BLSA
Several developments since we published our year-end bulletin highlight the immense challenges we still need to overcome if we are to resolve the country’s core problems.
For example, we saw the governing party push through the NHI Bill, despite several submissions and petitions by BUSA and B4SA, which are highlighted in this edition.
Then in February it was confirmed that we face a natural gas supply shortage, despite government being warned for some time that this was coming. This is yet another example of self-inflicted damage exacerbated by the resistance in government to implementing the necessary reforms.
But amid the challenges there have also been signs of progress, albeit painfully slow, that prove what can be achieved when we work together towards common goals.
In this edition we report back on the numerous initiatives that are underway; we highlight the establishment of an interim rail infrastructure manager to open the network to third-party freight operators and the appointment of the board of directors of the Transnet National Port Authority (TNPA), an independent entity, to oversee all ports in the country.
We also note Cabinet’s long-awaited approval of the Freight Logistics Roadmap for implementation, as well as the publication of the Draft Integrated Resource plan in 2023.
After repeated delays, the Department of Home Affairs has published the draft trusted employer scheme for public comment, which is encouraging. However, as we point out, the proposed immigration policy document, which includes the trusted employer scheme is yet to be published.
On top of the positive developments highlighted in the Bulletin is the welcome news about the appointment of Michelle Phillips as Transnet CEO and to Nosipho Maphumulo as CFO. This follows the appointment of the highly experienced Dan Marokane as Eskom CEO, announced in December.
As I said in my 4 March newsletter, these appointments add momentum to the work being done to resolve our logistics and electricity crises. It is important that the core within government working hard to get things right in partnership with the business sector can continue to do its work, notwithstanding the inevitable distractions that we are beginning to see in the run up to elections.
If anything, we hope that electioneering campaigns are dominated by pledges to see through the implementation of reforms and solid plans on how to grow the economy and address the unemployment crisis. Government, working in collaboration with the business sector, cannot afford to shift its focus from the business of running the country and pushing through the reforms that will set us on the right track.
That is the one path that will ensure we create a significant number of jobs and turn the tide on the unemployment crisis.
We thank BLSA’s members for their continued support and their willingness to invest in delivering the change that we so desperately need.
Sincerely
Busisiwe Mavuso
CEO
We note some positive steps in Q3/4 2023, such as the establishment of an interim rail infrastructure manager to open the network to third-party freight operators and the appointment of the board of directors of the Transnet National Port Authority (TNPA), an independent entity, to oversee all ports in the country. However, government still needs to do more to ensure the success of economic reforms. One striking observation has been the lack of any sense of urgency among reform implementers. These time lags can make policy decisions more difficult and seriously affect the economy and output. Despite extremely slow progress, there have been notable developments in some areas of the economy.
In December 2023, the Department of Minerals Resources and Energy (DMRE) published the Draft Integrated Resource Plan (IRP) 2023 and it received approval from the Cabinet. The latest draft IRP reviews the previously approved IRP 2019, considering changes in key assumptions such as electricity demand projection, Eskom’s energy availability factor, Eskom’s coal-fired power plants shutdown plan, and the cost of new power generation technologies.
The draft plan covers two time horizons, namely 2030 and 2050, and emphasises a diversified energy mix to ensure security of electricity supply while adhering to emission reduction plans.
The current iteration outlines a review methodology, input assumption parameters, and analysis for both the 2023-2030 and 2031-2050 periods. It covers factors considered, including Eskom plant performance, shutdown plans, new building challenges, the Koeberg long-term operation plan, compliance with emission standards, timing of new capacity rollout, and development of the transmission grid.
The DMRE highlights that the IRP Review presents various options to meet three aspirations: security of supply, energy affordability, and carbon emissions reduction. However, it expresses concern about an electricity supply and demand deficit until 2030, despite ongoing initiatives to add generation capacity. The analysis underscores the need for a long-term decarbonisation trajectory for policy decisions, aligning with South Africa’s competitiveness, economic growth, and industrial renaissance as outlined in the National Development Plan (NDP).
Interested parties were invited to provide comments on the Draft IRP 2023 by 23 February 2024. BLSA members were asked to make submissions through BUSA.
The National Water Resources Infrastructure Agency (NWRIA) has successfully navigated through the NEDLAC consultation processes. The Bill has now advanced to the portfolio committee on water and sanitation for additional deliberation. While there is widespread support for the Bill to be enacted into law, it was noted that the labour sector has expressed some concerns and reservations, particularly regarding the transfer of staff from the Trans-Caledon Tunnel Authority (TCTA) to the functions of the agency.
Transnet (again) plans to open the country’s logistics networks to third parties by April 2024 after a failed attempt last year. We expect the roadmap to be released soon, backed by Operation Vulindlela (OV). The National Logistics Crisis Committee (NLCC) will be overseeing the implementation of the roadmap. We believe this comprehensive plan will promote competition by increasing private sector participation in the operations of both rail and port networks and reduce Transnet’s monopoly.
The key for Transnet is to put in place appropriate measures to manage conflicts of interest by offering more favourable conditions to third parties. This will also prevent port and rail access deals running into trouble in the future, as is the case with the Durban container terminal where Philippines company International Container Terminal Services was chosen as the joint venture partner to run the terminal. The deal could be delayed because unions are demanding no job cuts over the 25-year agreement period.
The Department of Home Affairs published the draft trusted employer scheme for public comment. Aimed at simplifying the visa process for eligible SA corporations to employ foreign skilled professionals, the scheme holds the promise of making the foreign labour market more accessible and efficient for companies in response to the ongoing challenges with the visa and permits backlog. However, the proposed immigration policy document that the department has promised is yet to be published. It includes:
The global financial crime watchdog FATF hosted its first plenary and working group meeting of the year during mid-February. Not much headway was expected for South Africa at this meeting. The country was greylisted a year ago and is working hard to implement the necessary remedial action as soon as possible, with the next observation in 2025.
After several delays, we expect the department of home affairs to publish a new visa strategy (an update from the 2014 version) incorporating the key changes to immigration rules (outlined in the OV progress section above). The timing, however, remains uncertain after repeated delays, but we do expect it in Q1 2024 with the changes likely to come into effect later in the year.
The overall goal is to encourage and attract foreign skilled nationals and companies to the country.
We expect OV’s Q1 2024 report before BLSA’s next board meeting. The main areas of focus, include:
In the BUSA Environment and Energy Standing Committee on 1 December 2023 the National Energy Crisis Committee’s (NECOM) Technical Working Group, dedicated to enhancing the energy availability factor, provided an update on progress. The group focuses primarily on coal plants and has offered technical assistance to ensure a stable power supply. Efforts include securing ample diesel supply for power stations to address issues like load shedding and load curtailment. However, concerns have been raised about the sustainable financing of Eskom, particularly regarding the diesel supply issue, given the existing debt and repayment challenges.
In response to these challenges, the Technical Working Group is currently directing its efforts towards the repair of five power stations. Additionally, Business has committed to offering technical advisory services, emphasising the collaborative approach to address the crisis. Most of the rectification work was scheduled to take place in January 2024, with the establishment of a dedicated project management team tasked with overseeing and executing initiatives at each of the five power stations. This strategic approach reflects the committee’s commitment to ensuring a stable and reliable power supply for South Africa.
As part of the ongoing deliberations on the Climate Change Bill, in early November BLSA took part in a workshop organised by BUSA and the Department of Forestry, Fisheries, and Environment (DFFE). This workshop, designed as a high-level information session, provided valuable insights into the emerging carbon budget regulations. The DFFE played a pivotal role in offering comprehensive details on the development of these regulations.
Additional engagements are planned, including bilateral discussions between BUSA and the DFFE. These discussions aim to delve deeper into the specifics of the emerging regulations, with both parties making a concerted effort to stay informed and contribute meaningfully to the ongoing discourse.
Furthermore, the National Council of Provinces (NCOP) asked for comments on the Climate Change Bill and the select Committee on Land reform, Environment, Mineral Resources and Energy invited comments on the Bill until 30 January 2024.
The South African government hosted the 2023, 20th AGOA Forum in Johannesburg from 2 November till 4 November 2023 under the theme “Partnering to Build a Resilient, Sustainable, and Inclusive AGOA to Support Economic Development, Industrialisation and Quality Job Creation.”
On 15 November BLSA in partnership with Webber Wentzel hosted an engagement for business, industry and the Department of Trade, Industry and Competition to unpack the outcomes of the AGOA Forum. The engagement, among other things, discussed the key outcomes of AGOA, including the need for lengthier time frames for the legislation and how it could be better utilised to yield more benefits for African countries, as well as what potential export baskets could look like on the continent.
BUSA put a multi-sector team together to meet with independent researchers and consultants on 8 November 2023 for an evaluation study that aims to analyse the economic, social, human rights (including labour rights) and environmental impacts of the Economic Partnership Agreement (EPA) with six partners from the Southern African Development Community (SADC): Botswana, Eswatini, Lesotho, Mozambique, Namibia, and South Africa.
An online survey on the performance of the EPA was open until 30 November 2023. Detailed information, including the evaluation reports, is available from the evaluation website: http://eu-sadc.fta-evaluation.eu
Africa Free Trade Agreement (AFCFTA) Workshops – the Department of Trade, Industry and Competition (DTIC) has been on a drive to host various provincial workshops on the AFCFTA. The purpose of these workshops is to educate people about the importance of the agreement, the benefits that it will present to the South African economy and the need for businesspeople to take advantage of the agreement. In addition, there have been some workshops aimed at exploring market access opportunities for women, youth, and persons with disabilities entrepreneurs in the context of the AFCFTA locally and globally.
AFCFTA Trade in Services – the Department of Trade, Industry, and Competition (DTIC) is collaborating with BUSA and its professional services sector members to address key challenges in the ongoing AFCFTA and SADC negotiations. These challenges include: emigration of professionals from South Africa, trade barriers faced by South African service firms in other African countries, and preparation of a draft offer for the second phase of SADC Trade negotiations.
In November 2023, the South African National Assembly passed the 2023 Taxation Laws Amendment Bill, which was subsequently sent to the National Council of Provinces (NCOP) for concurrence. The Bill was initially tabled in Parliament on 1 November forming part of the Medium-Term Budget Policy Statement (MTBPS). Following parliamentary approval, the Bill was sent to President Ramaphosa in December 2023 for assent. President Ramaphosa signed the Bill into law, officially enacting the 2023 Taxation Laws Amendment Act.
On 14 December 2023, the Portfolio Committee on Trade and Industry, Economic Development, Small Business Development, Tourism, Employment, and Labour issued a notice, inviting written submissions on the Companies Amendment Bill [B27B-2023] and the Companies Second Amendment Bill [B26B-2023] by 29 January 2024.
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On 30 November 2023 a dialogue was held by the Department of Public Enterprises (DPE) in order to provide an opportunity to kick start discussions on the Bill by the NEDLAC social partners. This dialogue was in the form of input provided by the DPE on the Bill, followed by a facilitated panel discussion. The dialogue aimed to answer the question of whether the Bill will be able to address the governance, effectiveness and developmental agenda of State-Owned Entities, and if not, to propose alternative measures.
The DPE has now gazetted the final SOE Bill to create the holding company (Holdco) that will be submitted to parliament along with an explanatory memo of the Bill. The Bill addresses several issues, while streamlining the appointment process of directors and introducing a judge to enhance independence. The SOE Advisory Council becomes a permanent fixture, with members including business and labour representatives, though concerns persist about the significant presence of SOE leaders.
Notably, the legislation outlines broader amendments in various Acts to ensure compliance and specifies eligible SOEs for potential inclusion in the Holdco, listing entities such as Eskom and Transnet. However, uncertainty remains regarding the criteria and timeline for their entry. The National Treasury (NT) has indicated that only profitable entities will be included, based on their statement in September 2023.
Furthermore, the Bill explicitly sidesteps the Public Finance Management Act (PFMA), a development viewed unfavourably. The strategic role of the Holdco in relation to its subsidiaries is poorly defined, and the absence of clarity on the transfer of financing instruments adds complexity. Unlike the assumption of automatic creditor transfer, the Bill creates new Subcos under the Holdco, posing challenges for creditors, as seen in the prolonged Eskom unbundling process.
In the second half of 2023 HealthPol, through Business for South Africa (B4SA), implemented a short-term (3- month) focused Health project to consolidate work done to date on the NHI Bill and identify any remaining gaps while understanding the legal implications of health policy proposals and legal options available. An NHI framework and implementation trajectory was established and recommendations were consolidated.
This project was extended to December 2023 as there were several areas including stakeholder management, communications, modelling, legal and contracting which required continuous engagement. A submission to the National Council of Provinces was crafted and presented and the Select Committee Hearing that was meant to take place on 31 November 2023 was postponed. This meant that the parliamentary process dates would be pushed out and the project would be aligned accordingly.
On 6 December 2023, the National Council of Provinces officially passed the NHI Bill. Following this development, BUSA and B4SA sent a petition letter to the President on 14 December 2023. Unfortunately, this effort proved futile, given the President’s 8 January 2024 pronouncement that he would sign the NHI Bill into law, despite objections.
There are no changes in the status of the Employment Equity Amendment Act (EEA) implementation date. The Department of Employment and Labour has met with the BUSA Commissioner on Employment Equity (CEE) and Task Team to assess the BUSA position and the rest of the sectoral public comments. The main theme raised is the lack of sufficient consultation on the sector targets. The Department is contemplating another possible round of public comments and will communicate the final decision and date to the BUSA team. It is understood that the Department has either scheduled meetings or will be scheduling them in a short while with BUSA members to reopen discussions on sectoral targets. In the interim, BUSA has sent out communication to members requesting a progress update from sectors, so as to consolidate accurate data for the next CEE meeting with the Minister of the Department of Employment and Labour (DEL).
After BLSA and BUSA drafted and released media statements on the dysfunction within the Unemployment Insurance Fund (UIF), the NEDLAC Unemployment Insurance Fund Modernisation Task Team met with the Minister of Employment and Labour to receive the Presentation on the Architecture Review Report and Recommendations for the UIF and the Compensation Fund (CF). The Minister acknowledged that systemic change is needed within the UIF and there has been a concerted effort to consolidate the technical recommendations of the social partners over the years.
PricewaterhouseCoopers (PWC) has produced a thorough deep diagnostic report, concurring that there are many structural and skills issues within UIF and CF. The report highlights that the entities need high-level skills to properly administer and manage the organisations, including data analysts, ICT specialist skills, investment specialists, medical specialists, actuaries, and financial skills. There is general agreement that working groups, including stakeholders and social partners, must be involved while the process is in its infancy. This is to ensure that any systems development or proposed changes will incorporate the realities of payroll and modern workforce management. There are short, medium, and long-term plans of action and these will be implemented incrementally over the next 36 months. Once the general approach has been approved by the Cabinet, the Government will engage social partners on how these plans will be rolled out.
The focus is to unbundle the CF and UIF from DEL (Department of Employment and Labour) – as Schedule 3a entities and consideration is being given for the integration of systems between CF and UIF as per BUSA’s request. DEL believes that the placing of the funds under administration will not resolve the issues and that there is no intention to privatise either the CF or the UIF.