Annex . Progress in main structural reforms
This annex reviews action taken on recommendations from previous Surveys since the July 2015 Survey.
Macroeconomic policy and safeguarding fiscal sustainability
Recommendations from previous Surveys |
Action taken since July 2015 Survey |
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Continue the prudent approach to fiscal consolidation, including the use of spending ceilings, to reduce the structural budget deficit and contain public debt in a growth and equity friendly way. Continue to sell state assets where a higher return can be achieved by using the revenues to finance infrastructure investments. (2015 Survey) |
Fiscal consolidation has continued. Additional tax raising measures have been introduced. The expenditure ceiling has been lowered further. |
Maintain the current monetary policy stance and continue to carefully monitor the development of core inflation (2015 Survey) |
The repo rate increased to 7% in March 2016 from 5.75% in July 2015 to anchor inflation expectations. |
Increase the emphasis on the cyclically adjusted balance when setting and explaining fiscal policy. (2013 Survey). |
No action. |
The government should continue to seek opportunities to increase the efficiency of public expenditure. (2010 Survey). |
All suppliers must be registered with a central database. All contracts above ZAR 500 000 at national and provincial, and ZAR 200 000 at municipal level are subject to a competitive bidding process. Efforts to expand centralised procurement of goods and services and renegotiation of transversal contracts continue. |
Consideration should be given to strengthening the link between commodity prices and the fiscal balance; if this link is strengthened, establishment of a commodity fund can be considered to ensure that windfall revenues are saved. In the meantime, such windfalls should be used to reduce debt. (2010 Survey). |
No action taken. |
To further increase transparency and signal commitment to price stability over the longer term, the SARB should consider moving in the direction of announcing a future policy-rate path consistent with the inflation objective. At a first stage, this might involve merely signalling the expected direction of future movements in policy rates. (2010 Survey). |
The SARB started to publish its underlying forecast assumptions and two-year inflation projections in its MPC statements from July 2015 to increase transparency. |
Broadening tax bases to help finance requirements for stronger and sustainable growth
Recommendations from previous Surveys |
Action taken since July 2015 Survey |
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Broaden personal and corporate income tax bases by reducing deductions, credits and allowances. Increase tax rates on higher incomes. (2015 Survey) |
The 2017 Budget created a new top tax bracket with a marginal tax rate of 45%. The dividend withholding tax rate was increased from 15% to 20%. |
Broaden the VAT base and strengthen VAT compliance. Proceed with the introduction of a carbon tax. (2015 Survey) |
The VAT exemption for fuels is being reviewed. Draft legislation for the carbon tax has been published. |
Regional convergence and deeper trade integration
Recommendations from previous Surveys |
Action taken since July 2015 Survey |
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Further develop pro-growth regional policies which focus on skills formation, investment and infrastructure in a co-ordinated way. (2015 Survey) |
In 2016, SADC approved a US$3.5 million feasibility study for a regional project to expand and transmit Mozambique’s hydro power and diversify South Africa’s electricity supply. |
Resume trade policy measures that enhance international integration, including with developing countries, by reducing barriers to trade. (2015 Survey) |
A free-trade agreement was reached between SADC and ECOWAS in 2016, agreeing on tariff liberalisation and related rules. |
Improving labour market outcomes
Recommendations from previous Surveys |
Action taken since July 2015 Survey |
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Increase the role of mediation and arbitration to make wage negotiations less confrontational (2015 Survey). Curtail the within-sector legal extension of collective bargaining agreements and increase the level of centralisation and co-ordination in collective bargaining to allow for greater influence of outsiders on wages and conditions. (2013, 2010 Survey). |
Amendments to LRA, Picketing Regulations and a Code of Good Practice on Collective Bargaining, Industrial Action and Picketing are to be promulgated to enhance labour market stability and effective dispute resolution and will accompany the introduction of the national minimum wage. |
Appoint an independent body including researchers to advise on key decisions regarding the minimum wage, balancing potential employment losses against social benefits (including level, scope and opt-outs). If established, the minimum wage should be regularly reviewed and adjusted in an independent and transparent way. (2015 Survey) |
The social partners have reached agreement on modalities for the introduction of a national minimum wage of ZAR 20 an hour to be implemented from no later than 1 May 2018. The institutional set-up of a commission in charge of the annual review is still being finalised. |
Establish a public employment service as a one-stop shop for job seekers to lower the cost of job search and hiring costs for employers, which would improve the matching of workers to jobs (2015 Survey). Efforts to strengthen job search assistance should be intensified. (2010 Survey) |
The existing 126 labour centres around the country now have self-help kiosks. 3 mobile units have also been established to increase access in remote areas. An employment services database has been created. Counselling and other services that improve work readiness and increase placement have also increased. |
Enforcement of existing labour laws relating to labour broking should be tightened, but liberal arrangements for temporary employment should be maintained. (2010 Survey) |
No action taken. |
The arbitration process for dismissals for cause should be speeded up and simplified. (2010 Survey) |
No action taken. |
The use of wage subsidies should be expanded, possibly by building on the existing learner ships, but with a reduced administrative burden. (2010 Survey) |
The Employment Tax Incentive has been extended until 2019. |
Probationary requirements in respect of new hires of young employees should be extended. (2010 Survey). |
No action taken. |
Climate change mitigation and green growth
Recommendations from previous Surveys |
Action taken since July 2015 Survey |
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Price environmental externalities, including carbon emissions, and scarce resources, particularly water, appropriately. (2015 Survey). |
A tyre levy has been implemented from 1 February 2017 which will address the externalities associated with tyre disposal. |
In designing climate change mitigation policies, favour broad and easy-to-implement instruments with limited demands on administrative capacity, such as a simple carbon tax. (2013, 2010 Survey). |
Draft legislation for the carbon tax has been published. |
Reduce implicit and explicit subsidies for energy and coal consumption, and use other instruments, such as cash transfers or supply vouchers, for protecting the poor. (2013, 2010 Survey). |
The diesel fuel levy refunds for the electricity sector were reduced from April 2016. The 2017 Budget proposed a review of the VAT exemption of transport fuels in consultation with stakeholders. |
Electricity prices should be allowed to rise further to fully cover capital costs. Favourable pricing arrangements for large industrial users of electricity should be renegotiated. (2010 Survey). |
NERSA approved an average annual price increase of 9.4% for 2016/17 and 2.2% for 2017/18. |
Accelerate the allocation of water-use licenses and ensure that charges for water reflect supply costs and scarcity. (2013 Survey). |
The application process for water-use licences has been streamlined to accelerate allocations. |
Tackling infrastructure bottlenecks and improving business regulation to support job creation
Recommendations from previous Surveys |
Action taken since July 2015 Survey |
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Choose infrastructure investments with the highest social returns to facilitate prioritisation and cost control. (2015 Survey) |
Infrastructure projects remain concentrated in energy, education, health, water and transport sectors. |
Improve employment opportunities by expanding affordable public transport, including integrating minibuses into the public transport system, and building new, denser settlements closer to economic centres. (2015, 2010 Survey) |
Public transport has been expanded further in major cities. The first upgraded PRASA train went into commercial operation in March 2017. Construction continues of bus rapid systems continues in 13 cities across the country, including the four major cities with systems already in operation. |
Experiment with support schemes and regulation for special economic zones to move jobs to poor urban neighbourhoods. (2015 Survey) |
The government has introduced a programme to revitalise old industrial parks located in poor black urban settlements across the country. Work is at various stages in 6 of the 10 identified parks. |
In network industries, complete the introduction of independent regulators and charge them with ensuring non-discriminatory third-party access. Secure additional electricity generation capacity by accelerating the independent power producer programme and facilitating private co-generation. (2015 Survey) |
No action taken. |
Support SMEs by increasing the use of regulatory impact analysis to reduce the regulatory burden, eliminating entry barriers, and promoting competition. (2015 Survey). |
All policy proposals are now required to have a Socio-Economic Impact Assessments completed which allow for clear consideration of the regulatory impact on small business, where necessary. |
Systematically identify and eliminate competition- hampering regulation (2015, 2013, 2010 Survey). Privatise state-owned companies, such as telecoms, that are in markets with a sufficient degree of competition (2015 Survey). |
A red-tape reduction bill is with parliament. It would create a regulatory impact assessment unit that reviewed existing legislation. |
Product market regulation should be made less restrictive, particularly as regards barriers to entrepreneurship. Simplify regulations and ease compliance. (2013, 2010 Survey). |
Department of Trade and Industry will establish three “One Stop Shops” in 2017 to reduce compliance times, with one already opened. Information and assistance will be under one roof. The Sub National Ease of Doing Business project to reduce regulatory barriers within South Africa’s largest municipalities is underway. The Department of Small Business Development is assessing the regulatory burden of several sectors and pieces of legislation, with a view to partnering with the relevant departments to reduce these. |
Making the education system more effective
Recommendations from previous Surveys |
Action taken since July 2015 Survey |
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Expand the Accelerated Schools Infrastructure Development Initiative programme to address infrastructure backlogs and improve the delivery of learning materials (textbooks, desks, libraries and computers) with priority to the most deprived schools. (2013 Survey) |
136 new schools were built and completed in 2016/17, 167 provided with sanitation facilities, 344 with water and 134 with electricity. The department committed to provide at least two libraries in each province with the ASIDI allocation. The delivery of learning materials has improved to close to 100% coverage in 2017. |
Expand the Funza Lushaka bursary programme for teaching studies and allow more immigration of English teachers. (2013 Survey) |
The Funza Lushaka bursary allocation has increased by over ZAR 100 million since 2015 and the programme continues to boost the supply of skilled teachers. Around 10 000 newly qualified teachers under the age of 30 have entered the system each year since 2015 (including non-bursary holders). The number of students supported is expected to decline over the medium term due to increases in university fees. |
Provide more school leadership training and support staff in exchange for stricter accountability. Allow the education authorities to appoint and dismiss school principals in a more flexible way (depending on progress on school performance in Annual National Assessments and on external reviews), while making school principals responsible for yearly teacher evaluations and monitoring teachers’ daily attendance. (2013 Survey) |
In 2016, the Department of Basic Education introduced a new policy defining the role of school principals and the key aspects of professionalism, image and competencies required. A new collective agreement on quality management of principals is with the teaching union. The use of competency assessments when appointing new principals is under consideration in the bargaining council, but some provinces have voluntarily already implemented this tool. |
Empower the independent federal evaluation unit NEEDU, join the Programme for International Student Assessment (PISA) and the Teaching and Learning International Survey (TALIS) and undertake an OECD Review of Evaluation and Assessment Frameworks for Improving School Outcomes. (2013 Survey) |
No action taken. |
Foster on-the-job training with tax credits and simplify administrative procedures for hiring trainees from FET colleges. Widen the scope for apprenticeship programmes organised by public-private partnerships. (2013 Survey). |
The learnership tax incentive has been revised to provide more support for scarce skills, particularly for artisans, and extended until 2022. The employment tax incentive has been extended until 2019 to allow for further evaluation. |
Improvements in basic education should be prioritised, even though the contribution to raising employment will be small in the near term. (2010 Survey) |
Spending on basic education continues to be the largest share of the national budget. |
Other
Recommendations from previous Surveys |
Action taken since July 2015 Survey |
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Access to credit for business start-ups should be improved, for example by easing collateral constraints. (2010 Survey). |
No action. |
Remaining restrictions on capital outflows should be removed and replaced by prudential regulation. (2010 Survey) |
Draft legislation to implement a “twin peaks” macro-prudential regulatory framework is in parliament. The bill separates prudential from conduct regulation resulting in the development of two key regulators – the Prudential Regulation Authority, under the South African Reserve Bank, and a new Financial Sector Conduct Authority. |
Pension arrangements should be designed with a view to increasing private saving, in conjunction with other goals. Compulsory pension saving by employees is one promising way of doing this, while positive results might also be achieved via compulsory enrolment with an option to withdraw, particularly in combination with a “save more tomorrow” mechanism. (2010 Survey) |
Reforms were introduced in 2016 to harmonise the tax treatment of contributions to different retirement funds to reduce the scope for tax avoidance salary structuring. |