The modernising of network industries – including transport – is essential if South Africa is to achieve higher and sustainable growth that can contribute to economic transformation.
This is one of the issues highlighted in a comprehensive strategy document released by Finance Minister, Tito Mboweni. The document, “Towards an Economic Strategy for South Africa” sets out far-reaching structural reforms.
However, South Africa cannot fully harness the productivity benefits due to the absence of efficient economic regulation, backlogs in infrastructure investment and maintenance, lack of access to quality services and poorly managed state-owned companies.
Economic institutions that support growth require a capable state as well as a functional relationship between the state and the private sector.
A new compact is required between the government, the private sector and social partners. Government must prioritise the strengthening of the capability of the public sector and state-owned entities and achieve the right balance between policy progress and certainty to ensure the economy is able to attract foreign and domestic investment.
Competition and private sector participation in the transport sector can increase investment and improve service delivery without weighing on the balance sheets of state entities. This will encourage the development of new and small firms in the infrastructure space and promote economic transformation.
The direct impact of more competition on the balance sheets of SOEs will be outweighed by the efficiency gains in the rest of the economy.
Economic transformation and inclusive growth must be accompanied by an emphasis on building an economy that is globally competitive. For example, prioritising local procurement by state-owned entities can boost economic transformation and inclusive growth, but the short-run impact on competitiveness will not be neutral if local industries are unable to supply the designated products at the same price as their international counterparts.
Road freight transport continues to have a market share of about 70%.
The Treasury document supports the Department of Transport’s Green Paper which proposes:
- Stricter enforcement of traffic laws
- Full cost recovery from road freight operators
- Related external environmental costs
- Major improvements in rail services
While a road-to-rail shift may not have a direct impact on economic competitiveness, it will improve the efficiency of the transport system and support the viability of Transnet’s rail business.
The document calls for the finalisation of the Economic Regulation of Transport Bill which includes provisions to create a transport regulator who will oversee the entire sector including entities such as SANRAL, Transnet, Prasa and Acsa. “Several unregulated areas that are dominated by large state-owned entities or the government should have their economic activities regulated by independent agencies,” the document concludes.