, noting that a faster allocation of the high-demand spectrum would unleash much new investment in telecoms infrastructure which, among other factors, should help further reduce the cost of data and enable significant growth in this vital sector.

“South Africa has already waited too long for this policy change,” he states.

Formby notes that a plan to fix municipalities is also needed.

“It’s a longer road but we need to re-skill municipalities to enable projects to repair ageing infrastructure alongside better financial management.”

Companies have increasingly expressed concerns about the additional costs they have to incur because of lack of delivery by municipalities. Poultry producer Astral has had long running water supply problems in Standerton, while Clover has just decided to move its cheese plant from Lichtenburg in the North West to Queensburgh, Durban, because of poor service delivery.

“For the current cyclical economic recovery to develop into a durable business-cycle upswing, jobs must be created, and for that to happen, fixed investment must accelerate.

“With increased collaboration between the public and private sector South Africa now has an opportunity to create a sound platform which could serve us for years to come,” Formby concludes.