Finance Minister Enoch Godongwana acknowledged that South Africa’s economic growth is being hindered by the challenges caused by loadshedding and ineffective freight rail, despite significant progress in structural reforms.
The minister explained that the government is embarking on broad structural reform that aims to address these challenges and aid economic growth. They addressed the nation during the 2024 Budget Speech at Cape Town City Hall on Wednesday.
This agenda has included areas like electricity, logistics, water, telecommunications and visa reforms. The Budget Review details the good progress that has been made in these areas over the past few years. But, obstacles remain and let me focus on the two largest of these.
Godongwana acknowledges the negative impact loadshedding has on production, operations and livelihoods. The need for long-term energy security through sector reform is therefore imperative for the economies growth prospects.
Loadshedding, which is characterised by scheduled power cuts, severely hampers economic growth by disrupting various sectors of the economy. Industries reliant on continuous power supply such as manufacturing, mining and services, experience production delays and increased operating costs.
This may cause businesses to struggle to meet deadlines, fulfill orders, or maintain consistent output level which leads to revenue losses and reduced profitability.
Additionally, the uncertainty surrounding power availability discourages investment as investors may perceive the lack of reliable energy supply as a risk to business operations.
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 15 megawatts to 30 megawatts
Eskom
Godongwana announced the release of the report on the independent review of Eskom’s coal-fired power stations is expected later this week. The recommendations from the review would inform Eskom’s corporate plans to enhance accountability and oversight at the ailing power utility.
It is through the combination of private investment in new energy projects, rooftop solar installations and improvements in Eskom’s generation fleet that load shedding will be reduced, and reliability and security of supply improve
Logistics Challenges
Godongwana also addressed South Africa’s logistics challenges, announcing the introduction of third-party access to the freight rail network by May 2024.
Inefficient logistics, including challenges in transportation and distribution networks, create bottlenecks that impede economic efficiency and competitiveness. Delays in transporting goods from production facilities to markets result in inventory stockouts, higher storage costs, and reduced customer satisfaction.
Inefficient logistics may also inflate the cost of goods due to increased transportation expenses, which ultimately burdens consumers with higher prices.
Additionally, the minister revealed a private partner's involvement in upgrading Pier 2 of the Durban Container Terminal to enhance operational efficiency and technological capability.
In ports, a private partner has been secured to upgrade Pier 2 of the Durban Container Terminal. This should increase private investment in equipment, enhance technological capability and improve operational efficiency
The Minister highlighted government support for Transnet, providing a R47 billion guarantee facility to support its recovery plan and immediate debt obligations.
Godongwana emphasised that this guarantee came with conditions, requiring Transnet to focus on core activities and introduce private sector partnerships to enhance sustainability and support the implementation of the Freight Logistics Roadmap.
