Operation Vulindlela: SA ‘will hit 3%’ growth by 2029 if reforms continue

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JEREMY MAGGS: Operation Vulindlela [notes] structural reform is beginning to unlock investment and improve state performance, with progress reported in electricity, in freight, rail, water, visas and digital government. But its latest quarterly assessment also shows 40% of reform actions are delayed or are off track. I think that raises questions about whether policy activity is actually translating into results that ordinary South Africans can see.

Well, someone at the centre of all of this is Rudi Dicks, who’s head of the project management office (PMO) at the private office of the president. Rudi, welcome back to the programme. So is Operation Vulindlela genuinely changing the economy or, as a result of this latest report that we see, still producing plans, laws and institutions rather than measurable results?

RUDI DICKS: Hi, Jeremy, thanks for inviting me. Well, as I said, I think it’s important to contextualise it. And no, it’s not spinning. When we say that 40% is off track, it doesn’t necessarily mean that they’re not being implemented. They slightly off track because, as I’ve explained, there may be technical aspects.

So let’s deal with two of them. Energy reforms and particularly the most fundamental reforms that we have never seen in the last 30 years in our energy space, the formation of the wholesale electricity market and, of course, the unbundling of Eskom.

What we are seeing is getting into much of the weeds and the details and therefore requires additional technical work. So they are slightly behind schedule, but the work and the momentum continues, and I think that’s really the important thing to understand.

Similarly for logistics, we spent a bit of time on getting a network statement that’s bankable, that can get third-party operators, private sector operators onto the rail network so we can unlock an additional 24 million tonnes. That needed quite a bit of work to ensure that we get an agreement on the network statement.

So that’s really it. It doesn’t necessarily mean that we are not committed to the reform programme. It means that we are getting to where it really matters, the nub of issues that require for us to now say, this is how we’re going to unbundle Eskom and create a transmission system operator. This is what we’re going to do in logistics in moving forward. That, I think, is the important point that I want to make, Jeremy.

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JEREMY MAGGS: It’s not quick enough, though, to meet the urgent needs of the economy and its growth.

RUDI DICKS: Well, certainly, of course, but reform is a slow process, isn’t it? Unfortunately, I think there are huge amounts of expectation. We still stick with the numbers, both independently done by the Bureau of Economic Research and, of course, internally by Treasury, and the South African Reserve Bank (Sarb).

But the reform is an important basis for us to catalyse economic growth.

We still think that if we fully implement the reform aspects that we’ve announced in phase two, that we will hit 3% by 2029, as we set out.

JEREMY MAGGS: Let me pick you up on the wholesale electricity market that you referenced, due to open externally early next year. But I think the question is, how can a competitive electricity market succeed while municipal distributors remain financially broken and distribution reform is still facing significant challenge?

RUDI DICKS: Absolutely. I think that’s really the crux and the nub of it. If you had noticed, for example, the report that we released, I think there’s a press release that we’ve issued early today or late last night on the Eskom Restructuring Task Team, you would have noticed that as part of the unbundling and creating a transmission system operator, we have set up a separate work stream under that by the two Director-Generals, the Director-General in the Presidency (Phindile Baleni) and the Director-General in the National Treasury (Dr Duncan Pieterse), to particularly address fundamentally those concerns.

Because you’re spot on, if you’re going to set up a wholesale electricity market, you’ve got to fix the distribution and allow also municipalities, for example, or the electricity distribution utilities to participate in that market.

So it is fundamental and what is that, financial sustainability. It’s why part of the reforms is to ring-fence those utilities so that you are able to pay for the bulk electricity that you buy, professionalise it, but also ensure that you invest in maintenance and infrastructure.

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So that’s quite critical. A lot of the interventions that we’ve done over the years have not achieved the desired results. So we’ve got to think about the long-term reform around it. But your observation is correct. We’ve got to deal with EDI (Electricity Distribution Industry), and we’ve got to move with it as quickly as possible to ensure we can have a successful, competitive market.

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JEREMY MAGGS: All right. Let’s move on to rail that you also referenced. Eleven private train operators, if I have read this correctly, have signed rail access agreements. But again, the question is, when will businesses actually see more freight moving reliably by rail?

RUDI DICKS: Well, certainly I think we’ve seen some significant progress, [but] not knocking on the 250 million tonnes. The minister (Barbara Creecy) has set 250 million tonnes as the target for 2029, 2030. What we have seen from the low of 2023, when we were doing 149 million tonnes, we’re now pushing at about 168 million tonnes in the last financial year.

The private train operating companies would see an additional 24 million tonnes. So that’s an important part as we move towards the target.

A lot of it is dependent on the ability for us to be able to raise capital, both internally through the budget facility for infrastructure or design concession deals, private sector participation on fixing the rail network.

It is really the rail network that is in a dire state, Jeremy, that requires for us to be able to make that investment so we can get more volumes on the iron ore line, on the Natcor (Natal Corridor), the line that runs from Johannesburg, which is our container line, on the coal line, on the chrome line.

It’s really a fact of us being able to put huge amounts of money quickly and fast, in partnership with the private sector, to ensure that we maintain and fix a broken system, a broken rail infrastructure, so we can get greater volumes. What we’re doing is, of course, ensuring that we can support the maintenance that Transnet is busy doing, and the budget facility for infrastructure is an important aspect of that.

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JEREMY MAGGS: The other big issue, of course, is water. It’s a big problem, particularly in urban South Africa. The water project pipeline, I think it’s valued at around R100 billion. How much, at this point, Rudi, is fully financed? How much is under construction and actually delivering water as we speak?

RUDI DICKS: Well, a lot of them are already in quite an advanced stage. So you’re correct, it’s R100 billion. About R60 billion of that is close to financial close. So we are able to ensure that we can move towards construction and announce commercial operation dates.

There has been a kink in our value chain of getting it from project pipeline into bankability, COD (commercial operation date) and then, of course, the actual construction. Part of it is now to ensure that the Infrastructure Fund of South Africa and the Water Partnerships Office are able to unlock that. We’ve set a target because we don’t want to continue hearing about a project pipeline, and that’s quite an important part.

The target is both at a wholesale level or at a raw water pricing level, at bulk and then, of course, also at distribution. So we’ve got to move pretty fast and get many of those projects into construction. That’s a critical focus of the National Water Crisis Committee, Jeremy.

JEREMY MAGGS: Rudi Dicks, thank you very much indeed, head of the project management office in the private office of the president.

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