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Post COVID-19 A New Inclusive Economic Future for South Africa Delivering an Accelerated Economic Recovery Strategy 10 July 2020 1 A New Inclusive Economic Future: The COVID-19 crisis and the partnership created to respond, provides an

  1. Reimagine SA Impact of COVID-19 Key Challenges Shared Vision Key Risk Factors Partnership The circumstances facing South Africa have changed dramatically even though the issues are similar 1 COVID-19 has had a devastating impact on the South African economy adversely affecting both lives and livelihoods The COVID-19 crisis 2 presents an opportunity Q2 GDP has declined by 30% and over 1 million jobs have to rethink the future of been lost , which demands a coordinated and bold response South Africa and work together on an 3 An opportunity exists to reset the course for South Africa but accelerated economic this requires decisive leadership and urgent delivery recovery focusing on inclusive growth and 4 To build a better South Africa requires a shared national prosperity for all citizens vision with a focus on inclusive growth and job creation 5 SA’s economic strategy urgently requires a new social and economic compact among all role players to deliver decisive leadership, inclusive growth and prosperity 8

  2. Reimagine SA Impact of COVID-19 Key Challenges Shared Vision Key Risk Factors Partnership South Africa’s economy was already weak at the start of 2020 South Africa started the year in a technical recession after a 0.8% q-o-q decline in Q319 and a 1.4% q-o-q decline in Q42019, an expected fiscal deficit of 6.8% and public debt ratio of 65.6% 4 3 2 1 0 -1 -0,5 -0,8 -2 -1,4 -3 -4 2016Q4 2017Q1 2017Q2 2017Q3 2017Q4 2018Q1 2018Q2 2018Q3 2018Q4 2019Q1 2019Q2 2019Q3 2019Q4 q-o-q y-o-y 75,0 -3 71,6 69,1 -3,5 70,0 65,6 -4 Budget balance, % of GDP Public debt (% of GDP) -4,0 65,0 61,6 -4,2 -4,2 -4,2 -4,5 -4,3 -4,5 -5 60,0 56,7 -5,5 53,0 55,0 50,5 -6 -5,9 -5,7 -5,9 48,9 50,0 -6,2 -6,5 -6,3 -6,2 -6,5 -6,8 -7 45,0 2018/19 2019/20e 2020/21f 2021/22f 2022/23f 2015/16 2016/17 2017/18 2018/19 2019/20e 2020/21f 2021/22f 2022/23f Budget 2019 MTBPS 2019 Budget 2020 Budget 2019 MTBPS 2019 Budget 2020 Source: SARB, National Treasury 9

  3. Reimagine SA Impact of COVID-19 Key Challenges Shared Vision Key Risk Factors Partnership The economic impact of COVID- 19 exacerbates the challenges with B4SA’s own economic analysis being consistent with the SARB Direct impact of lockdown on Q2 GDP Growth GDP Growth pp of q/q saar rate Declines Q2 GDP q/q saar (%) expected growth Other factors across expected -2,0% nearly all to decline Lockdown effect sectors 30.6% -30,6% Sources: Stats SA and SARB Source: SARB Total Employment Potential GDP Jan 2020 MPC GDP not 1.1 million Million people Over 1.1 expected million job Billions May 2020 MPC to return losses in 2015Q3 2020Q2 to original the last 770.6 770.1 trajectory month Source: SARB Source: SARB 10

  4. Reimagine SA Impact of COVID-19 Key Challenges Shared Vision Key Risk Factors Partnership In just a few months, COVID-19 has unravelled much of the progress made over the last 25 years and exacerbated the weakness of the last 10 years SA emerges Stagnation COVID Direction From 1994 to 2008 South Africa thrived • GDP doubled in US$ terms to $287bn 1994 2008 Dec 2019 2020 unit • Debt:GDP almost halved to 27.8% • SA secured an Investment grade rating in 1999 GDP 140 287 368 330 US$bn x2.1 x1.3 -10% • Foreign Direct Investment grew 30 fold to $12bn • Tax revenues grew by 550% Debt : GDP 49.2% 27.8% 62.2% 82.0% % -21.4% +34.4% +23.4% • However growth was not inclusive as unemployment remained a problem and the Gini coefficient grew S&P Rating BB+ BBB+ BB BB- 3 notches 4 notches 1 notch Over the last 10 years South Africa has stumbled JSE total market 260 828 1,231 924 US$bn x3.2 x1.5 -25% capitalisation • Debt:GDP has more than doubled record levels • SA’s Rating is now lower than in 1994 Banking assets 97 383 421 335 US$bn x3.9 x1.1 -20% • Foreign Direct Investment has declined • Unemployment and inequality continue to rise Foreign Direct US$bn 0.4 12 7.1 n/a x30 x0.6 • South Africa entered a recession prior to COVID-19 Investment Tax revenue COVID-19 unravels much of progress since 1994 114 625 1,356 1,140 Rbn x5.5 x2.2 -16% • GDP is expected to decline by more than 10% • Debt:GDP expected to exceed 100% by 2023 ZAR : USD 3.55 8.26 14.00 17.30 +133% +69% +24% • All key metrics have declined in the last 3 months Unemployment 20% 23% 29% 35% % +3% +6% +6% South Africa needs to embrace a more accelerated growth path Gini coefficient 59 63 63 n/a % +4 - • Requires strategic choices and courageous leadership Sources: National Treasury, BER, StatsSA, JSE, SARB, SARS, HIS Markit, Fitch Solutions, CapIQ, IMF 11 Note: Figures in square brackets, based on expected impact applied to previous level or guidance previously given

  5. Reimagine SA Impact of COVID-19 Key Challenges Shared Vision Key Risk Factors Partnership The pandemic has highlighted the need to re-ignite the economy and offer better opportunities to a larger share of our people 1 SA has the highest Gini coefficient with The education system is simply not The unemployment rate is expected to 2 3 most of our talent trapped in poverty delivering increase to c.35% Change in employment figures from the previous year 8,0 5,9 6,0 4,6 3,6 3,6 3,6 4,0 2,7 2,7 2,7 2,3 2,3 2,3 1,8 1,8 1,8 1,8 2,0 0,0 -2,0 -4,0 Upside scenario -6,0 Baseline scenario -8,0 -7,6 -10,0 Downside scenario -8,7 -9,6 -12,0 2019 2020f 2021f 2022f 2023f 2024f 2025f Key observations Key observations Key observations • South Africa is consistently ranked as one of the • Per capita, South Africa spends more on education • The 2020 unemployment rate will be driven by most unequal countries in the world than most advanced economies yet its primary the number of out-of-job South Africans who • has its roots in the history of colonisation and education system was rated 126th out of 138 consider themselves unemployed vs discouraged apartheid countries (WEF 2016-2017) • Modelling suggested that a 1% increase/decrease • in addition to being extremely high, inequality • After five years of schooling, about 50% of South in real GDP growth leads to a 0.91 % appears to be remarkably persistent African pupils cannot do basic calculations increase/decrease in employment • Despite B-BBEE legislation, until there is domestic • 50% of children do not reach matric • Even in the upside scenario, GDP is only economic growth the challenges of inequality expected to reach pre-COVID 2019 levels after • South Africa has 1 engineer for every 3 200 people stemming from an unjust past will continue 2 years (China – 1:130; Europe – 1:250; Australia 1:450) • Sustainable economic growth is the key to • Current labour laws often deter businesses from • 70 000 positions available in IT; only 17 000 addressing inequality and enhancing prosperity employing workers, particularly given the learners have qualified over the last 10 years uncertain economic outlook 12

  6. Reimagine SA Impact of COVID-19 Key Challenges Shared Vision Key Risk Factors Partnership We must address key issues which undermine our relative competitiveness and impede our growth potential Factors relating to competitiveness and ease of doing business South Africa’s growth potential has been on a 1 2 that undermine our growth potential downward trend … driven primarily by a drop in SA is not sufficiently competitive total factor productivity growth 1 Global Competitiveness Report (WEF) to attract foreign investment (ranks 60 out of 141) Key concerns include: • Security (135 th ) South Africa's Potential Growth rate • Labour market flexibility (111 th ) 5 (SARB) • Hiring foreign labour (123 rd ) • Poor Transparency (62 nd ) 4 • Government adaptability to change (100 th ) 3 • Low business dynamism (60 th ) is 2 inhibited by: • Insolvency regulation 1 • Administrative burdens to start a business 0 • Ease of doing business SA dropped from 35 th in 2008 to -1 Ease of Doing Business (World Bank) 84 th in 2019 (out of 190) -2 2008 2020 Change in Key areas of concern include: Total: 177 Total: 190 ranking Total factor productivity Labour Capital Total • Electricity supply Starting a Business 53 139 (86) Dealing with Construction Permits 45 98 (53) • Difficulty starting a new business Getting Electricity n/a 114 n/a A country’s potential growth is a combination of • Dealing with construction permits Registering Property 76 108 (32) productivity growth and the accumulation of both Getting Credit 26 80 (54) • Registering property Protecting Minority Investors 9 13 (4) productive investment and human capital • Credit availability Paying Taxes 61 54 7 • Cross border trade red tape Trading across Borders 134 145 (11) Enforcing Contracts 85 102 (17) • Enforcing contracts 1 TFP refers to how efficiently and intensely inputs are used in the production process Resolving Insolvency 68 68 - Employing Workers 91 n/a n/a 13 Total score 35 84 (49)

  7. Reimagine SA Impact of COVID-19 Key Challenges Shared Vision Key Risk Factors Partnership Broad- Based Black Economic Empowerment (“B - BBEE”) is key to inclusive growth, but legislation has not delivered on its transformational intent Key recommendations to accelerate B-BBEE and Guiding principles for B-BBEE and Inclusive Growth transformation whilst also achieving accelerated economic • B4SA is fully committed to accelerated and sustainable B-BBEE growth and inclusivity • However, the pace and depth of B-BBEE to date has been insufficient • Enable a transformation culture in business 1 leading to a narrow base of beneficiaries • Work with business to build strategic partnerships to deliver transformation • Full and equitable participation by a broad base of black people in all • Develop a research base that demonstrates the economic value of diversity aspects of the South African economy, with an emphasis on those that • Policy consistency & simplification 2 are most disadvantaged (women, youth, disabled, rural, poor) is critical • Simplify B-BBEE Codes and ensure alignment with sector Charters • Business’ ability to transform rapidly is enhanced by Government • Identify key barriers to transformation and work with business to address creating the enabling conditions for inclusive growth • Selective SMME amendments and/or simplification • Corruption and maladministration will undermine B-BBEE and inclusive 3 growth unless decisively addressed • Review and simplify the application of certain regulations to SMMEs A social and economic compact between all partners • Zero-tolerance policy on corruption and maladministration 4 • Address procurement corruption in SOEs and ensure accountability for public • A collaborative, partnership approach between business, Government, funds allocated to supporting black and small business development organised labour and other social partners is needed • Should be proactive and take into account the diversity and cyclicality • Skills development and employment promotion 5 of business sectors, formats, and relative sizes • Skills - leverage ISFAP and implement a widespread mentorship programme • Employment – leverage the YES initiative and other contributors to jobs • A substance over form approach, focusing on interventions to build social cohesion and ensuring a transformative culture within business • A mechanism to clearly measure Economic Transformation 6 • Recalibrating and accurately measuring economic transformation is • Business to work with social partners to ensure a transparent measurement necessary to determine the current status and progress system and assess progress on an annual basis • Introduce into the socio-economic regulatory impact assessment process, specific considerations for the impact on economic development and SMMEs 14

  8. Reimagine SA Impact of COVID-19 Key Challenges Shared Vision Key Risk Factors Partnership To build a better South Africa requires a shared national vision with a focus on inclusive growth and job creation and a culture of delivery Key Constraints and Challenges to inclusive growth Key Opportunities presented by the crisis A new social and ✓ Business, Government, Labour and Communities Inequality & • Ongoing changes to legislation inhibits investment economic compact • Regulations should enable incremental new investment have worked together to tackle the COVID-19 crisis transformation focused on Must build on recent positive cooperation to inclusive growth now tackle SA’s economic issues State capability • State capacity has not been as effective as it should • Public/private partnership will enhance capability & capacity ✓ There is a strong pipeline of projects across network Infrastructure industries that must be prioritised and funded Corruption • Has inhibited local and foreign direct investment investment Implementation must be accelerated • Must urgently implement a zero tolerance policy & crime ✓ An opportunity to simplify regulations, review • Must urgently address the role of SOEs as sector enablers Inefficient and • Inability to supply sufficient and uninterrupted electricity supply chains and tackle market concentration Rapid acceleration redundant SOEs Focus must be on improving SA’s: is a major impediment to growth and confidence of SMMEs • Global Competitiveness ranking Together • COVID-19 has diminished global availability of funding Funding • Ease of Doing Business ranking we must • Unsustainable government finances lead to a high cost constraints of capital meaning long term projects can’t be funded ✓ Highly motivated and capable sector leaders address Unlocking sector have come together to formulate strategies • Economic Transformation is a national imperative opportunities Policy certainty Business is ready to partner Government • Simplify B-BBEE Codes and ensure alignment with sector Charters to attract investors Innovation & • Enablers to create Entrepreneurs and support innovation ✓ Can leverage SA’s strong ICT infrastructure to Digital economy • SMMEs drive the greatest number of new jobs and taxes entrepreneurship embrace digital work, health and learning acceleration Digital migration and spectrum allocation is key Education • A fundamental rethink of education is essential • Should encourage business to invest more in upskilling outcomes ✓ SA is not alone, the whole world is embracing changes A new global Health & Nations that adapt quickly will find new • Covid-19 has highlighted public healthcare issues paradigm opportunities, but SA must compete for capital • Partner the private sector and embrace digital tools wellness 15

  9. Reimagine SA Impact of COVID-19 Key Challenges Shared Vision Key Risk Factors Partnership Business is the primary contributor to the economy and is well positioned to do more to assist with the key challenges Private sector contribution to SA How Business can assist with Constraints & Challenges Inequality & • Increased commitment to economic and social transformation • Consider a new narrative based on shared prosperity transformation 17% GDP State capability • Business is ready to partner on delivery of key infrastructure projects (2018) • Business can assist with skills and expertise as demonstrated by B4SA & capacity 83% Corruption • Sector initiatives to tackle crime in SMMEs, mining and construction • Coordinate with the financial services sector to address corruption & crime 19% 26% Taxes Inefficient and • Need to close and/or rationalise certain SOEs to enhance performance (2019) • Private sector participation will increase competition and efficiency redundant SOEs 55% Funding • Able to source private capital for economically viable projects Other Private sector VAT • Have the skills and expertise to source international capital constraints • Help Government set policy to improve SA’s Global Competitiveness ranking 21% Policy certainty Jobs • Simplify B-BBEE Codes and ensure alignment with sector Charters (2019) 79% Innovation & • Focus on improving SA’s Ease of Doing Business ranking • Alignment across existing Innovation & Entrepreneurship ecosystems entrepreneurship Education • Partner Government to transform education with a focus on 31% Investment workforce upskilling outcomes (2019) 69% Health & • Partner with the public sector to embrace wellness technology wellness tools and preventative care models Public sector Private sector 16

  10. Reimagine SA Impact of COVID-19 Key Challenges Shared Vision Key Risk Factors Partnership Africa presents opportunities for greater regional cooperation as well as increased localisation via the accelerated roll out of AfCFTA Full impact of COVID-19 in Africa only expected in H2 2020 Illustrative • South Africa will have an important role to play in the region providing healthcare support, supplying PPE and offering skills and expertise • To accelerate the economic recovery in the region, South Africa should establish a focused program to: Halo effects • accelerate exports of high priority manufactured products to targeted countries • ensure an expedited penetration of the African Continental Free Trade Area (“AfCFTA”) Halo effects Opportunities to develop new AfCFTA corridors Lagos Accra 1 Sea Corridors: Cape Town - Walvis Bay – Lagos - Accra • Aims to unlock trade with West Africa’s biggest economies Nairobi 1 2 • Reduce cargo time-at-sea by 30+ days compared to European Imports ~10 days 2 Dar es Salaam Road/Rail Corridors: Johannesburg – Lusaka – Dar es Salaam – Nairobi ~10 days • Aims to unlock trade with East Africa’s biggest economies • Road freight 30+ days shorter than time-at-sea from Asian Imports Lusaka Indian Ocean Atlantic Ocean The Maputo Corridor Initiative Walvis Bay Maputo JHB • The Maputo corridor connects South Africa's industrial and commercial heartland with its EN4 highway nearest deep water port in Maputo via the N4 highway Cape Town • There are opportunities that should be accelerated including: Maputo corridor - existing linkages • increasing the export of agricultural products and mining output from Limpopo and Mpumalanga Potential new corridors • building a LNG import terminal and leveraging the ROMPCO pipeline 17

  11. Reimagine SA Impact of COVID-19 Key Challenges Shared Vision Key Risk Factors Partnership B4SA has completed an extensive risk analysis which highlights the need to work together in several key areas Severity Key Considerations Economic impact / damage, lockdown economically unaffordable Catastrophic • The economic crisis is likely to eclipse the Supply chain security Failure in critical Infrastructure Energy, for essential services water, sanitation, gas ,IT health crisis in the coming year Loss of livelihoods, and goods social unrest, riots • A number of key risks exist, with the greatest Insufficient healthcare, being the potential for social unrest due to workforce, infrastructure & equipment Leadership / command Inability to enforce law the loss of livelihoods incapacitated by COVID-19 and order • The risks identified by B4SA can be mitigated Continued government Sustainability & practicality of service delivery by working together to develop a lockdown rules in SA context coordinated economic response Another significant event occurring Defining ‘new normal / vision / • B4SA has identified specific opportunities by structural shifts required Fair, transparent and Critical Breakdown in social impact sector to help ensure South Africa can come equitable distribution of between government, social funding together to focus on an accelerated business, labour & society economic recovery Lack of structure interface: Key: government, business, • B4SA has demonstrated the potential of labour & civilians Government focus areas mobilising the private sector to collaborate with the State, including supporting with Government & Regional / cross provincial business shared risks lockdown impact exert capacity and funding constraints Serious additional strain Likelihood Possible Likely Almost certain 18

  12. Reimagine SA Impact of COVID-19 Key Challenges Shared Vision Key Risk Factors Partnership The role of SOEs: The success of SA is interlinked to the success of SOEs which are over-leveraged and have consistently under-delivered • In the 2020 Budget it was announced that total debt SOE assets vs Net Debt per last financials (R’bn) 1 of the seven largest SOE borrowers was R760bn • in addition, Government has R980bn in contingent % of total 67 19 7 <1 1 1 <1 3 0 1 liabilities of which R385bn are SOE guarantees SOE Debt • South African SOEs generate an average return on 687 2 Govt contingent liabilities: equity (ROE) of below 0.2% 2 , which is: Total assets Interest-bearing debt • • significantly below the average ROE of c.5% 3 SOE Guarantees R 385bn • Road Accident Fund R 270bn generated by emerging market peers • • well below SA Govt cost of funding of c.7.6% IPPs R 161bn 454 • if returns don’t improve they will therefore • Post retirement medical R 70bn 407 • perpetually require bailouts Claims against Govt R 36bn 334 • UIF R 22bn • Debt levels at Eskom, Transnet and SANRAL are 3 • Other R 36bn unsustainable and inhibit new investment Total contingent liabilities R980bn • as a result critical infrastructure projects have not 128 been implemented 72 • We note the creation of an SOE Council and think 47 4 32 30 16 19 16 11 6 4 6 1 2 0 4 they and the DPE need to urgently implement: 1 • a review of the mandate and purpose of each SOE Eskom Transnet SANRAL PRASA ACSA Rand Water PetroSA SAA SAPO Denel • rationalisation and closure where relevant Net Debt to • management and governance improvement 3.0 0.9 0.2 0.1 0.3 0.2 3.8 n/a 4 0 n.m NAV • cost savings and eliminate waste and corruption • balance sheet restructuring - working with Net Debt to 14.4 3.8 6.1 0.3 2.0 1.1 6.2 n/a 4 0 1.8 EBITDA National Treasury to optimise aggregate cost • revenue enhancement via selective increases and ✓ ✓ ✓ ✓ ✓ r r r r r Sustainability targeted expansions of debt • public private partnerships to fund expansion 1. SAA value of assets based on business rescue draft as at Nov 2019, and Net Debt: Net Debt: • allowing greater private sector competition debt value based on latest public announcements EBITDA EBITDA 2. 2018 Budget Speech > 3.5x < 3.5x 3. JPMorgan Global Emerging Market Bond Index (USD) used as a proxy • SOEs and the SOE Council need appropriate private 5 4. Latest 2017 reported EBITDA of – R2.8bn and NAV of – R17.8bn 19 sector technical support to fulfil their mandate

  13. Reimagine SA Impact of COVID-19 Key Challenges Shared Vision Key Risk Factors Partnership Key iterative steps: All stakeholders need to partner across key areas and focus on ensuring delivery and accountability Given the limits on State and SOE capacity and funding, a social and ◼ Key areas of immediate focus ◼ Need to stimulate innovation economic compact with business, ◼ Need to assess Economic Value labour and society is key to SA’s ◼ Rethink where SA has a and Economic Risk ◼ Greater labour flexibility is key to competitive advantage post success new investment 1 COVID-19 ◼ Need inclusive growth with Identify critical ◼ Address social requirements State: guide strategic initiatives balanced regulation including housing, water and sectors and 7 and provide an enabling 2 ◼ Potential opportunity for a public transportation enablers for environment with policy certainty Align with paradigm shift with all players Develop and recovery and consistency labour on implement conducive strategies to Business: focus on sourcing capital regulation scale and investing in projects and initiatives to create inclusive ◼ Alignment within 6 ◼ Need urgent and effective Government is critical economic growth and jobs interventions by sector with Align with 3 ◼ Speed of support and alignment from SOEs government on implementation is key Labour: focus on ideas to create Revisit policy ◼ Private sector can assist with new role of new jobs and ensure greater and regulatory access to funding state organs labour flexibility and fair working inhibitors ◼ Must reprioritise state spending and SOEs conditions rather than just 5 protecting existing jobs 4 Extend fiscal support and Refine and All social partners must focus on incentives to extend trade / ◼ Target sectors with greatest export ensuring shared prosperity to accelerate potential exports ◼ Need a catalyst to drive new investment address poverty, inequality and growth ◼ Weak ZAR likely to provide new unemployment ◼ Focus on inclusive growth and job creation opportunities 20

  14. Reimagine SA Impact of COVID-19 Key Challenges Shared Vision Key Risk Factors Partnership SA’s future economic strategy urgently requires a new social and economic compact, among all role players, to deliver inclusive growth and transformation Post-COVID-19 Economic Reconstruction, Growth and Inclusivity Plan Labour Refine and enhance Community Interventions Monitoring and Appreciation Identification Agreement Implementation evaluation of of the issues of solutions on priorities of initiatives outcomes Creation of a Joint Reconstruction Task Team to coordinate and agree Based on the A wide range of ideas documents seen from and proposals have priority actions across sectors and implement far-reaching reforms Working various stakeholders been tabled from together there is already broad across society with Sector sub-committees to focus on implementation of key initiatives alignment extensive overlap and evaluation of outcomes versus objectives 21

  15. Reimagine SA Key Initiatives Funding Working together Policy & Sector An opportunity to reimagine the South African 1 economy and reset the trajectory Key Topics for Discussion Actionable initiatives to drive investment, job 2 creation and inclusive growth Section 2 3 Funding, cost of capital and fiscal considerations Actionable initiatives to drive investment, job creation and inclusive Working together to ensure an accelerated growth 4 economic recovery and a shared national vision Sector and policy analysis underpinning 5 actionable initiatives 22

  16. Key Initiatives Work done Interdependencies Top 12 Initiatives Sector Overview Key Takeaways Overview of the work done by B4SA 1 B4SA assembled a team of industry experts to analyse “We must do challenges and consider potential opportunities whatever it takes to 2 limit the damage to Focus has been on sectors and projects with strong multipliers that can scale quickly to create jobs and GDP growth our society and people and get our 3 We have identified key challenges that inhibit investment and economy back onto a priority actions to accelerate inclusive growth and job creation path of recovery” 4 Regulatory obstacles and policy interventions have been President Ramaphosa identified that require Government action to unlock 5 Funding key projects is critical given limited capital availability and reduced foreign investment support 23

  17. Key Initiatives Work done Interdependencies Top 12 Initiatives Sector Overview Key Takeaways We have considered every industry sector and focused on sectors with strong multipliers that can scale quickly to create jobs and growth High impact industry focus areas Complete sector ranking pre-COVID Attractiveness Sectors score Ranking Combining the effects of 1 SMMEs (multi-sector) & Township / Rural 1 Tourism 0.57 1 these factors is what 2 Citrus Fruit 0.50 2 3 Building & Construction 0.46 3 4 Trade 0.39 4 constitutes a high impact SMMEs and 5 Forestry 0.39 5 Resources 6 Meat, Fish, Fruit, Vegetables, Oils and Fat Products 0.39 6 2 Energy & Water Retail are industry sector 7 Dairy products 0.37 7 multisector 8 Grain Mill, Bakery and Animal Feed Products 0.37 8 functions that 9 Vegetable 0.37 9 10 Real Estate 0.36 10 enable GDP contribution 11 Fishing 0.36 11 Current impact 3 Mining delivery of 12 Accommodation 0.36 12 13 Communication 0.35 13 products & 14 Wood and Wood Products 0.34 14 GDP output multiplier services to all 15 Water 0.34 15 16 Livestock 0.34 16 sectors and 4 Construction 17 Transport 0.33 17 consumers 18 Non-Metallic Mineral Products 0.33 18 Employment multiplier Industrial 19 Paper and Paper Products 0.33 19 20 Deciduous Fruit 0.33 20 21 Game 0.32 21 5 Manufacturing Trade size 22 Poultry 0.32 22 23 Natural gas 0.32 23 24 Subtropical Fruit 0.32 24 Market growth rate 25 Other Agriculture 0.32 25 Growth potential 26 Other food products 0.32 26 Wholesale & Retail 6 Transport 27 Dairy 0.32 27 28 Furniture 0.32 28 Export growth rate (multi-sector) 29 Other Fabricated Metal Products 0.32 29 30 Machinery & Equipment 0.31 30 31 Electricity 0.31 31 GDP input multiplier 7 Agriculture 32 Textiles, Clothing, Leather Products and Footwear 0.31 32 Services & Support 33 Electrical Machinery & Apparatus 0.31 33 34 Finance & Insurance 0.30 34 Employment multiplier 35 Structural Metal Products 0.30 35 36 Publishing and Printing 0.30 36 37 Business Services 0.29 37 8 Financial Services 38 Other Manufacturing & Recycling 0.29 38 Structural advantage 39 Beverages and tobacco products 0.29 39 40 Chemicals & Chemical Products (incl Plastic Products) 0.29 40 41 Pharmaceuticals 0.29 41 42 Cereal and Crop 0.29 42 9 Telecommunications Section 5 provides the 49 43 Community, Social and Personal Services 0.28 43 44 Basic Metal Products 0.28 44 subsectors included in 45 Rubber Products 0.28 45 46 Coal and lignite 0.26 46 47 Other Mining 0.25 47 high impact areas 10 Tourism & Leisure 48 Manufacturing of Transport Equipment 0.25 48 49 Communication, Medical and other Electronic Equipment 0.23 49 50 Gold 0.22 50 Sectors and subsectors are analysed in 51 Ferrochrome 0.20 51 52 Platinum 0.12 52 more detail in section 5 24 Red font: Denotes subsectors that fall outside the focus areas (aside from SMMEs)

  18. Key Initiatives Work done Interdependencies Top 12 Initiatives Sector Overview Key Takeaways There is a high degree of convergence between the issues identified by Government and the priority actions proposed by the B4SA sector analysis Methodology & Approach Identified priorities across Activators of Critical success Critical enablers all economic sectors factors employment • Policy consistency • Regulatory reform There is a high degree of alignment between: • The National Development Plan • Crime & corruption • Supplementary Budget Review 2020 • National Treasury economic reform paper • Infrastructure investment High level of • Presidential Economic Advisory Council • Industrial Policy Action Plan • SOE optimisation convergence • Integrated Resource Plan • Energy industrialisation • SARB industry analysis • Objectives of the Investment Envoys strategy • Various South African scenario plans (including Indlulamithi) • Economic transformation B4SA Specific interventions and actions per industry and B-BBEE • Skills shortages Consider key Key sector Identify key Roadmap • Modernisation investment priority objectives challenges & Plans actions 25

  19. Key Initiatives Work done Interdependencies Top 12 Initiatives Sector Overview Key Takeaways Key sector interdependencies overlap with the Jobs Summit and timing for implementation fits with the revised Budget and the Jobs Summit outcomes Activators of employment 2. 3. 4. 5. 1. Digital Economy Enhanced Localisation Unlocking Agriculture Revitalising the Built Immediate Job Environment Retention ( Economy-wide) SMMEs / Retail Telecomms Manufacturing Construction Agriculture, All Sectors Wholesale & Retail SMMEs / Retail All Sectors Tourism & Leisure Critical enablers 1. 2. 3. 4. 5. Energy Security and ICT Connectivity Transport Logistics Access to Finance Skills Development Green Energy (incl. Spectrum and Transition Broadband) Energy & Mining Energy & Mining Transport & Mining Transport & Mining Telecomms Telecomms Financial Services Financial Services All Sectors All Sectors SMMEs SMMEs SMMEs SMMEs / Retail SMMEs 26

  20. Key Initiatives Interdependencies Top 12 Initiatives Sector Overview Key Takeaways Work done Top 12 projects and initiatives across all network industries to drive investment, job preservation and creation, economic capacity and inclusive growth Job enablers & GDP Jobs (1) Projects & Initiatives Specific Projects / Opportunities Sector Drivers impact (1) activators • Address Eskom operating and capital structure / update IRP 88,000 Energy Security Secure and affordable up to R177bn Energy, Construction, Mining, 1 • created Embrace Gas economy: Revise IRP gas to power targets, and Green capex electricity supply Manufacturing, Water 248,000 enable extension of Pande-Temane, invest in LNG imports Energy Transition protected Fast-track Green economy • up to $83bn of Accelerate renewables deployment via REIPP5 and REIPP6 2 500,000 Energy, Construction, SMMEs • green funding Launch Green stimulus and national green funding strategy Indirect • Address debottlenecking issues to grow rail volumes Transport Transport Transport & Implement Transnet’s Transport, Mining, • Expand Saldanha railway capacity R66bn p.a. 19,000 p.a. 3 Logistics road to rail strategy Construction, Manufacturing • Private concession Lephalale-Maputo line - Mining • Improve competitiveness relative to global peers Transport, Mining, 4 Ports expansion 70,000 by 2024 • Expand capacity for agriculture & mining Construction • Construction Construction Complete BRT implementation Transport, Construction, 5 Road infrastructure • up to R100bn p.a. up to 100,000 p.a. Clarify role of minibus taxis within public transport SMMEs • Digital migration, permanent allocation, network sharing Telecommunications, Tourism, ICT Connectivity 6 Full Spectrum utilisation • “Use it or lease it”, Rapid Deployment Plan, WOAN licences SMMEs Telecomms Telecomms R15 - 20bn p.a. >55-65,000 p.a. E-learning & digital health • Ensure more affordable connectivity Telecommunications, 7 • platforms Increase access and financial inclusion Education, Healthcare, SMMEs Tourism Tourism • R17-34bn p.a 70-120,000 p.a More powerful and less costly systems Telecommunications, Financial 8 E-commerce acceleration • Migration of Govt & SMMEs to Digital Services, SMMEs, Tourism Agriculture, Construction, Unlocking 9 Water infrastructure • Complete delayed projects /coordinate with sectors Mining Agriculture Agriculture Agriculture Maximise commercial • R10 - 15bn p.a . 60-80,000 p.a. Cannabis industrialisation: has wide industrial product use 10 Agriculture, SMMEs agricultural output • Improve access to finance and enabling infrastructure Enhanced Import replacement focus • Target high value sectors and new wild-card products Manufacturing, Transport, Manufacturing Manufacturing 11 Localisation • R21-35bn p.a. 28-70,000 p.a. Develop regional trading corridors SMMEs Increased financial • Enable acceleration of digital financial services ecosystem, Access to Finance Financial Services, ~ R50-90bn p.a. 220-470,000 inclusion and lower cost establish new challenger banks 12 Telecommunications, SMMEs from steady state from steady state • of capital Funds targeting SMMEs, agriculture and Green economy (1) Based on statistics sourced from the key Access to more affordable funding - impacts all sectors and key initiatives 27 “enabled” sector (refer to the “Job enablers and activators” column)

  21. Key Initiatives Work done Interdependencies Top 12 Initiatives Sector Overview Key Takeaways There is a high level of overlap between Government and the private sector’s infrastructure priorities, however it requires focus and a viable funding plan Strategic Integrated Projects (SIPs) MTEF infrastructure spend (2021 to 2022): R815bn ✓ PPPs 900 National 1 Unlocking the Northern Mineral Belt with Waterberg as the catalyst Administration Departments 18 Public ✓ 800 Health 2 Durban - Free State Gauteng Logistics and Industrial Corridor Eskom and Transnet Local entities 50 Other services account for c.R300bn or Government Other 59 ✓ 700 Education social 3 South Eastern node & corridor development c.90% of SOE capital spend Human Settlements 600 197 Provincial 4 Unlocking economic opportunities in North West Province Government Water & sanitation ✓ 500 5 Saldanha-Northern Cape Development Corridor 177 400 R150bn Energy SOEs 6 Integrated Municipal Infrastructure Project 300 ✓ 7 Integrated Urban Space and Public Transport Programme 200 ✓ Transport R314bn 314 8 Green Energy in support of the South African economy 100 ✓ 9 Electricity Generation to support socio-economic development - ✓ SOEs Provincial Local Government Public entities National departments PPPs 10 Electricity Transmission and Distribution for all Government Transport and energy account ✓ ~85% of total MTEF spend for >50% of the total MTEF 11 Agri-Logistics and Rural Infrastructure • The Presidential Infrastructure Coordinating Committee (“PICC”) and the Investment 1 and Infrastructure Office (“IIO”) have developed 18 priority SIPs 12 Revitalisation of public hospitals and other health facilities • These focus on, inter alia: 2 13 National school build programme • Electricity transmission, distribution & generation The Sustainable Infrastructure ✓ • Integrated public transport 14 Higher Education Infrastructure Development Symposium of South • Water and sanitation infrastructure Africa (“SIDSSA”) on 23 June ✓ 15 Expanding access to communication technology • Urban infrastructure and living standards Investing in infrastructure for • Agriculture and Agri-logistics projects shared prosperity: now, next and 16 SKA & MeerKat • Educational infrastructure beyond ✓ • Regional integration for African cooperation 17 Regional Integration for African cooperation and development • There is substantial overlap between SIPs and the work of SIDSSA on the one hand, and 3 ✓ 18 Water and Sanitation Infrastructure Master Plan the priorities identified by B4SA on the other, with considerable scope to cooperate on implementation and funding 28

  22. Key Initiatives Work done Interdependencies Top 12 Initiatives Sector Overview Sector Focus Area The Top 12 policy interventions to help create greater certainty and enable more inclusive growth Policy Inclusive Policy focus area Key issues Key benefits (aside from jobs, GDP and tax benefits) certainty growth Tackle crime & corruption • Corrupt procurement practices particularly within SOEs - • ✓ 1 Improved economic competitiveness, builds confidence • Need to support SMMEs impacted by crime • Generate more job opportunities per unit of invested capital Improve ease of doing • Support business start-ups and entrepreneurship - • 2 Support increased local procurement ✓ • business Reduce red tape and constraining regulations • Improved efficiency increases the capacity of the economy Mobilise large scale • • ✓ ✓ Reprioritisation of Government's infrastructure portfolio Long-term, predictable pipeline of bankable projects 3 • • infrastructure projects Appropriate PPP frameworks, expand export capacity Absorbs low-skill base employees • Reduce the burden on the State resources SOE reform and • ✓ ✓ Clarity regarding State subsidies, Eskom unbundling, PPP • 4 Improve competitiveness fundamentals, incl. competitive rationalisation framework and retention of systemically important SOEs energy supply • • Property right certainty s25 and expropriation act resolution Greater certainty attracts investment and lowers the cost of ✓ ✓ Clarity on land reform 5 • Uncertainty has a negative multiplier effect on investment doing business Education and skills • • ✓ Limits the development and application of technologies Improved labour force capabilities - 6 • • development Barrier to entrepreneurial activity and technical expertise Bolster much needed entrepreneurial and technical skills • • Incentivise strategic value chains by realigning trade Domestic manufacturing / beneficiation to support local ✓ ✓ Review trade policies 7 policies, prioritising manufacturing procurement • • Expanded public works programme, selective amendments Improved employer / employee relations based on fairness ✓ ✓ Labour law reform 8 • for SMMEs, restrictions on bargaining council extensions A more efficient labour system focused on decent work • Comprehensive review and rewrite of the MPRDA including Simplify mining • Grow portfolio of projects with increased exploration ✓ ✓ 9 consolidation of Charter into the MPRDA • investment regulation Implement projects in the pipeline and from exploration • Increasingly expensive supply of electricity • Electricity: Unblock/optimise key regulatory processes to • Affordable and reliable energy Align national energy ✓ ✓ transition to lower carbon generation mix 10 • Transition to a lower carbon energy mix • strategy across all sectors Gas : Secure supply for the short, medium & long term • Potential to catalyse large scale investment • Liquid Fuels : Align on strategic industry plan of action Telecomms: maximise • Digital migration, complete spectrum auction and finalise 11 • ✓ ✓ Maximise population access to connectivity connectivity Rapid Deployment Policy • Infrastructure funding and financial inclusion Financial inclusion and • Infrastructure investment will drive growth and jobs - 12 • Barriers to competition to be reduced to enable new ✓ • fiscal support Deeper and more meaningful financial inclusion entrants, whilst maintaining soundness of financial system The creation of a Task Force by sector will enable the acceleration of key interventions 29

  23. Work done Interdependencies Top 12 Initiatives Sector Overview Key Initiatives Key Takeaways Industry Summary: An opportunity to generate up to 1.5 million jobs, increase GDP by over R1 trillion and increase tax revenues by R100bn per annum (1/2) Benefits if interventions Challenges Interventions successful Impact of Ease of Covid-19 Key structural constraints facing the Extent of Based on the constraints prioritised implemen- Jobs GDP Tax Rev. sector challenges interventions required tation • Costly and difficult regulatory Loss of 330-440k • Industry wide fin. services approach SMMEs, framework jobs in SMMEs Over 1 Catalyst for • Reduce red tape and accelerate growth 1 • Skills Up to 700k job Township and million driving GDP N/A • Pay SMMEs on time & support local buying losses informal • Access to credit protected growth Rural Economy • Help SMMEs pivot sector • Crime and corruption • Water: completion of delayed projects ~164-248k 10-40% drop • Electricity: Optimise key regulatory processes to in demand protected • Policy uncertainty & effectiveness transition to lower carbon generation mix until 2021 ~88k created ~R177bn (in • Supply challenges & price increases • Gas: Secure supply for the short, medium & long 2 Energy & Water Up to 500k capex N/A • High carbon energy mix & need for Loss of 164-248k term from Green deployed) just transition jobs across Elect., • Liquid Fuels : Align on strategic industry plan of stimulus Gas and Liquid action initiatives 20-30% drop in • Comprehensive regulatory reform package • Regulatory uncertainty 2020 output • Permit self/3rd part generation & fix Eskom ~70k 2 ~R30bn 3 ~R10bn 4 3 Mining 30,000 1 • Unreliable energy supply supply jobs at risk • Re-prioritisation of Govt infrastructure portfolio • Sector in decline before Covid19 50-60% jobs • Bring in private sector funding 100k R100bn R15-20bn • No clear pipeline of work to re- vulnerable, 4 Construction • Change contracting and procurement to be more p.a. p.a. p.a. ~20% at risk invigorate the sector collaborative 20 – 40% drop • Improvement in fundamental competitiveness; • Energy, Infrastructure in output • Quick capture of untapped export markets; 28K - 70k R21- 35bn R6-10bn • Business Environment 5 Manufacturing • Improved co-ordination and prioritisation of p.a. p.a. p.a. 140k – 240k • Skills and collaboration strategic value chains jobs at risk - - Less Significant Challenging Manageable Notes: 1. Direct mining employment. 2. Includes direct and indirect employment uplift by 2024. 3. High-level estimate based on 30 significant industry revenue uplift by 2024. Excludes economic multipliers. 4. High-level 2024 estimate excluding multipliers

  24. Key Initiatives Work done Interdependencies Top 12 Initiatives Sector Overview Key Takeaways Industry Summary: An opportunity to generate up to 1.5 million jobs, increase GDP by over R1 trillion and increase tax revenues by R100bn per annum (2/2) Benefits if interventions Challenges Interventions successful Impact of Ease of Covid-19 Key structural constraints facing the Extent of Based on the constraints prioritised implement Jobs GDP Tax Rev. sector challenges interventions required -ation • Infrastructure • Reduce costs, improve infrastructure Up to Up to Up to 42k – 72k formal transport sector jobs are at risk in • Private sector participation • Private sector participation ~19k 1 ~R66bn 2 ~R28 bn 2 Transport 6 2020 • Tariff & policies • Rail concession & policy p.a. p.a. p.a. Relatively protected from • Invest in infrastructure, boost global job loss. However, • Availability of financing trade highlighted the • Lack of infrastructure 60-80k R10-15bn R3-4bn • Improve access to financing infrastructural constraints 7 Agriculture • Access to new markets p.a. p.a. p.a. across the sector • Enhance reform programmes • Slow transformation (including logistics and • Ensure commercial growth water) • Extending relief beyond short term ~220-470k ~ R50-90bn Return to ~ 10-20% decline in GWP • Lack of bankable infrastructure pipeline • Increase efficiency & reduce cost p.a. from p.a. from pre-crisis in insurance • Inadequate financial inclusion Financial • Acceleration of digital financial services steady state 3 steady state 3 8 15-35% drop in revenue level of • Increasing regulatory burden Services (after risk cost) in banking. + preserve + R50bn ~R50bn over ecosystem and inclusion through 4IR • Limited new entrants into the sector But both remain resilient ~800k short-term next 5-years+ • Enable long term growth • Finalisation of RDP Weak demand given • Lack of RDP and spectrum allocation • Allocate spectrum, complete digital consumer and business Telecomm- 55-65k R15-20bn 4-6bn • Limitations in capabilities at income pressure. Demand 9 migration p.a. p.a. p.a. unications is expected to be subdued • Enhance capabilities and governance at DCDT/ICASA in the medium term ICASA/DCDT • Help stakeholders survive the crisis • Lack of demand Tourism & R850m – 4-8bn USD GDP • Prepare to restart industry, 170-240k 4 R37-54bn 4 10 280-490k jobs • Lack of resilience in industry 2.5bn 4 Leisure • Increased focused on domestic tourism Notes: 1. Jobs refers to formal sector jobs. Figures may be significantly higher if informal jobs are accounted for. 2. GDP and - - Less Significant Challenging Manageable Tax Revenue effects from interventions are cumulative over the period 2021 – 2030; 3. Steady state expected to be reached 31 in 2025, thereafter the figures are annualised. 4. Potential 2020 uplift from sector reopening significant

  25. Key Initiatives Work done Interdependencies Top 12 Initiatives Sector Overview Key Takeaways Key takeaways from the detailed sector analysis: Infrastructure investment and policy initiatives are critical, but require partnership to ensure implementation • Infrastructure investment is a key enabler for all network industries if they are to deliver accelerated growth 1 • Energy: reliable supply is a key challenge and substantial opportunities exist from deregulating generating capability • Water: implement delayed projects, ensure prioritisation of new projects and embrace private sector investment Mobilise • Road & Rail: debottlenecking and expansion can unlock SMME opportunities and new revenues in mining and manufacturing Infrastructure • Public transport: strategies to improve public transport and reduce congestion of minibus taxis are critical post COVID-19 investment • Ports: expansion in capacity for agriculture and mining is key, combined with steps to improve global competitiveness • Telecomms: An urgent process to accelerate analog to digital migration and ensure full spectrum utilisation is critical • A clear pipeline of bankable PPP opportunities is critical to creating jobs and accelerating growth • Business and consumer confidence is at its lowest levels since 1994, to ensure inclusive growth we must: 2 • Social infrastructure projects: public sector to engage private sector on health, water and sanitation and housing projects • Implement key initiatives: Green energy transition, ICT connectivity, Digital education, MPRDA, eVisas Policy initiatives • Simplify key policies: ease of doing business, land reform/property rights, labour law reform, regional trade expansion to enable • Tackle crime & corruption: must urgently implement a zero tolerance policy with meaningful consequences growth • Fiscal discipline: SA must demonstrate it can reduce the public sector wage bill, address corruption and ensure more efficient use of resources through improving state capacity • Policy certainty is critical to attract new investment and SA has to compete with other emerging markets • To ensure inclusive growth and transformation in a constrained funding environment, will require: 3 • Public Private Partnership: Government does not have the funding or the skills to implement all the required changes Partnership with • Focus on implementation: Serious and meaningful change is urgently required with visible evidence of key actions a focus on job • Job creation & skills development: build on existing initiatives such as YES and encourage partnerships with SMMEs creation and • SOE optimisation: increased partnership to address funding and skills shortages and irregular and wasteful expenditure funding • Tax incentives : targeted at job creation and investment growth, with an emphasis on long term tax generation • Working together to tackle key challenges is the only way that SA can overcome the current challenges 32

  26. Key Initiatives Work done Interdependencies Top 12 Initiatives Sector Overview Key Takeaways Key takeaways: We need to integrate and synthesise existing initiatives to ensure implementation of national projects and greater capacitation of the public sector Selective Government / Business Initiatives Key Takeaways • Presidential Infrastructure Coordinating • B4SA fully supports the IIO which provides a single entry point to Committee (“PICC”) coordinate private and public sector involvement in infrastructure Government • Investment and Infrastructure Office (“IIO”) • A clear pipeline of bankable PPP opportunities is critical to creating • Public Private Growth Initiative (“PPGI”) jobs and accelerating growth across network industries Infrastructure • Government does not have the funding capacity or the skills and • Sustainable Infrastructure Development Initiatives capability to implement all the envisaged projects Symposium of South Africa (“SIDSSA”) • Prioritising projects and ensuring partnership between the public • Strategic Integrated Projects (“SIPS”) and private sector is key to successful implementation • National Business Initiative (“NBI”) • TAMDEV has been funded by ASISA and BLSA working with the NBI Capacitating and can play a key role in state capacitation and skills development • Technical Assistance, Mentorship and the State • The project has made good early progress but needs to be scaled to Development (“TAMDEV”) increase the benefits • Ikusasa Student Financial Aid Plan (“ISFAP”) • ISFAP has been highly successful funding disadvantage students in Education & high demand skills and should be expanded • Youth Employment Service (“YES”) • YES has made good progress facilitating SA’s youth to gain work Skills • Sector Education and Training Authorities (“SETAs”) experience - need to find opportunities for greater full time jobs • Technical and Vocational Education and Training Development • Need to boost and redesign TVETs/SETAs to address poor (“TVET”) colleges governance, low relevance of industry skills and lack of innovation Business is keen to assist with an accelerated roll out and implementation programme We need to build on the most successful initiatives and consolidate them 33

  27. Reimagine SA Key Initiatives Funding Working together Deep dive An opportunity to reimagine the South African 1 economy and reset the trajectory Key Topics for Discussion Immediate actionable initiatives to drive 2 investment, job creation and inclusive growth Section 3 3 Funding, cost of capital and fiscal considerations Funding, cost of capital and fiscal considerations Working together to ensure an accelerated 4 economic recovery and a shared national vision Sector and policy analysis underpinning 5 actionable initiatives 34

  28. Funding Overview Macro Economy Policy Sources of Funding Enablers & Conclusions Global liquidity and funding will be increasingly constrained, placing pressure on SA’s fiscus 1 COVID-19 will increase SA entered the crisis in a recessionary environment . COVID- 19 will amplify the lower GDP outlook and, as a result, a global demand for funding materially higher budget deficit and debt:GDP for which emerging 2 markets will compete Aggregate funding requirement is estimated to be R3.4tn over three years, of which R2.4tn is public sector (including SOEs) Unsustainable government finances set a high cost of Traditional SA based funding sources will be insufficient, as a 3 result a substantive portion will need to be sourced capital which could render internationally, constrained by SA’s sub -investment grade projects unviable SA will be competing for capital against all other emerging 4 markets and public and private sector coordination will be a Public and private sector critical enabler cooperation is critical to making South Africa 5 Fiscal discipline, regulatory certainty, market stability and globally competitive well structured viable infrastructure projects are imperatives to attract capital and funding at a reasonable cost 35

  29. Funding Overview Macro Economy Policy Sources of Funding Enablers & Conclusions Macro economy: Consolidated funding requirement in the public and private sectors Categories Overview Funding requirement • Significant funding requirement in • Total public sector debt amounts to c.R4tn , comprising of R3.2tr national government and Status quo R0.8tr local government / SOE debt the public sector as budget deficits • In addition, contingent liabilities amounted to c.R0.6tn , excluding contingencies related to SOE ante widen and SOE revenues shrink funding • Government facilitated lending to • The Feb’20 budget anticipated a 3 year public sector funding requirement of R1.3tn 1 , SMMEs by virtue of the R200bn Anticipated 3y Public comprising of R1.1tn by national government and R0.2tn by local government / SOEs guarantee, with a high probability of requirement • The budget incorporated an anticipated capitalisation of certain SOEs, to enable the redemption Sector an incremental requirement to pre Covid-19 of existing debt and an additional R0.2tn to fund operational requirements sustain SMMEs • The revised budget is likely to show an increased budget deficit due to lower tax revenues and • No provision has been made for a Revised increased expenditure, some of which relates to R500bn rescue package rescue of large business , many of • We anticipate a total 3 year public sector funding requirement of c.R2.4tn 1 . The requirement outlook can reduce if private business can contribute to infrastructure development which have incremental access to liquidity in the near term. In the • Total loans by SA financial institutions to the non-financial private sector (incl. households) longer term, working capital funding Status quo amounts to R3.9tn , including R3.3tn 2 bank funding and R0.6tn by the savings industry requirements will depend on the ante • Corporates held significant liquidity buffers of c.R1tn shape of the economic recovery • The private sector can contribute • Credit growth in FY’19 was muted at 4.2% in a subdued economy Anticipated 3y Private meaningfully to inclusive economic • There was an expectation of continued muted credit growth as the economy entered a requirement Sector growth and transformation through recession pre Covid-19 funding of SMMEs and infrastructure • Prior financial crises indicate that demand for credit increases due to liquidity constraints development , thus reducing the Revised • Early indications of an increased demand for credit for working capital purposes, constrained public sector funding requirement outlook by lenders’ risk appetite. Infrastructure investment would increase demand. Lending to SMMEs supported by R200bn guarantee . Total 3 year requirement is estimated at R1tn 1 Excluding refinance of national government debt that is due for redemption 36 2 Comprising 72% of total loans and advances of (R4.6tn)

  30. Funding Overview Macro Economy Policy Sources of Funding Enablers & Conclusions Macro economy: Given the medium term economic outlook, fiscal discipline and structural reforms are national imperatives Estimated Budget Deficit and Debt:GDP Scenarios GDP growth outlook Scenario 2020/21 2021/22 2022/23 2023/24 2024/25 8,0% 6,0% 5,0% 5,0% 6,0% Annual 454 432 423 444 473 Budget deficit pre 4,0% 4,0% 4,0% 4,0% 2,5% 2,5% Covid (R’bn) 1 Cumulative 454 886 1,309 1,753 2,226 2,0% Reform 289 412 437 314 41 Additional Budget 0,0% shortfall (R’bn) Baseline 289 662 1,072 1,528 2,027 2020/21 2021/22 2022/23 2023/24 2024/25 -2,0% Reform 743 1,298 1,747 2,067 2,266 Cumulative funding -4,0% requirement (R’bn) 2 -6,0% Expected to Baseline 743 1,548 2,382 3,281 4,253 Sustainable GDP -8,0% decline by Budget Deficit as % Reform 13.3% 10.8% 8.3% 5.9% 3.5% growth of at -10,0% of GDP 8.3 – 10.6% Baseline 13.3% 14.2% 13.6% 14.0% 14.2% -9,6% -9,6% least 4% p.a. -12,0% Total Debt as % of Reform 82.0% 88.2% 92.2% 94.6% 94.4% Base Reform GDP Baseline 82.0% 90.3% 97.9% 106.7% 115.1% Required reforms: assumptions • The baseline projections assume GDP to contract by 9.6% in 2020 , with a recovery off a lower base in 2021 and 2022 and muted growth thereafter. Virtuous circle pursuant to fiscal discipline of reduced debt and increased investment • The baseline projects the economy to recover to pre Covid-19 levels within 3 years , with an resulting in lower cost of funding, increased growth and higher tax revenues upside scenario of 2 years and a downside scenario of 5 years, depending on the spread of the virus ✓ Zero-based budgeting by National Treasury. • A combination of lower GDP growth and lower tax collection post COVID-19, will result in ✓ Most expenditure items growing slower than inflation , except for investment in unsustainable fiscal strain. In the absence of structural reforms : infrastructure to stimulate economic growth. • Budget deficit will remain above 13% of GDP (Deficit of 6.6% in 1994 and surplus of 1% in ✓ Consistent reduction in the real wage bill for Government over the entire period. 2008) ✓ Reduction in the funding requirements of local government and SOEs . • Debt will continue to increase , exceeding 100% in 2023 (49% in 1994 an 28% in 2008). Total government debt (including SOEs) could exceed R8tn by 2025 ✓ Achieving long term real sustainable economic growth of at least 4% per annum . • Private and public sector cooperation and public sector structural reforms will reduce the strain ✓ No increases in tax rates, but improvement in tax collections through higher growth and on the fiscus, and increase GDP growth, thus stabilising public finances and reducing funding improved administration. cost over time . The budget deficit could normalise at 3.5% in 2025 1 Medium term outlook per Feb’20 budget 37 2 Excluding refinancing of debt that are due for redemption (R220tn and R385tn over 3 and 5 years respectively)

  31. Funding Overview Macro Economy Policy Sources of Funding Enablers & Conclusions Fiscal Policy considerations: Levers for stimulating recovery while rebuilding fiscal sustainability Economic Recovery initiatives Fiscal Sustainability initiatives ✓ Statutory reform of unsustainable liabilities • Fiscal and monetary policy coordination 1 • Ensure financing channels remain open and liquid • Compulsory third party insurance to replace Road Accident Fund • Maintain long-term market confidence in fiscal discipline • Law reform of medico-legal compensation • Ensure adequate funding of relief and recovery measures ✓ Continue investment in SARS capacity and tax modernisation ✓ Consolidate public service employment and remuneration within • Investment in improved living standards 2 affordable medium term limits • Rebuild momentum of municipal infrastructure and housing ✓ Continue institutional reform of government – towards fewer investment • Co-financing through FLISP and DFI funding: mobilise private departments and agencies finance for mixed use residential investment ✓ SOC fiscal obligations • Accelerate settlement upgrading and neighbourhood development • Network industry restructuring: towards regulated competition programmes • Liquidate non-core, unprofitable and phase out funding guarantees • Managed procurement of independent producers 3 • SEZ developments: light manufacturing and job intensive industries ✓ Higher education and training reform • Broaden ETI to targeted industries and SEZ developments • Strengthen TVET college funding through business partnerships • Strengthen partnerships between cities, local industry ✓ Social security and health insurance stakeholders, colleges/universities and workseeker support programmes • Build on UIF reform to phase in statutory social security funding • Strengthen public-private collaboration in health delivery and finance • Network industry investment 4 ✓ Strengthen government and municipal revenue management • Electricity, renewables and gas: accelerate IPP programmes • Reconsider “dual municipality” architecture • Support telecoms modernisation & digital economy 38

  32. Funding Overview Macro Economy Policy Sources of Funding Enablers & Conclusions Stock of invested domestic assets is c.R12tn 1 ($700bn) in total, adjusting for overlap within and between savings and bank assets • Primary source of local funding to the public sector (bonds) and private sector (equity and loans), whilst providing significant liquidity to the banking industry Other • Portfolios are fully invested and need to meet prudential requirements . Incremental funding capacity subject to: • Net inflows : Inflows of R170bn in 2019 (c.2% of FUM). High probability of net outflows in the foreseeable future due to COVID-19 related job losses Regulated • Rebalancing of portfolios: recognising beneficiary rights, fiduciary duties and the need to savings maintain stability of the financial system. Current debt/equity split at c.50% is in line with OECD average R8.4tn • Infrastructure funding: Banks • Significant indirect investment via sovereign and SOE bonds (c.R1tn invested, excl. GEPF) R5.8tn Total • Direct investment is attractive for long term portfolios of Life Companies and Defined Benefit Retirement funds. Unlisted direct investment currently constitutes c.1.5% of R14.2tn Regulated portfolios (OECD average of 1.3%, 4.3% in funds that have mandates to invest directly) 2 or • Incremental capacity available if investment instruments are tradeable Savings R1,409bn cR12.0tn R8.4tn • Primary source of loans to the private sector and a significant financier of public sector debt after adjustment for • Loan capacity double counting • Liquidity conditions are improving due to precautionary savings but credit capacity constrained due to impairments. Capacity facilitated by relaxation of liquidity and capital requirements as well as the SMME guarantee • Additional credit extension supported by well capitalised balance sheets but depends on Banks profitability R5.8tn (excl. • Early indication of funding capacity of R350bn – R450bn p.a ., majority of which could be available to the private sector as holdings in public sector securities exceed regulatory derivatives) requirements • Potential for increased lending through prudent redeployment of investment in government bonds • Infrastructure funding : Historically advanced the majority of risk funding to develop IPPs and Source: other PPPs. Once de-risked, sold to regulated pools of savings 1 Industry discussions; Regulatory filings; Team analysis 2 Annual Survey of Large Pension Funds and Public Pension Reserve Funds 2019 39

  33. Funding Overview Macro Economy Policy Sources of Funding Enablers & Conclusions International portfolio flows from GEM investors are very substantial, but there has been a recent outflow that will need to reversed Global Emerging Market (GEM) investors as a financier of the public sector 1 Non-resident investors funded the majority of public sector deficit in 2017 • In 2017, these investors funded the majority of the public sector deficit. • Since the beginning of the year, GEM investors have sold R64bn government bonds. Net purchases of govt bonds (as % of total) Whilst holdings have reduced, foreign investors sill hold c.31% of government bonds 120% (c.R800bn) alongside c.R300bn of non-marketable instruments 70% Global Emerging Market (GEM) investors as a financier of the private sector 2 20% • The JSE has an aggregate market capitalisation of 16tn, including a number of large multi- 2017 2018 2019Q1 2019Q2 2019Q3 -30% nationals that have secondary listings on the JSE. The local registers of JSE listed companies Foreign SARB Banks have an aggregate market capitalisation of c.R6.5tn. PIC Insurers & RFs Other • There has been significant net foreign selling of equities - R114bn in 2019 and R46bn since Non-resident holdings of SA government the beginning of the year. Foreign investors currently hold 39% of the shares on local bonds declined from 37.3% in Jan 2020 to 31.5% in May 2020 registers (R2.6tn) 100,0% 0,6% 0,6% 0,7% 0,7% 0,8% 3 Ramifications of net selling by foreign investors 14,5% 14,7% 15,6% 15,7% 16,9% 90,0% • The increased holding by domestic financial institutions reduces the industry’s capacity to 80,0% 24,7% 24,5% 24,9% 24,6% 70,0% 23,7% provide incremental recovery funding. 60,0% 6,1% 6,3% 5,9% 6,2% 6,6% • Increased demands on SARB to fund public sector deficits 50,0% 16,8% 16,9% 19,0% 20,1% 20,6% 40,0% It is of critical importance to re-attract international investment, as it will: 30,0% 20,0% • reduce the reliance of the SA financial sector to fund the public sector budget deficit 37,3% 36,9% 34,0% 32,7% 31,5% 10,0% • free up the capacity to fund the recovery 0,0% January February March April May • address the escalating balance of payment deficit Non-residents Banks Insurers Local pension funds Other financial institutions Other 40

  34. Funding Overview Macro Economy Policy Sources of Funding Enablers & Conclusions There are large non-traditional pools of international capital with minimal exposure to SA, but access requires policy stability International non-traditional funding pools could supplement traditional sources • International DFIs have significant capacity to contribute to the economic recovery. The R500bn rescue package includes R100bn funding from DFIs. Subject to fiscal discipline, DFI & ECA additional capacity should be available to the public sector • DFI and ECA funding can also be mobilised for investment in economic and social infrastructure >$10tn Infrastructure • Several net exporting sovereigns have invested surplus government funds in global income But not only funds Sovereign focused on generating assets, with the aim of diversifying economies Emerging Wealth • Bias towards balanced portfolios. Ability to invest in infrastructure and private equity Markets Funds • The impact of COVID-19 on domestic funding needs must still be determined Global AUM have increased by 15% p.a. over the last 15 years, now representing 26% of global asset allocation: Alternative • Private Equity : Global uninvested funds of $2.5tn as at December 2019. In SA, R171bn FUM in Dec’18 (private and public), including R30.1bn undrawn asset • Private credit : Focus on high yield loans. c.14% of total credit, growing at 14% p.a. Foreign direct investment into South Africa (R’bn) classes • Infrastructure funds : Inflow of $85bn in 2018. Total assets of $415bn 79 80 72 • Mining Funds : FUM of more than $30bn but less than 1% invested in South Africa 71 63 Average: R50bn • FDI will increase capital availability to the extent that funding is sourced offshore Foreign 38 34 40 30 • There is an expectation that foreign direct investment and M&A will slow down in the 27 22 direct 18 wake of Covid-19, as corporates seek to consolidate existing positions investment • In SA, FDI expansion coincided with periods of perceived political stability - 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 41 1 Excluding undrawn contingent commitments by member countries

  35. Funding Overview Macro Economy Policy Sources of Funding Enablers & Conclusions Increased private sector participation in infrastructure development will reduce strain on fiscus, requiring close cooperation with local and international investors Funding requirement Funding sources • Traditional SA based funding sources will be insufficient to meet the requirements • In the absence of structural reforms, we estimate an aggregate funding and significant funds will need to be sourced internationally requirement of c.R3.4tr over three years: • In the wake of credit downgrades, there has been significant divestment of local • R2.4tr by the public sector, including local government and SOEs bonds and equities by foreign investors, thus reducing funding availability in the • An estimated requirement of c.R1tr by the private sector local financial services industry to fund the recovery The public sector funding requirement could reduce significantly if SA will be competing for capital against all other emerging markets private capital is invested in privately owned infrastructure Funding enablers • Fiscal discipline: Reduce public sector debt burden, funding costs and currency volatility • Optimise private sector investment in network infrastructure where SOEs currently have monopolies: The private sector can play a significant role in funding and operating of network infrastructure, including electricity, rail and ports • Infrastructure investment: Attract private investment in network infrastructure development by providing investors with an appropriate risk adjusted return • Regulatory certainty: Investment in fixed capital is directly correlated with regulatory certainty • Private and public sector coordination: Maximise the private sector’s participation in infrastructure development by leveraging existing project pipeline and DFI funding commitments (IDC & DBSA in particular) • A consolidation of state owned DFIs could reduce pressure on the fiscus if consolidated capital could alleviate Land Bank requirements • Stability of financial markets: Prudent deployment of local funds to avoid contagion on the listed equity and bond markets and the value of investments • Investment product design: Whilst direct investment in infrastructure projects is appropriate for certain long term portfolios, additional liquidity can be mobilised for investment in marketable securities • Financial services regulation : Continually review capital and liquidity requirement relaxation, broaden scope of allowance for guarantees to banks by retirement savings beyond housing and allow for pension backed loans by retirement funds. ASISA is currently engaging with NT, SARS and the FSCA in this regard • Commitment to environmental and social transformation: ESG investment is a key ingredient in asset allocation globally. ESG commitments could attract funding and / or funding support from institutions and DFIs Paradigm shift required to address obstacles to investment over the last decade that resulted in slow growth, cost leakage and increasing debt 42

  36. Reimagine SA Key Initiatives Funding Working together Policy & Sector An opportunity to reimagine the South African 1 economy and reset the trajectory Key Topics for Discussion Actionable initiatives to drive investment, job 2 creation and inclusive growth Section 4 3 Funding, cost of capital and fiscal considerations Working together to ensure an accelerated economic recovery and a Working together to ensure an accelerated shared national vision 4 economic recovery and a shared national vision Sector and policy analysis underpinning 5 actionable initiatives 43

  37. Working Together Overview Key Initiatives Key success factors Next Steps Sector & Policy Focus Areas We must work together to ensure an accelerated economic recovery and a shared national vision 1 SA has wasted time and resources over the last decade, and given the impact of COVID-19 we must now work together and make compromises and sacrifices Business is ready to help address the Leaders in all areas must focus on securing an accelerated 2 economic recovery in the national interest, not just their own economic challenges specific interest groups in South Africa working in We urgently need a social and economic compact, a cohesive 3 plan and bold leadership to implement rapid economic and partnership with inclusive growth and create a more equitable society Government, labour and communities Properly capacitated task teams (sector and policy) 4 combining public and private sector experts reporting to the Presidency 5 Short-term compromises will be required in order to achieve longer term strategic goals and objectives 44

  38. Working Together Overview Key Initiatives Key success factors Next Steps Sector & Policy Focus Areas Key steps to develop a plan, tackle SA’s challenges and introduce measures to prioritise policy initiatives A B C Iterative steps to reimagine and Key challenges that must be Key measures to assess reform the economic recovery addressed to attract investment prioritisation of policy initiatives Investment Jobs impact 1 impact Policy Identify critical certainty sectors and 7 2 Supports private and Number of jobs created in enablers for public sector investment the short and long term Align with recovery Develop and labour on State implement Corruption conducive capability strategies to regulation & crime scale & capacity Second round effects Fiscal impact Public vs Private 6 Impact on government 3 Impact on the functioning finance & funding Align with government on expenditure and revenue of the rest of the economy constraints Revisit policy new role of and regulatory state organs Innovation, inhibitors Inequality, and SOEs B-BBEE / Inclusivity entrepreneurship Transformation 5 impact & education 4 Extend fiscal & B-BBEE outcomes support and Economic impact biased Inefficient Refine and incentives to toward SMMEs and rural/poor extend trade and accelerate growth / exports as opposed to urban elites and redundant established businesses SOEs We must work together to agree We must acknowledge and We must create a conducive a plan and key objectives tackle the key issues enabling environment 45

  39. Working Together Overview Key Initiatives Key success factors Next Steps Sector & Policy Focus Areas Key factors that underpin successful intervention implementation ▪ A firm intention and commitment on the part of government entities is imperative Political will to carry through the execution of priority interventions ▪ We need leaders with vision and foresight, that understand there will need to be Strong, dynamic leadership trade-offs and recognise that South Africa is competing on a global stage ▪ Being quick and decisive on key interventions to allow stakeholders to take fast Act quickly and decisively actions to materialise the desired change ▪ Must prioritise which interventions are important because concurrent programs Prioritize rigorously may spread resources too thin and result in uncoordinated interventions Ensure dedicated & skilled ▪ Successful implementation requires having enough people with the skills and project management motivation required to manage a fast-moving and often ambiguous challenges ▪ Key sectors should develop their own strategic accountabilities and work together Maintain accountability to set clear and actionable targets that they take ownership of ▪ Social partners must be regularly updated on the progress of interventions through Monitor and evaluate rigorous monitoring and evaluation methods ▪ A comprehensive change management plan is required to ensure that all Change management stakeholder are kept informed regularly and sustainable impact is delivered 46

  40. Working Together Overview Key Initiatives Key success factors Next Steps Sector & Policy Focus Areas Proposed Next Steps: Alignment on approach following the revised Budget and in conjunction with the Jobs Summit via the creation a sector Task Teams Post-COVID-19 Economic Reconstruction, Growth and Inclusivity Plan Post COVID Budget between social partners Refine and enhance Updated Jobs Summit Interventions Rapid Alignment Reconstruction Conference Monitoring and Agreement Implementation evaluation of on priorities of initiatives outcomes Focus Areas Creation of a Joint Reconstruction Task Team to coordinate and agree priority actions across sectors and implement far-reaching reforms Sector Policy Priorities Initiatives Sector sub-committees to focus on implementation of key initiatives Funding Fiscal and evaluation of outcomes versus objectives Options Stabilisation 47

  41. Working Together Overview Key Initiatives Key success factors Next Steps Sector & Policy Focus Areas This presentation provides a summary of the deep dive analysis performed by multiple teams across sectors 1 There are 10 separate B4SA assembled a team of industry experts to analyse challenges and consider potential opportunities by sector detailed presentations for each sector analysed 2 There are over 50 subsectors that were aggregated into 10 The conclusions have primary sectors , with a detailed presentation supporting each been summarised into 3 four pages per sector in Separate teams analysed policy, innovation, education and Section 5 labour considerations with detailed presentations on each In addition there is an 4 Section 5 of this document provides a summary of the key Appendix to this conclusions, with sector and policy recommendations document providing supporting material to 5 B4SA can make available the detailed materials as well as the four page summaries provide access to the sector teams for further discussion 48

  42. Working Together Overview Key Initiatives Key success factors Next Steps Sector & Policy Focus Areas Sectors and subsectors in more detail: Focusing on sectors with strong multipliers to create jobs and GDP growth High impact industry focus areas… ….comprise ~50 subsectors 1 SMMEs (multi-sector) & Township / Rural Covers all the sectors, including the subsectors below which are not • Resources • included in the focus areas: • Meat, Fish, Fruit, Vegetables, Oils Electricity Gold 2 Energy & Water • Business services • and Fat Products • Coal and lignite Water • • Community, Social and Dairy products • Platinum • Personal Services Grain Mill, Bakery and Animal Feed • Ferrochrome 3 Mining • Real estate Products • Natural gas • Other food products • Other mining SMMEs and Retail are • Beverages and tobacco products • multisector functions Building and construction • 4 Construction Textiles, Clothing, Leather that enable delivery of Products and Footwear Industrial • products & services to Wood and Wood Products • Furniture all sectors and 5 Manufacturing • Paper and Paper Products consumers • Publishing and Printing • • Citrus Fruit Pharmaceuticals • Rail, Roads, Ports 6 Transport • • Chemicals & Chemical Products Deciduous Fruit • Aviation (incl Plastic Products) • Subtropical Fruit • Rubber Products • Vegetable • 7 Agriculture, Wholesale & Retail Non-Metallic Mineral Products • Livestock • Basic Metal Products Services & Support • Wholesale & Game • Structural Metal Products • Dairy • Other Fabricated Metal Products • Finance & Insurance Retail 8 Financial Services • Forestry • Machinery & Equipment • Fishing • Electrical Machinery & Apparatus (multi-sector) • • Cereal and Crop Communication, Medical and • Communication 9 Telecommunications • Poultry other Electronic Equipment • • Manufacturing of Transport Other Equipment Agriculture • • Accommodation 10 Tourism & Leisure Other Manufacturing & Recycling • Trade • Tourism 49

  43. Working Together Overview Key Initiatives Key success factors Next Steps Sector & Policy Focus Areas Overview of the sector analysis: Each team has produced a detailed analysis of the key challenges and priority actions to develop a roadmap • Each sector team has produced a detailed report that has been reviewed by experienced sector leaders • This presentation summarizes the key findings of each report based on a 4 page template as outlined below • Additional appendices (per sector) are summarized in a separate document that focuses on the detailed sector findings 1 2 Overview of the sector: Challenges: Overview of the sector: Key challenges: • Key sector considerations • What are the • Key sector objectives • Key constraints • Market analysis structural challenges • Sector and market • Structural challenges • Sector resilience facing this industry • Exacerbated by the analysis • Impact on jobs • How will it be • Impact of COVID-19 pandemic • Challenges impacted by COVID-19 • Mitigations • Opportunities 3 4 Prioritised Actions: Priority Actions: Roadmap: Plan of Action: • What should be prioritised • Sector initiatives that • Implementation plan • Short term plan and why • Paving the way forward should be prioritised • Medium term plan • Implementing the correct • Benefits of proposed • Long term plan actions & yields actions • What is the job potential • What is the potential GDP uplift • What are the fiscal benefits 50

  44. Reimagine SA Key Initiatives Funding Working together Policy & Sector An opportunity to reimagine the South African 1 economy and reset the trajectory Key Topics for Immediate actionable initiatives to drive Discussion 2 investment, job creation and inclusive growth Section 5 3 Funding, cost of capital and fiscal considerations Policy and sector analysis underpinning the Working together to ensure an accelerated actionable initiatives 4 economic recovery and a shared national vision Policy and sector analysis underpinning the 5 actionable initiatives 51

  45. Policy & Sector Innovation Education Policy Transformation Sector Focus Area A stable and constructive policy environment is critical for driving inclusive growth Innovation & Entrepreneurship 1 There is an Diversifying the economy with a focus on innovation and entrepreneurship opportunity for national innovation Education 2 and renewal, but we A fundamental and fast transformation of education is needed must work together to in order to build the nation with a focus on workforce upskilling address the fundamental issues Policy revision and certainty 3 head-on if we are to Policy obstacles need urgent resolution and should be combined with a vigorous anti-corruption agenda achieve inclusive growth Economic transformation 4 Implementing sustainable interventions that seek to broaden and deepen economic benefit and participation 52

  46. Policy & Sector Innovation Education Policy Transformation Sector Focus Area Focus on diversifying the economy with particular attention on Innovation and Entrepreneurship Greater alignment required across the Innovation and To improve the Innovation ecosystem, SA should focus Entrepreneurship ecosystems on three areas (based on Total Entrepreneurship Activity) Create greater 1 Increase Startup skills 1 alignment Focus on education, increase ease of starting a business, Across all players in the employment training, shift from informal to formal, introduce ecosystem by using a wage subsidies centralised open source database Introduce non-traditional financial mechanisms 2 Focus on creating Examples include Fintech platforms, standardized non-traditional 2 credit scoring, support for non-bank lending, crowd funding*) demand By pivoting demand Technology as an enabler 3 from a push model to Embrace digital technology, increase employment and insourcing one that is driven by via demand driven digital skill training, increase digital inclusion, Government and/or build digital platforms private companies All these increase S A’s future potential to leverage 4IR and will Reduce duplication further enhance competitiveness. 3 Multiple players offer similar services and many are below the required * Could be met by creating a funding a platform to create alignment and demand across the innovation ecosystem professional level Introduce incentives across the ecosystem e.g. higher tax By focusing on these three areas 4 reductions for corporates who invest/procure services, tax breaks for SA could increase GDP by $80bn innovation investments and no tax for players at early stages of innovation 53

  47. Policy & Sector Innovation Education Policy Transformation Sector Focus Area A fundamental and fast transformation of education with a focus on workforce upskilling • 1 Allow for constant recredentialising thereby enabling proactive adaptability to crises, major events and The disruption of climate change Provide lifelong learning The disruption of • education during the Review of the skills development levy to restore its original purpose viz. to encourage work-based learning pathways/reinvent the skills • education during the Provide degree apprenticeships, alternative ladders of qualifications vs university degrees, create trade-to- pandemic provides a learning cycle management pathways through part-time study and longer paths or experience-based pathways to pandemic provides a catalyst to reimagine management to ensure strong skills base education, and correct catalyst to reimagine Business involvement in the • Will assist to develop curriculum which responds to business’ needs and build relevant skills 2 existing inequalities to education, and correct • development of skills Broadening the scope of ISFAP, which has a student throughput of 94% by providing students with a clear provide quality education programmes career path in skills occupations that are in high demand existing inequalities to to all • Differentiate universities and their funding models - allow fast track courses, elite programmes, as well as provide quality 3 developing universities This will allow a education to all Reassess funding models for • Make universities accountable for the quality of their outputs e.g. relevance and employment of graduates, universities generation of with appropriate bridging programmes where necessary learners to reach • Provide support to institutions that are poorly equipped, but with prescribed performance criteria This will allow a their potential • 4 Boost and redesign TVETs/SETAs to address poor governance, low relevance of industry skills and lack of generation of learners and, therefore, Redesign TVETs/SETAs innovation contribute to to reach their potential South Africa’s • 5 Bypass national institutions that are delaying progress by allowing international qualifications that can be and, therefore, economic and Create a competitive market for delivered by public private consortia or private institutions contribute to South • private skills providers Provide public funding to private skills providers to increase the supply and drive better quality and social prospects Africa’s economic and accountability social prospects • Follow examples in Japan, Korea, Vietnam and Singapore who successfully adapted existing models 6 Borrow from successful models in • They implemented policies, planning and processes which ensured that education systems were tightly and other countries relentlessly aligned to economic growth, with appropriate support from business Improvements in our skills systems is reliant • 7 Support material and immediate Need to supply high levels of connectivity and cheap data • For those trapped in the digital divide, provide multiple physical learning locations with connectivity growth in digital education on better outcomes in our schooling system 8 Improve supply and quality of • Emphasis on instructors with workplace experience or support for existing staff with such experience instructors 54

  48. Policy & Sector Innovation Education Policy Transformation Sector Focus Area Policy obstacles need urgent resolution and should be combined with a vigorous anti-corruption agenda National Inclusive growth will be driven by investment, jobs, Treasury economic improving economic capacity and a bias towards the rural reform and poor to ensure Broader Black Economic Empowerment paper* Industrial Policy NDP Action Fiscal stabilisation Plan SONA Large infrastructure PPPs commitments IPP/SSRG/Utility scale Investment IRP Investment Key policy theme clusters Envoys Spectrum auctions PEAC Mining /O&G policy certainty SOE reform Proposals broadly align with NT’s economic reform paper, SONA commitments, the IPAP and the IRP. Employment incentives – ETI, EPWP Consideration to be given to: Cutting red tape – registrations/tax compliance/visas How social partners should drive recovery agenda given the number of Property rights and policy certainty 1 Business policy initiatives currently underway e.g. PEAC, sectoral initiatives, environment Lower costs of data/comms Investment Envoys, NPC Energy stability 2 Creating capacity to rapidly turn policy objectives into white papers Labour law reform – particularly for SMMEs *Economic Transformation, Inclusive Growth, Competitiveness: A Contribution Towards a Growth Agenda for the South African Economy 55

  49. Policy & Sector Innovation Education Policy Transformation Sector Focus Area Proposed policy interventions should have a positive impact on attracting investment and creating job Second Policy interventions Investment Jobs Fiscal Inclusivity Policies can be assessed in terms of: round impact impact impact impact (numbers correlate to Top 12 initiatives) effects Tackle crime & corruption 1 Investment Jobs impact Fiscal impact Improve ease of doing business impact 2 Reduce red tape Large scale infrastructure projects Supports Number of Impact on 3 Infra: expanded public works programme private and jobs created in government public sector the short and expenditure 4 SOE reform investment long term and revenue Clarity on land reform – s25 and 5 expropriation act resolution Skills: Youth employment tax incentives B-BBEE / 6 Second Inclusivity Labour law reform 1 round effects 7 impact - amendments for SMMEs - restrict bargaining council extensions Economic Impact on the 8 Review trade policies impact biased functioning of toward Simplify mining regulation the rest of the 9 SMMEs and - Charter/MPRDA conclusion economy rural/poor Energy: Round 5 IPP programme 10 Energy : Free red tape for other energy generation (small, medium large scale) Rating scale to measure impact Energy: industrialisation strategy 10 (increase local content requirements) Positive Negative Negative Energy: Eskom restructuring & unbundling Positive high Positive low medium low medium 10 Energy: Oil & gas bill revisions Telecomms: Maximise connectivity 11 - auction of existing spectrum 1.Business is committed to advancing the agenda for decent work and ensuring workers are treated fairly and with dignity. We also recognise that some labour laws may have had - digital migration to release spectrum unintended consequences on employment and economic growth and believe they can be Financial inclusion: 12 amended without undermining dignity in employment and the agenda for decent work Regional financial services hub 56

  50. Policy & Sector Innovation Education Policy Transformation Sector Focus Area Implementing sustainable interventions that seek to broaden and deepen economic benefit and promote B-BBEE Interventions need to be Recalibrating and Pace and depth more transformative, Corruption, comprehensively insufficient to developmental and maladministration and measuring economic There is a need for full support a growing systemic in nature and State capture will transformation is economy, designed to be inclusive of undermine economic and equitable necessary to determine employment and social diverse businesses from all transformation unless participation by a the current status and development sectors, regardless of size decisively addressed broad base of black progress and/or format people in the South African economy , with Economic Transformation can be achieved through sustainable interventions to accelerate the an emphasis on those quality of education and skills development for black people, employment creation that are most (particularly among the black youth) and large scale black enterprise development , including: disadvantaged (black Inculcating a transformative culture within businesses and building social cohesion 1 women, youth, people Large scale enterprise development , focused on expanding opportunities and removing with disabilities and 2 regulatory and other exclusionary practices that are barriers for emerging black enterprises people from poor households, township Quality and demand-led education and skills development which requires enhanced support for 3 economies or rural basic education and a significant review of the current institutional skills structure so that skills areas) development is informed by current and future business needs 4 Clear blockages to employment , with systemic interventions to promote sustainable youth job creation Review of the efficacy of existing regulation and policies in achieving sustainable economic 5 transformation and B-BBEE 57

  51. Policy & Sector Innovation Education Policy Transformation Sector Focus Area The Wholesale & Retail sector is a key employer and enables the Retail delivery of a range of products and services across all other sectors • The largest employer in the economy creating 2.9 million jobs • c.82% (2.4m) are direct jobs in retailing with a further 0.5m jobs from indirect and wholesale roles The SA Retail • Represents 22% of formal employment (the largest private sector employer) Market • Total revenue of R900bn per year (14% of GDP) Contributions • 60% formal and 40% informal sector • Sector includes most of the largest food and clothing retailers in Africa • Key driver of overall economic productivity (efficiency of supply chains; replenishment; economies of scale etc) • Capital investment in new stores and infrastructure as well as strong logistics infrastructure • Physical stores as a driver of other local investment and increasing investment in digitisation • A major and growing employer of people Key role the • Primary route for acquiring skills and achieving social mobility sector plays • Major supporter of SMMEs as new and growing suppliers and as service providers to the entire sector • Contributor to health and wellness through improved physical access to modern and safe stores selling fresh nutritional products, pharmaceuticals, etc. • Clothing, general merchandising and services sector was hard hit by the lockdown provisions, impacting SMMEs Key • Reform of competition policy is key: An over-zealous and anti-market approach from the Competition Challenges Commission is emerging which is an increasing impediment to growth and new investment 58

  52. Policy & Sector Innovation Education Policy Transformation Sector Focus Area 1 SMME Overview of the SMME sector and implications of COVID-19 Categories Criteria Analysis Rationale Key Sector Objectives • Many of the informal sector micro-enterprises continue to stay afloat – many have been • The SMME sector includes able to adapt very quickly and are largely outside of the regulatory net • A large percentage of formal sector SMMEs are in the trade and accommodation sector, many different types of which will take a while to recover, those in the communications sector are best placed Resilience Sector and for future growth businesses , from the micro • Formal SMMEs are struggling – no savings buffer and consumer spending has dried up market informal economy which are (StatsSA survey – over 55% of SMMEs don’t have cash flow to survive post July 2020) analysis largely subsistence based, to • Digital skills is an important area for job and SMME creation – in 2019 LinkedIn had Job creation the larger formal small and 209,000 job openings on their platform, most of which would require some digital potential medium sized businesses skill (there is a mismatch between job seekers skills and demand) • The larger SMMEs employ • In the next 3-12 months, between 380k and 440k formal sector SMME jobs will be lost or are at risk, and a further 600k to 700k informal sector SMME jobs are at risk more people than the • ~70% of job losses were due to business closures and lack of customers (StatsSA) • Financial assistance is insufficient: 30 - 50% of SMMEs applied for government relief; 68% smaller, micro enterprises Job losses who applied were unsuccessful (due to conditions of the scheme), DSBD’s SEFA funding • Hence our recommendations window is now closed, and 71% of SMMEs require further funding post lockdown • As at 27 June, R10.6bn has been lent to 7,496 business under the Loan Guarantee Scheme for improving SMME • Rise in liquidations (up 10.7% in 2019 over 2018 and up 53% in the first quarter of 2020) sustainability and stimulating Impact of • The extended lockdown has had and will continue to have a negative impact on Covid-19 Supply and SMMEs, particularly given the contraction in consumer and business spend entrepreneurship differ • Not all government departments (national, regional, local), SOEs and businesses are Demand according to SMME segments paying SMMEs on time – there is no ‘one size fits all’ • SMMEs require access to cheap and reliable electricity and connectivity, as well as solution reasonably priced credit facilities Infrastructure • The regulatory environment is burdensome and costly for SMMEs – we need to identify policies to accelerate SMME growth (identify opportunities) 59

  53. Policy & Sector Innovation Education Policy Transformation Sector Focus Area 1 Key challenges: The SMME industry faces 4 main structural SMME constraints Access to Crime and corruption Costly and difficult Skills regulatory framework Credit & Markets • The regulatory environment is • A lack of digital skills is a critical • Access to appropriately priced public • Crime has been listed as a matter burdensome and costly for SMMEs – barrier to SMME creation and and private sector credit with fewer of concern for SMME owners we need to identify policies to expansion – and results in many onerous qualifications is a key • Procurement corruption (in terms accelerate SMME growth (identify jobs and successful tech SMMEs challenge across the SMME segments of awarding of contracts and opportunities), and review and simplify being off-shored • Augmenting the non-bank lender payment of invoices) is also an certain regulatory implementation • Many SMMEs lack marketing, offerings in South Africa is critical for ongoing matter challenges (elements of the Labour, B- sales and financial management liquidity injection into the SMME BBEE, tax and IP laws) that are onerous to SMMEs skills sector • World Bank Ease of Doing Business - • In the medium term, an • It’s difficult for SMMEs to provide difficulty in starting a business went entrepreneurial mindset needs products and services to large from 53 (almost top quartile) to 139 to be fostered in schools corporates – particularly given often (bottom quartile) between 2008 and onerous payment terms and a lack of 2020 appropriate supplier credit and credit • WEF Global Competitiveness index guarantee insurance which places SA at 89th in terms of burden of government regulation 60

  54. Policy & Sector Innovation Education Policy Transformation Sector Focus Area 1 SMME Priority Actions: Addressing constraints and opportunities Industry wide financial Reduce red tape and Pay SMMEs on time and Help SMMEs Pivot services approach accelerate growth support local buying • Identify and amend or simplify the • Support additional lending to • SMMEs working capital • Assist world-class small and top regulatory implementation SMMEs via banks and non-bank constraints are exacerbated by medium sized businesses challenges to SMME growth lenders (simplify application late payments (by government capitalise on areas of possible (elements of the Labour, B-BBEE, process, use appropriate departments, SOEs and business) competitive advantage tax and IP laws) to ensure SMME measures to assess credit- cost and ease of doing business is worthiness) lowered • Tariffs for inferior imports and • Business model adaptation – and • South Africa should focus on incentivise local buying export acceleration materially improving its position • Develop access to funding, digital in the World Bank Ease of Doing platforms for ecommerce and Business Index • Develop and onshore digital skills credit facilities through an • Revisit the Regulatory Impact and jobs - software, AI, digital industry wide financial services Assessment (RIA) Act to ensure all skills via centres of excellence approach new legislation takes account of small business constraints 61

  55. Policy & Sector Innovation Education Policy Transformation Sector Focus Area 1 Roadmap: Immediate interventions required to foster SMME SMME industry recovery Act Now Plan Now Immediate Medium Term Longer Term Up to 6 Months 6 - 24 Months 2 - 5 Years • Support additional lending to SMMEs - • Reduce red tape • Assist world-class small and medium sized simplify application process, use businesses to capitalise on areas of • Identify and amend or simplify the top appropriate measures to assess credit- possible competitive advantage regulatory implementation challenges to worthiness and augment non-bank SMME growth (elements of the Labour, B- • Aim to materially improve South Africa’s lending (micro loans to informal BBEE, tax and IP laws) to ensure SMME cost position in the World Bank Ease of Doing entrepreneurs, purchase order finance and ease of doing business is lowered Business index and the WEF Global to formal SMMEs, etc) Competitiveness Index • Revisit the Regulatory Impact Assessment • Engage with non-bank lenders and (RIA) Act to ensure all new legislation • Business model adaptation – and export banks to understand levers to increase takes account of small business acceleration liquidity injections constraints • Develop and onshore digital skills and • Pay SMMEs on time – critical for cash jobs - software, AI, digital skills via flow centres of excellence Remove red tape for SMMEs 62

  56. Policy & Sector Innovation Education Policy Transformation Sector Focus Area 2 Energy & Overview of the Energy & Water sectors and implications of Water COVID-19 Categories Criteria Analysis Rationale Key Sector Objectives • Eskom reduction in cash generation for April alone of ~R2,5bn due to COVID-19, • Economically viable and full impact still to be assessed Resilience reliable energy to the end • Liquid fuels value chain severely impacted due to complete shut down during April and continued supressed demand for product (specifically jet fuel) consumer (industrial, • Investments in energy sector highly uncertain due to lack of policy certainty and commercial and private Sector and delay in key regulatory and commercial processes consumers) market Security • Lack of historical investment in water infrastructure has impacted rural communities analysis • Stymied demand growth will further contribute to uncertainty • Potential to act as a catalyst for growth (in the broader • Up to ~72k jobs in the electricity sector with capex spend of ~R157bn Job creation economy and trigger large • At least ~1k jobs in the gas sector with capex spend of ~R4-11bn potential • Up to 15k jobs in liquid fuels sector with capex spend of ~R9bn scale investment) • Transition to a lower carbon • >82k jobs at risk in broader economy due role of electricity as an enabler energy mix • Up to ~66k jobs at risk if current supply decline (from Pande-Temane) not mitigated Job loss • Up to ~ 80k jobs at risk in the Liquid Fuels Sector (refinery operations only considered) • An appropriately capitalised • Electricity supply-demand balance at risk, demand has picked up to >80% of pre- and more efficient Eskom Supply and Impact of COVID levels during Level 4, large risk of load-shedding prior to lockdown if that is no longer a burden on additional supply not secured Covid-19 Demand the tax payer • Jet fuel likely to experience a long term significant reduction in demand • Opportunities to improve • Downtime during COVID-19 used as an opportunity to perform maintenance in both liquid fuels and electricity sector water utilisation and long Infrastructure • Liquid fuels supply under significant strain as demand for diesel ramps up but this term water security is a short term anomaly that the industry is capacitated to deal with 63

  57. Policy & Sector Innovation Education Policy Transformation Sector Focus Area 2 Key challenges: The Energy sector faces 6 main structural Energy constraints Policy Uncertainty Regulatory Process Supply Unpredictable High Carbon & Effectiveness Inefficiency Challenges Price Increases Energy Mix • Gaps on key policy • Complex, multi-stakeholder • Limited regional • > 8% tariff increases over • >80% Coal-based electricity considerations e.g. IEP not processes that result in cooperation to unlock gas the last 5 years for generation mix - becoming updated since 2016, lack of long lead times e.g. supply potential commercial and industrial increasingly uncompetitive Gas Master Plan finalisation of IRP users (2014-2018) and difficult to fund • Continued deterioration of • Misalignment of relevant • One-size-fits-all, • Additional R27 billion to be • Strong push from investors Eskom plant availability and key policies suboptimal processes stall Load-Shedding (when absorbed following court and shareholders to move • Key policy decisions stalled implementation e.g. demand was at Pre-COVID- decision in March 2020 to lower carbon feedstock generating licence process 19 levels) e.g. Clean Fuels II, self • Further uncertainty on • SA committed to climate same for Medupi-scale generation • Looming Pande-Temane gas energy commodity pricing mitigation in line with Paris plant, REIPPPP project and • Lack of clarity on key policy supply decline from 2024 also linked to COVID-19 agreement self generation project matters e.g. how SA will onwards transition to a lower carbon • Potential global supply-side economy competitiveness issues in • Water supply and sanitation long-term policies need to be revisited Need for a Just Transition Need for a social and economic compact that mitigates the risk of job losses as South Africa migrates to a lower carbon energy mix 64

  58. Policy & Sector Innovation Education Policy Transformation Sector Focus Area 2 Water Key challenges: Water Services sector challenges and response Focus Support Challenges Constraints Areas • COVID-19 increasing challenges to water • Private sector investment (capex and • Limited stakeholder acceptance of sector facing multiple stresses opex): private sector participation in sector • Increasing water demand but decreasing • Blended finance models • Inefficient water licensing regime and functionality of existing infrastructure unimplementable licence conditions • PPPs tailored to the needs of the • Backlog in provision of critical new water • Regulatory constraints to water re- water sector infrastructure (e.g. Lesotho Highlands use/recycling and efficiency • Direct support in water provision Phase 2) • No ring fencing of municipal • Skills development: • Inadequate technical capacity across funding/grants to guarantee loan • Expand and fast track Technical government to provide sustainable payments and for PPPs Assistance, Mentorship and services • Onerous and lengthy PPP process Development (TAMDEV) initiative • Financial constraints to meet capex and support to water service authorities opex needs • Integrate operations and • Increasing threat to water security maintenance support into initiatives • Declining water quality • R33 billion pa capital investment needed for 10 years to achieve water security • Corruption in sector Need for a Stronger Partnership Need for a social and economic compact to Improve water infrastructure, water quality and capacity to deliver water services 65

  59. Policy & Sector Innovation Education Policy Transformation Sector Focus Area 2 Priority Actions: Cross-cutting interventions enable economic Energy recovery in energy sector and broader economy Launch Green Stimulus and national Align national energy strategy green funding strategy across all key policies and plans • Up to $83B more in international funding Ensure alignment across energy accessible plans incl. IEP, IRP, Gas • On average 18bps cheaper for Green Bonds Masterplan, UPRDB to enable versus Vanilla Bonds coherent target picture that • Up to 500k direct jobs unlocked in green drives economically viable, investments reliable energy supply • Mitigate transition risk of >R1.8T to ensure long term economic prosperity These cross-cutting interventions are critical to unlock stated jobs impact and CAPEX deployment in the energy sector Note: IPP = Independent Power Producer; IRP = Integrated Resource Plan; IEP = Integrated Energy Plan; UPRDB = Upstream Petroleum Resource Development Bill 66

  60. Policy & Sector Innovation Education Policy Transformation Sector Focus Area 2 Energy – Priority Actions: Up to 64-82k jobs can be protected and up to Electricity 72k new jobs created within next 3-5 years Key enabler Key enabler Address Eskom Update IRP via revised Enable short-term Fast-track Provide policy Align G2P targets to operating and capital update process and in negotiated pricing and renewables certainty and updated demand structure line with IEP reform overall tariff deployment via regulatory clarity on projections landscape REIPPPP Round 5 self-generation Creates single-source Provide immediate relief Accelerates de-ployment Enables private sector and Creates certainty on Accelerate unbundling to of truth of SA energy to eligible businesses, of RE as per IRP and build municipalities to ensure expected gas demand enable expansion of IPP landscape reflecting build competitive industry of local supply chains reliable and affordable from power sector to programme and allow for latest tech. trends tariff landscape energy supply drive investments in gas improved operational performance Full potential Heavily documented outside this 2021-2025 analysis – Focus of B4SA assessment is on priority interventions outside Eskom Up to Up to72k Up to 64-82k R157bn jobs jobs in Capex protected created deployed Note: RE = Renewables; REIPPPP = Renewable Energy Independent Power Procurement Programme; RFP = Request for Proposal; DFI = Development Finance Institutions; IRP = Integrated Resource Plan; IEP = Integrated Energy Plan; G2P = Gas-to-Power 67

  61. Policy & Sector Innovation Education Policy Transformation Sector Focus Area 2 Energy – Roadmap: All cross-cutting and priority interventions require Electricity action in the short-term to ensure success Act Now Plan Now Immediate: Up to 6 Months Medium Term: 6-24 months Longer Term: 2-5 years • • Develop transparent IRP planning processes Update IRP according to revised process and in line with IEP and other energy plans as well as NDCs • • Kick-off IRP update process – role of nuclear and gas Ensure adherence to plans across government • • Finalise ST negotiated pricing agreement policy Develop transparent and standard NPA application process • • Fast-track processing of existing applications Reform industry tariff landscape • Finalise RFP, fast-track selection of Round 5 preferred bidders • Continue roll-out of renewables as per IRP and growth of • • Develop alternative, efficient procurement process Prepare next REIPPPP Rounds incl. fast track Round 6 and future local industry rounds • Streamline review process and accelerate processing time • Create policy clarity via blanket consent • Adjust regulatory framework, incl. review private sector recommendations on regulatory and administrative process • Improve efficiency of related administrative processes and build capacity of responsible authorities • Start procurement of "No-regret" G2P capacity • Draft RFP and begin bidding process for G2P procurement • Initiate process to revise IRP and G2P targets • Launch Green Stimulus strategy • Execute green stimulus and green funding strategy incl. continued • Create green financing strategy to unlock funding development of project pipeline • Remove barriers and develop project pipeline • Pre-requisite: Ensure policy clarity and regulatory certainty on key enablers e.g; through unbundled and independent transmission entity and economically viable compensation model for Eskom • Pre-requisite: Capacitate/align NERSA & DMRE Mitigated supply risk, adjusted regulatory frameworks, & Competitive tariff landscape, conducive and comprehensive Immediate relief to businesses through improved holistic energy planning affordability of supply regulatory landscape Note: ST = Short-term; NPA = negotiated pricing agreement; G2P = Gas to power 68

  62. Policy & Sector Innovation Education Policy Transformation Sector Focus Area 2 Energy – Priority Actions: The considered priority actions build the basis Gas for gas supply security in the short- and long-term Key enabler Establish a multi-stakeholder Secure viable short-term supply Enable and accelerate LNG Enable upstream exploration forum and working group to drive by maximising potential of Pande- terminal investments as 'bridge in South Africa and assess alignment and collaboration on Temane fields via win-win model solution' to support growing local Mozambique supply options to key issues and policy decisions with Mozambique demand and create optionality secure long-term supply Provide a collaborative approach Reach bilateral agreement with Establish policy clarity on LNG hub location Assess local and regional supply options between government and multiple Mozambican government that enables (Richards Bay, Saldanha, Coega), SOE roles and develop a long-term supply strategy industry stakeholders to drive an investments to extend Pande-Temane and price regulation. Align decision-making and plan of action optimal policy landscape and ensure supply. Make decision on additional between NERSA, TNPA, ports regulator and effective implementation thereof LNG supply from Matola other government bodies Full potential 2021 - 2025 (excl. last intervention 1 ) Only considered: Jobs created $250-700mn from FSRU deployment. Min. 1k Up to 66k (~R4-11bn) Overall job creation impact Capex jobs created jobs protected estimated to be much higher deployed 1. Enable upstream exploration in South Africa and assess Mozambique supply to secure long-term supply Note: RE = Renewables; REIPPPP = Renewable Energy Independent Power Procurement Programme; RFP = Request for Proposal; DFI = Development Finance Institutions; IRP = Integrated Resource Plan; IEP = Integrated Energy Plan 69

  63. Policy & Sector Innovation Education Policy Transformation Sector Focus Area 2 Energy – Roadmap: Immediate action required to provide to ensure Gas security of short- and long-term gas supply Act Now Plan Now Immediate Medium Term Longer Term Up to 6 Months 6 - 24 Months 2 - 5 Years • • Set-up multi-stakeholder forum and working group Multi-stakeholder forum to drive alignment and decision making on policy matters when needed at a minimum, ensure alignment between • Develop point of view to inform update of IEP on gas Gas Bill, PPGI Gas Sector Master Plan and DTIC Gas Master Plan to develop 'single source of truth and an aligned national response • Establish bilateral agreement with Mozambican government for • • Kick-off engagement with Mozambican government to Sign-off bilateral agreement remaining Pande-Temane reserves (with consideration to Matola) • lay foundation for bilateral "win-win" agreement Drive strategy implementation • Agree on pricing structure for new supply • Decide on optimal location of LNG hub and instruct IPP • office to start procurement of min. 1 GW G2P capacity Drive strategy finalization and deployment incl. • • Clarify role of SOEs and how LNG price will be regulated coordination of investment and LNG Drive strategy implementation • Set-up task team to drive alignment on action plan infrastructure development amongst all key stakeholders (e.g. TNPA, NERSA, PR 1 etc.) • Develop long-term supply strategy and concrete plan of action Expedite finalization of UPRDB 2 under consultation of • based on finalised IEP multi-stakeholder forum (including IOC 3 s) to ensure • • Engage in bi-lateral negotiations with Mozambican government Execute plan of action alignment and policy clarity on long-term supply options • Investigate farm-out strategies Build regulatory, commercial and physical Secure mid-term gas supply Secure short-term gas supply infrastructure for long-term gas supply 1. Ports Regulator 2. Upstream Petroleum Resources Development Act 3. International Oil Companies 70

  64. Policy & Sector Innovation Education Policy Transformation Sector Focus Area 2 Energy – Priority Actions: Addressing constraints and opportunities could Liquid Fuels set up the industry for long-term Short-term Strategic stocks Biofuels industry Clean Fuels II upgrades Potential for local Support mechanisms industry support policy and plan way forward way forward manufacturing base to grow LPG market Determine value chain Reassess requirements, Validate feasibility studies Understand socio-economic Coordinate development Conduct feasibility study for on 1 st , 2 nd and 3 rd segments needing direct, locations and options for linkages and mechanisms for of business case, incl. different product groups targeted support additional storage generation biofuels supporting upgrades support mechanisms (incl. other industries) DMRE and industry Finalise strategic stocks Take decision on whether Take decision on whether and Take decision on how Take a decision whether / stakeholders to work policy & implementation biofuels should be how (mechanisms & Government should for which products a local closely together plan, coordinate introduced as liquid fuels timeframe) refinery upgrades support LPG market manufacturing base should implementation with NERSA energy alternative should be supported growth be supported to be built Potential Uplift by 2025 Up to 80- 15k R9bn 100k jobs Capex Jobs created 1 required 1 protected 1. Not including jobs potentially created and capex potentially spent upon successful completion of feasibility studies and decision to push respective topic forward where required 71

  65. Policy & Sector Innovation Education Policy Transformation Sector Focus Area 2 Energy – Roadmap: Interventions short term to support industry survival, Liquid Fuels mid/long term to support strategic decision making Act Now Plan Now Immediate Medium Term Longer Term Up to 6 Months 6 - 24 Months 2 - 5 Years • Allow industry to work with Government • Kick off (validation of) feasibility studies • Implement proposed next steps based on to coordinate security of supply country- on potential for developing biofuels outcome of decisions from feasibility wide where possible in compliance with industry, supporting refinery Clean Fuels II studies competition act upgrades, supporting LPG market growth and localisation of manufacturing base • Realise implementation plans to grow • Facilitate collaboration between industry industry and improve security of supply and Government for early information • Make decisions based on outcome of sharing, to determine immediate feasibility studies on the way forward support required and identify additional need for support in the coming months • Where decisions already taken, develop strategic implementation plans and • Engage with industry on proposed implement regulatory changes to attract changes to regulatory frameworks industry investment Feasibility studies and decision on way Implement plans and unlock value of Collaboration between government and forward; set up regulatory frameworks increased investment industry; targeted support for industry incentivising industry investments 72

  66. Policy & Sector Innovation Education Policy Transformation Sector Focus Area 3 Mining Overview of the mining sector and implications of COVID-19 Key Sector Objectives Categories Criteria Analysis Rationale • The industry will likely end 2020 with 20-30% reduced output • Smaller firms and certain assets are under pressure Resilience • Most of the industry expects to be fully operational by end 2020 • Investments are considered to be highly insecure due to regulatory uncertainty Sector and market • Even if current uncertainties are addressed the possibility of future changes remain Security • Fundamental reforms, including policy stability commitments, are required analysis • Ramp up production to pre- • The industry is in structural decline due to lack of expansion capex COVID level Job creation • In the short term, reforms can help stave off job losses • Ensure safety of ongoing potential • Job growth is only a long term prospect once expansion capex resumes at scale operations • Improve investment • ~30 000 jobs are at risk due to vulnerable operations losing production Job loss environment • Unlock potential investments • Demand dynamics remain viable for most South African operations Supply and Impact of • Production is mostly capped due to supply caps in infrastructure and energy Covid-19 Demand • Medium term trends differ by commodity, but remain moderately optimistic • Supply infrastructure has remained largely intact • Service providers and supply chains are however highly affected by operations at Infrastructure risk 73

  67. Policy & Sector Innovation Education Policy Transformation Sector Focus Area 3 Key challenges: The mining industry faces 6 main structural Mining constraints Electricity Infrastructure Regulatory Cost Geological License to Supply Bottlenecks Uncertainty Competitiveness Complexity Operate • Increasingly • Mn and Iron Ore • Uncertainties • High labour and • Depleting ore • Tension with expensive supply production capped around the Charter electricity inputs bodies communities • Supply disruption, • Exploration Coal • Regulation by • Lack of • Deeper mines, with • Poor labour causing ~3% output production in Charter is subjective modernisation lower grades relations losses in 2019 Limpopo and and easily Mpumalanga changeable capped by rail constraints 74

  68. Policy & Sector Innovation Education Policy Transformation Sector Focus Area 3 Priority Actions: Addressing constraints and opportunities could Mining add ~70 000 jobs by 2024 Regulatory Industry Reliable Energy Infrastructure Community Exploration Gov-Industry Investment Reform Modernisation Supply Development Investment Strategy Task Force Promotion Overhaul Industry to invest in Permit self/3rd Invest in rail & port Allow pooling of Improve Establish task force Promote SA as regulations for modernisation party generation & capacity investments across Geomapping in key for executional investment competitiveness drive fix Eskom supply expansions companies areas of SA certainty destination Write regulatory Government and Maximise Eskom Explore PPPs to Jointly develop Improve mapping Expedite highest- Develop core requirements into Labour should Generation facilitate community plans & and exploration impact project narrative on law support shift performance development track progress strategy execution mining in SA Potential Uplift by 2024 70 000 Jobs by 2024 75

  69. Policy & Sector Innovation Education Policy Transformation Sector Focus Area 3 Roadmap: Immediate interventions required to foster industry Mining recovery Act Now Plan Now Immediate Medium Term Longer Term 6 - 24 Months 2 - 5 Years Up to 6 Months • Industry-Government workshop to align • Implement regulatory reform, including • Grow portfolio of potential projects with on next steps legislative changes increased exploration • Initiate regulatory reform process for • Develop infrastructure PPPs to expand • Sustainably grow the industry overall with more investment export capacity sustained higher levels of capex • Agree on industry compact to outline • Fast-track high-potential projects, • Deliver real impact for communities roles for each stakeholder unlocking bottlenecks through collaboration at local level Systematically implement plans in Aligned industry and Unlock value of increased constant alignment Government strategy investment; ~ 70 000 jobs by 2024 76

  70. Policy & Sector Innovation Education Policy Transformation Sector Focus Area 4 Construct- Overview of the Construction sector and implications of ion COVID-19 Key Sector Objectives Categories Criteria Analysis Rationale • Industry hard-hit by shutdown Resilience • Chronic cash flow / liquidity issues plague the industry, hampering ability to withstand current shock Sector and • Ongoing intimidation at construction sites by local crime syndicates that threaten market Security contractors in return for kickbacks analysis • Industry has lost ~300-400k jobs in the last five years Job creation Restart the construction • Potential to create > 100k jobs per annum in low and semi-skilled categories potential sector in SA on a more sustainable, productive and • Historical trend has been about 100k jobs lost per year over the last five years • We estimate a further 20% of jobs could be lost due to Covid19 job-accretive basis Job losses • Up to 60% of jobs vulnerable as a result of Covid19 (lost or reduced pay) • Supply side has atrophied due to a lack of a robust demand pipeline Supply and Impact of • With Covid19, demand has all but dried up during lockdown Covid-19 Demand • Sluggish post-Covid economy will severely hamper recovery • Structural capacity lost as a result of Covid-19 shutdowns and bankruptcy • Site working conditions impacted by Covid-19 and will structurally reduce Infrastructure productivity in the sector 77

  71. Policy & Sector Innovation Education Policy Transformation Sector Focus Area 4 Construct- Key challenges: the construction industry faces 5 main ion structural constraints Funding for Innovation & Lack of ‘baseload’ Lose-lose contracts Dire skills shortage infrastructure productivity • Construction has some of • Industry does not function • Application of current • Massive loss of skills in the • Government’s ability to the worst productivity in on a project-by-project procurement processes industry over the last 5 fund the ‘baseload’ of the economy basis inadequately cater for skill years (>300k jobs lost in infrastructure projects is and quality of work the last five years, limited • Productivity has largely • Industry needs a clear significant retirement of • Current contracts and • Limited demand for remained flat (or declined) pipeline of activity to experienced supervisors) over the last 30 years invest in capabilities and contracting processes private sector builds given • Primary owner technology typical in the industry sluggish growth • Limited uptake of result attempts to transfer (government) has capacity • Slow down in government • Substantial private sector technology to improve risk in an unsustainable gaps to innovate private infrastructure spending, funding available, but productivity because it way sector participation requires cross-project despite high level structural gaps in models and innovative • Results in low or negative investment which current expectations of ~R1T in procurement processes ways of designing and project economics seldom investment has left the margins for contractors limit participation contracting work allow industry in dire straits and late / overbudget projects for owners 78

  72. Policy & Sector Innovation Education Policy Transformation Sector Focus Area 4 Construct- Priority Actions: Addressing constraints and opportunities could ion add 100k jobs, 100bn GDP p.a. Pipeline Procurement Skills Innovation Streamline Re-prioritise government Iimplement modern Set up national construction Mandate common data Streamline processes and approvals (e.g. infrastructure build pipeline collaborative contracting skills academy to rebuild platforms and base environmental, water) from national through to methodologies for front-line supervision and technologies such as 5D BIM and systems e.g. municipal level to unlock infrastructure builds artisan capabilities to unlock construction procurement projects for private sector productivity funding and investment Estimated full Potential Annual Uplift 2021 - 2030 R100b 1 100k 15-20b Jobs GDP Tax Rev p.a. p.a. p.a. 1: ~80% of this comes from unlocking more productive infrastructure 79

  73. Policy & Sector Innovation Education Policy Transformation Sector Focus Area 4 Construct- Roadmap: 4 interventions are required in the short term, ion 6 medium term and 5 long term Act Now Plan Now Immediate Medium Term Longer Term Up to 6 Months 6 - 24 Months 2 - 5 Years • Pay contractors that are owed monies to • Announce restructured and re-sequenced • Set up construction industry academies - ~100k support their liquidity infrastructure build programme (unlocking up capacity p.a. required to R1tn in investment) • Develop incentives for immediate construction • Continue to refine and streamline build works e.g. refurbishment of infrastructure that • Align private sector on the key opportunities programme – accelerate most profitable is not fully utilized as a result of Covid e.g. and secure private sector funding for most projects to ensure private sector participation airports promising projects • Streamline and standardize building codes and • Rapidly review the infrastructure portfolio to • Streamline approval and permitting processes standards identify the most promising projects for • Start the revamp of the procurement and • Revamp higher education courses on private sector – national, provincial and contracting processes engineering and construction to include modern municipal construction methodologies • Establish new minimum standards for • Leverage existing project preparation pipelines innovation on infrastructure, e.g. common data • Support export of prefabricated units (support to get infrastructure projects to a point of platforms and 5D BIM for manufacturing) and engineering services bankability • Get the first wave of infrastructure design going Immediate relief for construction sector Clarity on pipeline to enable rebuild of Sustainable construction industry and initial basis for longer term planning construction industry 80

  74. Policy & Sector Innovation Education Policy Transformation Sector Focus Area 5 Manufac- Overview of the manufacturing sector and implications of turing COVID-19 Key Sector Objectives Categories Criteria Impact Rationale • 140k – 240k jobs (12% – 20% of existing jobs) are forecasted to be at risk • Improve fundamental Job loss without intervention due to the economic effects of COVID19 and competitiveness of lockdown manufacturing sector, focussing on priority value chains • Total manufacturing value added to GDP is expected to drop between 20% Impact of GDP - 40% due to supply disruptions and depressed demand (globally and • Capitalize on the manufacturing Covid-19 locally) industry’s strong multiplier effects • Manufacturing sectors reliant on imported inputs/feedstocks and Business • Build resilience and ensure downstream activities risk continuity issues due to global supply Continuity disruptions business continuity for key subsectors • Need to strengthen South Africa’s competitiveness in the global • Leverage geo-political position in manufacturing supply chains Competitiveness • Should leverage manufacturing competitiveness across linkages with other order to strengthen growth in sectors specifically mining, construction and agriculture Africa • Look to develop “wildcards” 1 • The manufacturing sector is critical to South Africa developing resilience Sector and and security of supply for key products including healthcare equipment, that improve competitiveness Supply & Demand market pharmaceuticals and personal protective equipment and minimize disruptions impact caused by dependencies on the global supply chain in light of • Manufacturing subsectors have varying labour intensities and easily Job creation COVID19 disrupted through automation potential 1 Wildcards are important opportunities for South African manufacturers to quickly identify and produce to improve competitiveness and - 81 Legend: Low impact High impact minimize disruptions caused by dependencies on the global supply chain in light of COVID19

  75. Policy & Sector Innovation Education Policy Transformation Sector Focus Area 5 Pharma- ceuticals Key considerations facing the pharmaceutical sector Key sector considerations Key sector objectives Specific areas of reform / intervention • SA has one of the world’s most • Ensure medicines are sustainably available • Implementation of local procurement disproportionate disease burdens , both and accessible to entire population – (Designation) and localisation procurement infectious diseases and non-communicable strengthen local supplier and SMME chains policies diseases (NCDs) such as Diabetes, Hypertension etc. • Significant reduction in the sector trade • Government tenders should be based on deficit through localisation of production long term offtakes, rather than short term • Security of supply (SOS) is key – COVID-19 and local procurement instruments tenders that provide no certainty for local has exposed South Africa’s SOS players and accelerate de-industrialisation vulnerabilities • Leverage local volumes for export • SAHPRA should prioritise registration of orientation • The pharmaceutical sector has a rising locally produced products and expedite trade imbalance licensing of local production facilities as a • Regulatory environment that enhances way of retaining / attracting sector • Pharma and medical devices are the 5th certainty and predictability to retain and investment largest contributor to SA’s current attract investors account deficit • Access structures to be implemented to ensure broad access to new generation medicines such as Biologics 82

  76. Policy & Sector Innovation Education Policy Transformation Sector Focus Area 5 Manufac- Key challenges: the manufacturing industry faces 5 main turing structural constraints Co-ordination Energy Infrastructure Business environment Skills & technology • The manufacturing • Poor port efficiency and • An increasingly volatile • South Africa is ranked 67 • There is a lack of sector is directly high costs significantly currency results in by the WEF future of prioritization of strategic impacted by increasing reduce competitiveness unreliable business production report for manufacturing value energy costs and cost of planning and poor current and future chains • Unreliable, unsafe rail interrupted supply financial returns labour-force capabilities • Trade and government networks lead to over- • South Africa has not fully • Ineffective • The manufacturing reliance on more costly policies are not aligned utilised the benefit of road-networks implementation of sector lacks enabling to maximising value in natural gas at scale, government policy technology skills base to strategic value chains • Inadequate transport specifically piped gas for decrease local and global quickly implement and • The private sector does infrastructure resulting in heat-intensive investment in South benefit from advanced opportunity cost in Africa not aggregate local manufacturing processes African manufacturing manufacturing demand through Group • Ineffective municipal • Complexity of • Insufficient practical skills Procurement service delivery regulations and hurdles development through Organisations (specifically water and decrease business vocational / electricity) confidence and growth apprenticeship training programs 83

  77. Policy & Sector Innovation Education Policy Transformation Sector Focus Area 5 Manufac- Priority Actions: Addressing key constraints and opportunities turing could add 28K -70k jobs, 21 - 35bn GDP p.a. Selected Game Changers: 1 2 3 4 5 Fundamental Transport National Procurement Africa Trade Repurposing Competitiveness Corridors Organisation Program Wildcards Accelerate repurposing to wild card Prioritise fundamentals, including Accelerate completion of existing To ensure the sustainable supply Establish a focused program to products 2 , which have a current competitive energy supply, network infrastructure and of key inputs to high impact accelerate exports of high priority import value of R271bn, supported incentivizing strategic value chains accelerate ‘corridor initiatives’ to subsectors at competitive prices subsectors to targeted African by champions within industries, to and transport infrastructure, to improve South African through expert sourcing and countries and ensure through ensure supply of critical products enable global competitiveness competitiveness in Sub-Saharan create a demand pull on wildcards program includes enablers of and promote localization of across all sub-sectors Africa through co-ordinated aggregation AfCFTA to expedite its rollout products in priority value chains (e.g. manufacturing and mining) Full Potential Annual Uplift 2 Wildcards are important opportunistic 2021 - 2025 products for South African manufacturers to quickly identify and produce to improve competitiveness and minimize disruptions 28K -70k 6 – 10bn caused by dependencies on the global supply 21 - 35bn chain in light of COVID19 Tax Rev 1 Jobs GDP p.a. p.a. p.a. 1. Based on tax-to-GDP ratio of 28 84

  78. Policy & Sector Innovation Education Policy Transformation Sector Focus Area 5 Manufac- Roadmap : 2 interventions are required in the short term, 4 turing medium term and 3 long term Act Now Plan Now Immediate Medium Term Longer Term Up to 6 Months 6 - 24 Months 2 - 5 Years • Establish a Group Procurement Organisation to • Accelerate completion of existing network • Accelerate repurposing and promotion of wild ensure the sustainable supply of key inputs to high infrastructure and accelerate ‘corridor cards through impact subsectors at competitive prices and create a initiatives’ to improve South African • Aligning on wildcards across public and demand pull on wildcards competitiveness in Sub-Saharan Africa private sectors to ensure sufficient support • Enhance catalytic interventions (e.g. NTIP1) to • Prioritise competitiveness fundamentals, • Sharing best-practice and appointing enable manufacturers to upgrade production including competitive energy supply, champions within industries to ensure supply facilities in line with future of production whilst incentivizing strategic value chains and of critical products and inputs simultaneously expanding into Africa with old transport infrastructure, to enable global • Marketing interventions (e.g., through Proudly equipment (“Tool –recycling”) competitiveness across all sub-sectors South Africa) to boost demand locally • Promote partnerships to develop turnkey • Review trade policies in line with strategic value solutions for large scale projects in Chemicals chains and develop financing frameworks to and Metals industries incentivise developed economies with low and negative interest rates to co-finance important South Africa capital project in the rest of Africa • Establish a focused program to accelerate exports of high priority subsectors to targeted African countries and ensure expedited rollout of AfCFTA Build resilience Capture untapped value Position for sustained success 85

  79. Policy & Sector Innovation Education Policy Transformation Sector Focus Area 6 Transport Overview of the Transport sector and implications of COVID-19 Key Sector Objectives Categories Criteria Analysis Rationale • The transport sector continues to operate in all scenarios to accommodate the base load of economic activity across all industry Resilience • However, the sector is highly dependent on the derived demand from other • Catalyse the growth of industries for its growth other economic sectors by • Across all modes of transport, logistics operators and passengers face the threat of: Sector and increasing the global theft, bribery and corruption, mishandled cargo, vandalism, mode specific risk market Security • Existing security and safety challenges directionally cost the South African economy competitiveness of South analysis at least R177 billion each year through a combination of direct and indirect effects African industries • Transport remains a crucial sector as it is well positioned to absorb the prevalent • Increase access to the South Job creation low-skill base in South Africa • There are significant opportunities to upskill and harness 4IR within all sub-sectors potential African market and to of Transport African markets • 42 000 – 72 000 formal transport sector jobs are at risk in 2020, primarily in the • Provide a reliable, efficient, Road, Support and Auxiliary sectors Job loss • Jobs at risk are significantly higher when considering the informal sector and cost effective service to • Air transportation under huge threat with multiple airlines in business rescue other industries which keeps • Transport plays a dual role by serving the demand of other sectors, and the cost of moving goods to catalysing increased competitiveness through efficiency and cost improvements Supply and Impact of a minimum • The sector is highly dependent on the derived demand from other industries for Covid-19 Demand its growth • Dramatic reductions in liquidity as a result of the financial impact of Covid-19 will delay the implementation of existing and new infrastructure projects, particularly Infrastructure large scale transport infrastructure 86

  80. Policy & Sector Innovation Education Policy Transformation Sector Focus Area 6 Key challenges: the Transport industry faces 5 main structural Transport constraints Ageing & outdated Significant skills Lack of Private Sector Uncompetitive tariff Absence of critical infrastructure shortage participation & pricing systems policies • Absence of multiple key • Workforce requires significant • Limited rural road network and • • The landlord port authority Existing PPP and private sector policies constrains upskilling and limits the outdated road infrastructure participation (“PSP”) should be independent of competition, limits private limit the movement of goods frameworks for the Transport Transnet development and application sector participation, and allows of technologies sector contain unnecessary • Dilapidated rail infrastructure • Port prices and tariffs are inefficiencies to develop complexity and are not tailored • 50% of the labour force had and a disused rural network opaque and do not • Absent policies and regulation to specific sub-sectors reducing less than a secondary limit the options for industry to differentiate based on port include: their effectiveness and the – Single transport economic education in 2019, more than move products around the operations appeal for private players to regulator country and to ports. This 12% had less than a primary • The fuel and road accident engage with government – PSP frameworks education causes an overreliance on the fund levies increase projects – Separate Transnet overburdened road network • Transport remains a crucial operational costs and limit accounting divisions • Lack of technical expertise in • Over reliance on road transport – National rail policy sector as it is well positioned to growth opportunities PPP and PSP management – Corporatization of ports absorb the prevalent low-skill infrastructure results in • Lack of harmonisation between limits the effectiveness of – Performance based additional transport costs and base in South Africa standards and pricing across private-public projects which standards accelerated deterioration of SADC could boost the efficiency of – Updated public transport infrastructure transportation services subsidies 87

  81. Policy & Sector Innovation Education Policy Transformation Sector Focus Area 6 Transport Priority Actions: Addressing constraints and opportunities could add ~190 000 jobs 1 , ~R665bn in GDP 2 ,and ~R279bn in Tax Revenue 2 Drive a step-change in Increase private sector Implement rail Finalize and implement Accelerate infrastructure reliability and service participation concessions critical policy development Improve operational Address PSP and PPP Improve transport support to Drive towards regulation – Develop new infrastructure efficiencies across all modes. framework limits in each sub- key industries and transport e.g. standalone regulators for and upgrade outdated sector. corridors, such as secondary ports and rail – that will foster infrastructure to alleviate Reduce the cost of moving branch lines, that support enhanced competition and network congestion, reduce goods around the country Create management and manufacturing, agriculture, transparency in the market. cost, and improve national and to ports. financial partnerships. and mining. competitiveness. Full Potential Annual Uplift 2021 - 2030 ~19 000 R66.5 bn R27.9 bn Jobs 1 GDP Tax Rev p.a. p.a. p.a. 1. Jobs refers to formal sector jobs. Figures may be significantly higher if informal jobs are accounted for . 2. Effects from interventions are cumulative over the period 2021 – 2030 88

  82. Policy & Sector Innovation Education Policy Transformation Sector Focus Area 6 Transport Roadmap: 3 interventions are required in the short term, 6 medium term and 3 long term Act Now Plan Now Immediate Medium Term Longer Term Up to 6 Months 6 - 24 Months 2 - 5 Years • Increase private sector participation for infrastructure • Ensure a step-change in core rail network reliability • Create public private partnerships and optimise the development and operation by optimising the PSP process through: participation process to accelerate infrastructure and creating management and financial partnerships development through creation of management and – Improved operational efficiencies • Accelerate the establishment of an independent rail financial partnerships – Effective maintenance programs regulator to drive pricing and competitiveness • Provide open access to the rail system to allow a more • Continue to drive towards a standalone National Ports innovative and cost efficient multi-modal transport • Reduce the cost of road transport services by Authority that will foster enhanced competition and solution balancing regulation towards performance driven transparency in the market standards and cost enhancing regulation for • Optimise the integration of transport modes to ensure • Accelerate the development of inland port processing transporters. right of access and affordability facilities to reduce congestion at sea ports and speed up inland border crossings • Drive operational efficiencies to reduce the cost of moving goods through ports e.g. performance • Implement rail concession agreements to improve transport support to key industries and transport corridors driven compensation frameworks, introduction of such as secondary branch lines that support transparent and reduced cargo fees. manufacturing, agricultural and mining • Accelerate investments in Smart Logistics to further • Expedite the finalisation and approval of the public drive efficiency and productivity in the sector transport subsidy policy Create up to R246 billion in GDP 1 Create up to R224 billion in GDP 1 Create up to R195 billion in GDP 1 and 70 300 jobs 2 and 53 800 jobs 2 and 65 800 jobs 2 1. GDP and Job effects from interventions are cumulative over the period 2021 – 2030 2. Jobs refers to formal sector jobs. Figures may be significantly higher if informal jobs are accounted for. 89

  83. Policy & Sector Innovation Education Policy Transformation Sector Focus Area 7 Agriculture Overview of the agriculture sector and implications of COVID-19 Key Sector Objectives Categories Criteria Analysis Rationale • Fairly resilient sector in the face of economic shocks: market-economy nature of Resilience the sector make resource allocation flexible based on factors of demand and supply; Export demand generally benefits from declining ZAR Contribute to GDP • The agriculture value chain can be Sector and • Economic performance is fairly secure, however primary agriculture sector can be an important contributor to GDP market Security impacted by natural shocks (e.g. droughts and disease, which may impact output growth for developing markets significantly), emphasising the need for investment in water infrastructure analysis Boost employment • High potential for job creation opportunity, particularly within emerging / rural • Employment opportunities are Job creation sector farming, and through the growth of certain labour intensive crops (e.g. created across the value chain, potential citrus, vegetables) particularly in rural parts of the country • Sector relatively protected from job loss; initial trade restrictions (e.g. alcohol) as Ensure food security and nutritional Job loss well as reduced demand of higher-value produce may result in negative outcomes economic consequences and thus may lead to job loss • Agricultural value chain is key to • Supply: Most sub-sector value-chains for both informal and formal markets ensuring domestic and regional Supply and Impact of remain intact; some concern around how COVID may impact operations of agro- food security processors. Demand: consumers likely to trade down for cheaper goods as Covid-19 Demand impact of recession influences disposable income • Sector responsible for ensuring nutritional outcomes in SA • No significant impact on existing infrastructure, however situation has brought to light various infrastructural constraints across the sector (including logistics Infrastructure and water) 90

  84. Policy & Sector Innovation Education Policy Transformation Sector Focus Area 7 Agriculture Key challenges: the agricultural industry faces 5 main structural constraints Access to Finance Land Reform Water Infrastructure Transport Access to New Infrastructure Markets • Limited institutional capacity • • Delayed water infrastructure • Lack of investment in port • Redistribution: Limited Cyclical and capital intensive to drive agricultural trade nature of agriculture means transfer of ownership, state projects, limited strategic infrastructure at key ports in farmers have a critical need to support post transfer, prioritization of new projects the country – constraining agendas, develop new agreements, enforce existing access financing beneficiary selection strategy and limited private sector exports of high-value produce trade terms investment • • Existence of operational Financial sustainability of the • Restitution: Limited • Lack of effective coordination • Weak or inefficient Land Bank, and its ability to inefficiency at major institutional capacity and and cooperation between the serve conflicting mandates administrative processes (e.g. agricultural export ports in SA budget to process large (profit/commercial and provisioning of water rights) DAFF, DTI and Dirco, to backlog of claims • Limited investment / lack of formulate aligned and development) under question and significant delays in operational effectiveness of execution of projects coherent trade strategies and • Tenure rights: Lack of clarity • Limited state funded rail networks has driven up drive through to conclusion and formalization of existing • Impending impact of climate agricultural insurance/relief costs and caused shift to road land rights in traditional areas • Need to target new export available to protect farmers change on water availability transportation and water supply gap will likely opportunities in Sub-Saharan from the impact of recurring • Expropriation without Africa droughts reduce available land for compensation: A key inhibitor cultivation in key regions to future investment given uncertainties created 91

  85. Policy & Sector Innovation Education Policy Transformation Sector Focus Area 7 Priority Actions: Addressing constraints and opportunities Agriculture could add 60-80k jobs, R10-15B GDP p.a., R3-4B in tax Maximise commercial Improve access to Investment in enabling Commitment to Global trade agricultural output financing infrastructure transformation optimisation Support and expand Ensure sustainability of Prioritise maintenance and Support agricultural Continue to establish commercial primary existing institutions and investment into logistics and transformation through international trade agricultural sector to ensure enhanced access to water infrastructure projects, solving land right issues, agreements to drive regional food security and affordable financing through with an openness to PPPs for optimizing land reform, and market-led growth, and increase export earnings blended finance premised on funding + management emerging farmer interventions support regional growth an open and competitive system Reduction in Full Potential Annual Uplift prevalence of 2021 - 2030 stunting +60-80k R10-15B +R3-4B + 0-2% Jobs GDP Tax Rev Nutrition p.a. p.a. p.a. p.a. 92

  86. Policy & Sector Innovation Education Policy Transformation Sector Focus Area 7 Roadmap: 5 interventions are required in the short term, 5 Agriculture medium term and 3 long term Act Now Plan Now Immediate Medium Term Longer Term Up to 6 Months 6 - 24 Months 2 - 5 Years • Backstop emergency farm financing through • Enhance capacity and address process • Conclude key infrastructure maintenance/ commercial banks, and ensure sustainability inefficiencies to increase finalisation rate of capacity projects for ports, water supply of the Land Bank restitution / labour tenant claims infrastructure and rail systems • Reduce existing COVID-19 restrictions on farm • Address key challenges in land redistribution • Continued formalization of existing land tenure service providers programmes (beneficiary selection, post- rights in traditional areas distribution support, ownership rights) • Assist processors with testing and PPE • Finalise new international trade agreements in supplies in COVID-19 outbreaks • Agree on future structure and funding model of new markets (e.g. East Asia) to drive export-led the Land Bank to address conflict in mandate growth • Maintain open ports for exports • Re- energise and resource “buy local” • Free up restrictions in informal distribution campaigns , especially for higher quality calories channel (e.g. vegetables and fruits) • Review/revise incentives to further enable private sector involvement in development / infrastructure interventions Establish grounds for agri-business Deliver on growth interventions and Ensure short term food security and confidence and long-term investment removal of key constraints prevent permanent loss of capacity 93

  87. Policy & Sector Innovation Education Policy Transformation Sector Focus Area 8 Financial Overview of the Financial Services sector and implications Services of COVID-19 Key Sector Objectives Categories Criteria Analysis Rationale • Enable long-term growth by • Well positioned to absorb market shocks given substantial capital buffers (both CET 1 Resilience and SCR levels ~2 x minimum thresholds) facilitating flow of capital to sustainable fiscal deficits Pre-COVID • Financial performance is highly correlated with the broader economy and high impact, real sector and • Security Given high operational leverage (reflecting high fixed cost base), declines in revenue market have a disproportional impact on profitability economy opportunities analysis • • Drive increased Large employer today of 480k people (~5% of all formal jobs) in 2019 Job creation • “Derived” sector reflective of the broader economy – therefore limited ability to create competition and potential in-sector jobs independently of overall economic performance innovation in the sector to • The industry is committed to minimise job losses in the short term. However there are achieve deeper, more risks of job losses downstream (e.g. independent brokers and the impact of ongoing meaningful financial digital migration by customers) Job loss • inclusion by leveraging Over the medium-term, declines in profitability (see below) and ongoing client shifts to digital will necessitate cost optimisation which, where possible, will be done through electronic payments, and reskilling, transfer to higher demand digital functions, etc. reducing costs through • Sharp declines in revenues and profitability expected in 2020, and depending on pace of digitisation and shared economic recovery, potentially spilling over into 2021. In either scenario, recovery to pre- Impact of Supply and COVID levels is only expected beyond 2021 services COVID-19 • Revenue after risk cost for the banking sector could fall by as much as ~35%, over the next Demand • Help to safeguard SMMEs two years, with a more optimistic scenario of ~15% decline in 2020 and a rebound in 2021 • Gross written premiums in the insurance sector is expected to fall by ~10-20% (and protect jobs) and provide relief to • Accelerate digital financial services ecosystem, including digital ID and digital payments households in the short- Infrastructure (to help ensure no citizens are left behind in the 4IR) medium term 94

  88. Policy & Sector Innovation Education Policy Transformation Sector Focus Area 8 Financial Key challenges: the Financial Services industry faces 4 main Services structural constraints Enabling long-term Unlocking sector vitality economic growth Lack of bankable Lack of meaningful financial Increasing regulatory Barriers to Competition infrastructure pipeline inclusion among SMMEs burden • Continuous increase in regulatory • Late payment of SMMEs by • Inconsistent pipeline of • Regulatory environment burden for incumbents (sector is both government and big bankable projects in recent years designed to ensure soundness of facing new wave of regulation e.g. business – constrains investment despite financial system and Basel Basel IV, Conduct of Financial • Limited access to credit for private capital being available compliance. Differentiated Institutions Bill, etc.) and often eager to invest SMMEs, particularly smaller and regulation may be appropriate - Reduces space to lend informal businesses (often for transaction only players such • Insufficient coordination (particularly into longer-term reflecting poor data availability as e-money licensees between private and public projects) and high business failure rates) • Limited flexibility for FinTech sectors to identify and fund a – constrains growth of - Adds to operating costs and broad range of network innovation (starting to be absorbs scare skills businesses and employment infrastructure development addressed through newly created • Low penetration of electronic • Regulation of statutory liquid FinTech innovation Hub) • Lack of pipeline has also made it payments (80% of transactions assets, sector rating and therefore difficult for institutions to invest cost of capital is aligned to that of by volume still cash-based), in specialist skills required to the sovereign – meaning all which contributes to credit sovereign downgrades directly execute projects access challenges (less data impact broader cost of capital available on SMME finances) 95

  89. Policy & Sector Innovation Education Policy Transformation Sector Focus Area 8 Financial Priority Actions: Addressing constraints and opportunities could Services add ~220k to 470k jobs, ~R50bn to 90bn GDP p.a. Enable faster long term growth Increase competition and financial Extend relief to households and inclusion businesses over the medium term • Create a long-term, predictable pipeline of • Mandate the accelerated roll out of a digital financial • Continued engagement between BASA, NT and infrastructure projects with appropriate services ecosystem , including digital ID and digital SARB , aimed at providing relief to households and risk/reward profiles. payments that can encourage greater adoption of SMMEs to support economic growth and job electronic payments (and therefore enable access to retention, including amendments to the SMME • Develop regulated retail investment credit for SMMEs) Loan Guarantee Scheme and potentially increase vehicles that can give retail investors access size of the programme • Reduce regulatory barriers to entry and innovation, to longer-term, real economy opportunities whilst preserving financial soundness • Continually review regulatory easement (LCR, SCR, (e.g. infrastructure) • Introduce tiered capital requirements, e-money capital buffers), i nclude additional adjustments • Phase out large government insurance licenses, and open banking legislation; (notably to NSFR) and re-consider or delay new schemes (e.g. RAF, Compensation Fund) that regulation (e.g. Basel IV, Conduct of Financial • Expand recently introduced FinTech Innovation Hub face financial and administrative challenges, Institutions Bill, etc) to enable continued lending • Encourage greater adoption of industry utilities unlocking fiscal capacity (there are large, and debt restructuring growing contingent liabilities on • Begin design and planning of a universal Digital ID government’s balance sheet arising from these entities) Steady state expected to Full Potential Annual Uplift GDP be achieved by 2025 ~ 220-470k ~50-90bn Excludes impact of long- 2021 - 2030 Jobs, from p.a. from term capital unlock for steady state steady state investments elsewhere in the economy A further ~800k jobs can be preserved In addition, ~R50bn p.a. could be over the next 2 years through measures added to GDP over the next 2-years to safeguard SMMEs through consumption stimulus 96

  90. Policy & Sector Innovation Education Policy Transformation Sector Focus Area 8 Financial Roadmap : Numerous interventions are required over time by Services government, regulators and the sector Act Now Plan Now Immediate Medium Term Longer Term Up to 6 Months 6 - 24 Months 2 - 5 Years • Enable creation of regulated, closed-end, • Create long-term, predictable pipeline of bankable • Return of sovereign to investment grade retail investment vehicles infrastructure projects; allow private funders to be rating to reduce cost of capital and boost involved in project governance investment, growth and jobs • Amend SMME Loan Guarantee Scheme • Legislate the use of universal digital IDs terms (to allow lenders flexibility to deviate • Mandate implementation of real-time rapid Actions led and drive implementation (supported by from standard credit policies and to include payments platform (RPP) financial institutions) by alternative lenders) • Introduce tiered capital requirements, e-money • Phase out public insurance schemes e.g. government • Continually review regulatory easement licenses, and open banking legislation; Expand on the RAF / regulator (LCR, capital buffers, SCR, NSFR); re- recently introduced FinTech Innovation Hub • Phase out use of cash in government to consider or delay new regulation citizen and citizen to government • Relax restrictive provisions of the CSI pillar of BEE transactions Codes, to allow for a viable bridge between corporate spend on SMMEs and commercial funding • Consider interoperability of e-wallets • Mobilise additional investment into real asset and • Support roll out of Digital IDs and link to • Facilitate accelerated (and additional) private infrastructure opportunities by the regulated bank accounts / e-wallets working capital loans to SMMEs (incl. savings industry through the design of marketable through alternative lenders) • Develop and leverage industry wide securities utilities (e.g. common KYC utilities in the • Provide cash-flow support to SMME Actions led • Invest in and implement RPP; develop accompanying banking sector) suppliers and loans to Independent by sector alternative digital payments applications Financial Advisors • Design and distribute affordable • Build the capabilities and capacity in the regulated insurance alternatives to current public • Assess opportunity to provide longer term insurance schemes e.g. 3 rd party injury savings industry to provide project funding cash-flow relief to customers liability insurance products 97

  91. Policy & Sector Innovation Education Policy Transformation Sector Focus Area 9 Overview of the Telecommunications sector and implications Telecomms of COVID-19 Key Sector Objectives Categories Criteria Analysis Rationale • Sector forms the basis of remote interactions and provides increasingly critical Resilience connectivity infrastructure required by other sectors and industries to function • Maximise population access to • Telcos have been able to continue operating largely uninterrupted by lockdown connectivity Sector and • The sector is reasonably stable with limited volatility in returns due to the mature nature market • Enable economic growth and Security of the market, however there are several factors which have caused shocks e.g. Competition Commission etc. development through connectivity analysis • Enables new growth industries within and outside of Job creation • Telco sector has a limited ability to create direct jobs but has significant potential to traditional telco (e.g. IoT, create jobs indirectly through enabling the growth and expansion of other industries potential Cloud) • Facilitates growing digital • Job losses in the sector likely to be limited as increased demand for connectivity will commerce and assist in protecting the sector’s economic output and workforce. Job loss • However, some Telcos in weaker financial positions pre-pandemic will not be equally protected from job losses • Realise social development goals • Demand for data has increased significantly during the crisis (not all able to be • Greater financial inclusion Supply and monetised however), while that for voice services has declined through OTT substitution Impact of • Expanded access to education • As consumer and business incomes come under significant pressure, demand is Covid-19 Demand platforms through e-learning expected to be subdued in the medium term • Improved access to healthcare • Increased connectivity demand has placed strain on existing network infrastructure through telehealth • Infrastructure Temp. Spectrum has been released assisting to alleviate pressure in mobile networks • Weakened Rand has an adverse impact on cost of additional infrastructure investment 98

  92. Policy & Sector Innovation Education Policy Transformation Sector Focus Area 9 Key challenges: the telecommunications industry faces five Telecomms main structural constraints Theft and Infrastructure and Policy Institutional Regulatory and vandalism spectrum deployment uncertainty capacity governance • Battery theft and • Lack of Rapid Deployment • Frequent changes in DCDT • ICASA could enhance its • ICASA Council made up of vandalism remain a major Policy (RDP) creates leadership has stalled technical and private 8 full time councilors complexity and high costs policy implementation sector telco experience without clearly defined challenge and increases costs for operators and for operators to roll out and created uncertainty in roles in the Act • This could improve users network the industry effectiveness of decision • DCDT appointment of • Frequent incidences of • Lack of trust between making and build trust • Under-allocation of ICASA councilors creates a theft also cause disruption industry, regulator and through industry spectrum increases capex potential conflict of ministry hampers effective representation in services for consumers cost and increases interest working relationship possible network • MTN has stated that in • DCDT should focus on • ICASA relies on congestion • Major policy changes 2019 it spent more than strengthening managerial parliamentary allocations, R100M dealing with acts prevented ICASA from and technical skills • Lack of HDS* and RDP a independence could be of theft and vandalism auctioning HDS e.g. Policy required to execute policy driver of high data prices enhanced through greater on creation and licencing implementation due to higher capex financial autonomy of WOAN Note: *HDS: High Demand Spectrum, DCDT: Department of Communications and Digital Technologies 99

  93. Policy & Sector Innovation Education Policy Transformation Sector Focus Area 9 Priority Actions: Addressing constraints and opportunities could Telecomms add 65K jobs, R20B GDP, and R6B in tax annually Rapid Deployment Spectrum Regulatory and Policy Stability and Policy Allocation Departmental Capacity Governance Bolstering the skills and industry Enactment of RDP is needed to Spectrum allocation (incl. finalising Reduced turnover of leadership in experience of ICASA and DCDT can facilitate faster and cheaper roll digital migration and licencing of DCDT and enhanced independence improve institutional capacity to out of network; critical to enabling WOAN) is essential to unlocking of ICASA important to drive policy fulfil mandates 5G and continued investment in network coverage/quality stability, implementation infrastructure advancement continuity and build trust Direct and indirect Full Potential Annual Uplift 2021 - 2030 contribution +55-65k R15-20B +R4-6B Jobs GDP Tax Rev p.a. p.a. p.a. 100

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