South Africa’s Government of National Unity Cabinet has endorsed a plan to incorporate three new reform priorities under the umbrella of Operation Vulindlela, which will now oversee and coordinate the implementation of reforms across seven areas in total.

Approved by Cabinet in March, the new reform focus areas included as part of what is termed Operation Vulindlela Phase II, include:

• Local government, where institutional, governance and financial reforms will be pursued to address a broad-based deterioration in performance, but particularly in metropolitan councils;
• Tackling the apartheid geography that has persisted, by pursuing urban densification and spatial integration to reduce transport costs and connect people to economic opportunity; and
• Leveraging digital public infrastructure to modernise State capabilities and unlock economic participation.

These new areas will be pursued together with ongoing economic reform efforts under way in the electricity sector, across the logistics system, in improving water supply, and in reforming the visa system to facilitate tourism and the entry of critical skills.

Speaking ahead of Operation Vulindlela Phase II’s official launch by President Cyril Ramaphosa, National Treasury director-general Dr Duncan Pieterse argued that Phase I had proved that well-targeted reforms, when implemented effectively, could have an effect on growth constraints.

In particular, he highlighted the progress that had been made in addressing electricity loadshedding, which had tapered significantly after peaking in 2022 and 2023.

The next phase of reforms in that sector would seek to build on progress as well as find solutions to the serious sustainability problem emerging in the distribution sector, which was resulting in localised outages and arrear debt owned by municipalities to Eskom had risen to over R100-billion.

The Presidency’s Rudi Dicks said that a new roadmap for the electricity distribution industry would be developed over the coming year, with the aim of setting in motion plans for the establishment of financially and operationally sustainable distribution companies.

Likewise, there were ambitions to accelerate reforms in the other sectors, including through: introducing private-sector participation in those parts of the freight logistics network still monopolized by Transnet; developing a National Water Action Plan and establishing a coordination structure to ensure water security; and implementing the points-based system for critical skills visas and general work visas.

However, Pieterse said the decision to add three new areas reflected the structural constraints to growth posed by the municipal service backlog and ongoing spatial inequality, as well as by a failure to integrate digital solutions.

“While South Africa's overall growth trajectory remains constrained, these reforms have laid the groundwork for stronger performance over the medium term,” he said, adding that the upcoming Budget, to be released on May 21 after two previous failed attempts, will reflect the Operation Vulindlela priorities.

The three new areas were both far-reaching in scope and complexity, particularly the reforms being proposed to strengthen municipal government.

NEW UTILITY MODEL

The Presidency’s director of strategy Saul Musker reported for instance, that Operation Vulindlela would be seeking to shepherd in a shift to a utility model for water and electricity services, whereby all metros would be required to establish or appoint ring-fenced, professionally managed and independently licensed utilities.

There would also be moves to ensure that all municipal managers and CFOs met the minimum standards for qualifications, experience and integrity, and to review how local government revenue matched its responsibilities.

Operation Vulindlela would also support the Department of Cooperative Governance and Traditional Affairs in publishing an updated White Paper on Local Government “to outline a modern and fit-for-purpose local government system”.

To begin addressing spatial inequality, the Operation Vulindlela Phase II aims to oversee a revitalisation of passenger rail; support densification through a demand-side rental subsidy for affordable housing, release public land and buildings for housing; clear the title-deeds backlog; and review land use, building and other regulations to enable low-cost property developments.

Musker also outlined an ambitious digital transformation agenda, which would involve investing in digital public infrastructure to enhance service delivery and expand financial inclusion.

Part of this agenda would include the establishment of universal biometric enrolment and introduce a foundational digital identity system, together with a digital wallet for citizens to access their digital ID, driver’s licence and other verifiable credentials.

“We have consistently said that we believe South Africa’s growth problem is structural, not cyclical and an important feature of the Operation Vulindlela reform is targeting the underlying structural constraints to growth and therefore raising our potential growth rate.

“As a result, the economic impact of the implementation of these reforms become visible over time, rather than in the immediate term,” Pieterse stressed.