Just hurry up already, Phakisa
Gloom and uncertainty intensified this week, as global market turmoil hammered the rand and South Africa’s economy was revealed to have shrunk sharply in recent months.
Under these circumstances, the importance of government programmes to boost the economy and deliver on its job creation promises becomes ever more evident.
The latest of its efforts is Operation Phakisa – Sesotho for “hurry up” – which President Jacob Zuma launched just over a year ago.
But the jury is still out on whether it will hasten service delivery or whether it will just be “yet another phrase to scatter through government planning”, as one analyst put it.
The programme is intended to deal with the development challenges highlighted in government’s National Development Plan (NDP), according to Ismail Akhalwaya, who is in the presidency’s department of planning, monitoring and evaluation and is the head of Operation Phakisa.
“Certain initiatives in the NDP require a collaborative approach between … spheres of government and other stakeholders to ensure effective implementation of solutions to achieve the goals of the NDP,” he said.
The programme is modelled on the Malaysian government’s Big Fast Results programme, and entails convening “laboratories” for the identified sectors to bring the role-players together to develop a detailed, practical plan, including setting targets and monitoring progress.
Two laboratories have been established so far – for health and the oceans economy. Another for mining is due to be launched in October, and one on education will follow.
Different focus areas or projects are included in the oceans economy laboratory, including aquaculture, offshore oil and gas, marine protection and governance, marine transport and marine manufacturing.
The health laboratory is focusing on the creation of ideal clinics in the public healthcare sector.
The programme has been received with caution. In a recent research note, Investec economist Annabel Bishop said Operation Phakisa’s success “will depend entirely on substantially increasing the ease of doing business so the private business sector can triple in size to sustainably absorb the unemployed”.
Saliem Fakir, the head of the World Wide Fund for Nature South Africa’s living planet unit, said: “Many people are struggling with clarity on the bigger picture.”
Although the focus areas of each laboratory were clearly identified, they had to be gauged against market conditions and the ability of the state to attract investment to these sectors in the long term, Fakir said.
The oil and gas sector is a case in point.
According to Operation Phakisa, oil and gas development could one day result in the production of more than 370?000 barrels of oil and gas a day, create more than 130?000 jobs and bring in about $2.2-billion each year for the country.
Although the South African industry is in an early development phase, Operation Phakisa has targeted the drilling of 30 exploration wells in the next 10 years.
But meetings with industry and other stakeholders have identified legislative and regulatory certainty as a major stumbling block to the sector’s progress and the most important issue that must be addressed.
The problem stems from the proposed changes in an amendment Bill, which was passed by Parliament last year, to the Mineral and Petroleum Resources Development Act (MPRDA). They include extensive state ownership of petroleum developments – in the form of free carried interest – as well as an option to acquire a further stake in any operation. But many oil firms are unwilling to undertake extensive capital expenditure without more clarity on how much the government will own.
Zuma refused to ratify the Bill and, at the beginning of the year, returned it to Parliament for further deliberation.
The ANC, however, in its discussion documents produced for its national general council in October, has motivated for the oil and gas sector to be removed from the ambit of the MPRDA.
“The minerals and petroleum industries have uneven levels of maturity in South Africa,” it said in the documents. “It behoves that the separation of the Bill to cater for mineral resources, on one hand, oil and gas on the other hand be expedited as part of the review of the Bill.”
This would be good news for many oil and gas industry players, who lobbied extensively for the sector to be legislated separately from mining. What position the party will take on the question of the free carried interest remains to be seen.
These processes have serious implications for the extent to which Operation Phakisa can hasten the development of the sector.
Fakir also said current market conditions were an even bigger challenge for the sector. Oil and gas prices have plummeted in recent weeks, limiting the likelihood of further investment by oil companies. “Even though you have developed a plan, you can’t escape market conditions,” he said.
Finally, the state of the implementing arms of the government, such as the state-owned enterprises (SOEs) and regulatory bodies, would affect how successfully Operation Phakisa could be rolled out, Fakir said.
But Akhalwaya said the operation’s success had been the collaborative planning between the government and other stakeholders “to identify a development challenge, diagnose the problem, agree and commit to detailed implementation plans, monitor progress with implementation and to resolve blockages as they arise”.
It had also forced government departments to work together and rid themselves of their silo mentality.
The limitations of the MPRDA were highlighted by industry through the Phakisa laboratory, he said, and was one of the reasons that prompted the president to refer the legislation back to Parliament.
The targets in the Phakisa programme did take into account external developments, he argued. “Market dynamics are very unpredictable and the commodity prices vary significantly today from when the planning was done.
“There is an ongoing process to adjust the agreed to implementation plans based on external economic environmental changes. However, we should also not be too hasty in making rash decisions since commodity prices do fluctuate and will probably rebound in the future,” Akhalwaya said.
Despite some of the uncertainty that clouded the functioning of many SOEs, the project was not wholly reliant on them for success, he said. “As an example, the aspiration to drill 30 exploration wells over 10 years was motivated by the private sector at the lab,” he said
“[Parastatals] will complement initiatives undertaken by the private sector in this regard.”
Funding for Operation Phakisa had to come from existing and reprioritised budgets.
The health laboratory had assessed 1 243 primary healthcare clinics and about 135 were regarded as having met 70% or more of the criteria needed to qualify as ideal, Akhalwaya said. The aim was to get all 3 500 facilities to ideal status by 2018.
Other progress included specialist port infrastructure under the marine transport and manufacturing project. That covered, among other things, cargo handling at the ports, ship building and oil rig and ship repairs in South Africa’s harbours.
Akhalwaya said Transnet, through the Transnet National Ports Authority (TNPA), had overhauled its funding model and the five-year maintenance plans for port infrastructure, much of which had not been operating at full capacity. That had resulted in the commissioning of R7-billion for infrastructure and the adoption of a public-private partnership funding model.
In terms of new infrastructure, the TNPA had already commissioned contractors to work on basic infrastructure for an oil and gas hub at Saldanha Bay, he added.
The embattled mining sector is the next in line to be given the Operation Phakisa treatment. But the planned mining sector laboratory will be the latest in a host of attempts to revive the industry.
Most recently, Minister of Mineral Resources Ngoako Ramatlhodi convened a task team to address the imminent threat of extensive job cuts. It will report its finding next week. It followed on from other forums and agreements aimed at supporting the industry, including the long-standing mining industry growth development and employment task team run through the Chamber of Mines, and the framework agreement for a sustainable mining industry.
There is also concern that much of what the industry faces, driven by slowing growth in China, cannot be addressed by government intervention.
Nic Borain, a political analyst, said some issues confronting the mining industry, such as infrastructure and power shortages, could be influenced domestically, but these were “overwhelmed and overdetermined by objective conditions outside of our control”.
But Akhalwaya said it was precisely when commodity prices were low that the government, business and labour needed to collaborate on the initiatives that all agreed would be beneficial for the sector.
The focus of Operation Phakisa was on stakeholders working together on detailed implementation plans for initiatives that would have a desirable effect and were feasible, he said. Other forums tended to focus on stakeholder negotiations and the development of high-level strategic frameworks. “Market dynamics are very unpredictable and the commodity prices vary significantly today from when the planning was done”