Rudi Dicks, head of the project management office in the presidency, says it’s essential that Operation Vulindlela becomes a well-established fixture of South Africa’s governance — but in a democracy, nothing is cast in stone.
“Let’s assume you have extreme right or extreme left parties that come in and don’t like this, these are the kinds of risks democracies face,” Dicks, who has led the structural reform programme since its launch five years ago, tells the FM. “We’ve got to sustain the momentum of the reform process and move it forward as fast as we can.”
In what he sees as a “critical indicator” of confidence in Operation Vulindlela, the IMF said in a recent assessment that if the programme is sustained, South Africa could grow 3% annually.
So to what extent has it been accepted by those in power?
“We’ve spent an inordinate amount of time to embed and institutionalise the programme to ensure that the cabinet is mobilised around it, and that the various departments responsible for specific aspects of the reform programme are driving and implementing it,” Dicks says.
Is this happening fast enough?
“I think so. There are, of course, challenges.”
The biggest of these, he says, is a dire lack of capacity to accelerate implementation and delivery. “It’s the technical skills that we’ve lost, the decimation of state capacity and bureaucracy to deal with these challenges.”
Much of what Operation Vulindlela is doing is to support departments where there is no implementation. One of those it has helped is the department of water & sanitation, but Dicks concedes that the water crisis is getting worse.
In the second phase of its reform programme launched last year, Operation Vulindlela took on local government, which is proving to be a formidable task, Dicks says.
“This is a different sphere of government that has its own constitutional powers. There are legislative parameters that you’ve got to follow here. You can’t simply come in as the national government, having a helicopter approach and declaring that you’re going to do this or that.”
The constitution makes local government pretty much untouchable, he says, though the review of the white paper on local government is intended to address this problem.
“As soon as we release the white paper, it’s going to be an important part about how we see local government moving forward and making the changes necessary.”
Do the potentially explosive socioeconomic consequences of collapsing municipalities not mean urgency is required?
“Absolutely, we do need to move faster. But you can’t ride roughshod over people who have been elected in those municipalities. You’ve got to work with them. Unfortunately, that does mean delays.”
It also means that Operation Vulindlela is having little or no impact on the sphere of government that affects lives and businesses more directly than any other. The bottom line is that across the country infrastructure decline and service delivery are getting worse.
“Absolutely, and we’ve got to address that. We’re working flat out to address the constraints.”
In its first five-year phase before tackling the nightmare of local government, Operation Vulindlela was mainly about electricity and logistical reform. So is electricity reform happening fast enough?
“I believe it is,” says Dicks. “The announcement by the president in his state of the nation address was fundamental and decisive. We’ve moved quite far, we’re in the process of launching the energy wholesale market.”
Is he concerned that it still hasn’t been launched? That there is still no fully functioning competitive electricity system, and ruinously high electricity prices are still rising steeply?
“We’re moving fast with fundamental reforms to create competition in the electricity market and to bring down prices. We’ve got grid access rules that have been issued by the National Energy Regulator of South Africa [Nersa].”
He concedes this has done little to ease grid capacity constraints.
“Unless you’re going to build new transmission infrastructure, there will be constraints. Given the scarcity of grid, you’ve got to have rules in place that have to be fair and transparent. This is exactly what Nersa has done.”
Private sector renewable energy players complain that Eskom is not only a competitor but also controls access to the grid. “Ultimately, what we’ve got to do is ensure the completion of new grid rollout. That is critical for a competitive market.”
Meanwhile a “big reform”, Dicks says, is that Nersa has issued the National Transmission Company South Africa (NTCSA) an operating licence. “This year we are going to have a competitive market.”
Is he concerned about pushback from Eskom and the minister of electricity, Kgosientsho Ramokgopa?
“No, I don’t think there is serious pushback. The government has taken a decision. The government is the shareholder, represented by the minister of electricity. And the decision is clear, and we’ve got to implement it.”
What about Ramokgopa’s statement in December walking back his commitment to make the NTCSA fully independent of Eskom with full ownership of national grid assets, saying that they’d remain with Eskom?
“I know there were concerns raised by the private sector and other players in the market about the minister’s interpretation. But we’ve made it fairly clear, and the minister has too, that this was the first phase, and we’re now moving into the second phase to ensure that there is full unbundling in Eskom.”
It’s non-negotiable that the price of electricity must come down, and introducing competition in the market is the only way to do this, says Dicks.
“Once you allow private competition it brings down the price. We have to create a competitive economy by bringing down the price of electricity. That’s why these reforms are so important.”
Dicks cites the end of load-shedding as an Operation Vulindlela success story. But what about fears it will be back with a vengeance if grid expansion is not sharply accelerated?
“It’s not going to come back in the way it was because we had a shortage of generation capacity. We’ve opened up private sector investment in generation.”
Now it’s the rail network that needs huge capital expenditure investment, he says, conceding that Transnet’s maintenance backlog is still crippling the economy.
“There’s no denying that we have not invested in the rail sector, and this has had a significant impact on us being able to move volumes. We’ve got to improve the standard of the rail freight network, including investments in the port space, so we move much more, much faster. That’s critical for our economy.”
Businesses complain that port bottlenecks are still costing them millions.
“Again, this is about introducing competition into this space that allows for private sector operators in the ports and on the freight lines,” Dicks says.
He says this is beginning to happen, but freight tonnage carried on rail will return to 2016 volumes only in 2030. Transport minister Barbara Creecy has made it “very clear” that 250Mt by 2030 is a must, but “that’s a huge ask”, he says.
“We’ve got to introduce competition, we’ve got to allow third-party operators, bring huge investment to the rail network, including for additional rolling stock, service and maintenance of locos and wagons. These are things the reform programme is addressing, but this doesn’t happen overnight.”
Businesses that rely on freight rail say the 2030 target is way too far off given the urgency.
“What do you want us to do? We’ve got to go out to market to potentially borrow additional money to fix the rail network. These things take time. People are looking for silver bullets. There is no silver bullet.”