President Cyril Ramaphosa delivers the first State of the Nation speech of the government of national unity. (Photo: Phando Jikela, RSA Parliament) President Cyril Ramaphosa plans structural reform for local government and for the water sector in an effort to lift constraints on the economy.Large infrastructure projects will be financed in `innovative ways`.Government efficiency is set to be increased by digitising services.President Cyril Ramaphosa has made his economic reform programme the centre of his agenda for the next five years, promising a `second wave` of reform that will include dealing with the water crisis, addressing local government dysfunction, and digitising government services. After electricity and logistics constraints, water and local government failures are the top impediments to doing business in SA. And, while infrastructure spending has been on the agenda for years, it has often failed to materialise.Ramaphosa`s first six years as president have yielded low returns on growth and employment. Growth has hovered around 1%, and unemployment has significantly worsened on his watch to 32%, a five-point increase. Ramaphosa noted that the economic reforms had boosted confidence in the SA economy and would lead to higher growth. `We are steadily removing the obstacles to meaningful and faster growth. The economic reforms we are implementing through Operation Vulindlela have created a new sense of optimism and confidence in our economy. We are seeing positive results in the improvement of the functioning of our network industries as well as the investment opportunities that are opening up and are being taken by investors, leading to job creation,` he said. While Ramaphosa expounded at length on the importance of the far-reaching reforms in electricity and logistics, the most significant new announcements in the speech were those on local government and water. Local government is to be completely overhauled in terms of structure and funding model. This will require a new White Paper, which will be published for public comment and consultation.Beginning immediately, the national government will work with municipalities to set up ring-fenced utilities for water and electricity services to ensure greater investment and maintenance. While Ramaphosa did not mention it, the ring-fencing of utilities will help solve the growing problem of municipalities not paying their bulk water and electricity accounts.`Many of the challenges in municipalities arise from the design of our local government system. We will, therefore, undertake extensive consultation to develop an updated White Paper on local government to outline a modern and fit-for-purpose local government system. We will review the funding model for municipalities as many of them do not have a viable and sustainable revenue base,` he said.The government would also expand its support to municipalities that require assistance.Reforms in the water sector will also begin this year by establishing the National Water Resource Infrastructure Agency, which will enable private sector investment and blended finance options for water infrastructure. Seven large water infrastructure projects costing R23 billion are planned, and Ramaphosa said their financing had been secured. Legislation will also be introduced to enable the Department of Water and Sanitation to withdraw the licences of water service providers where they do not meet the standards for quality drinking water.These measures have been welcomed by business, with Business Leadership SA (BLSA) saying it is encouraged by Ramaphosa`s focus on water system reforms and addressing dysfunctionalities in local government. `The fact that he spent much of his speech emphasising the importance of getting municipalities up to standard in terms of their management of the key areas of water and electricity was further encouraging because it signals that government recognises how important it is for the economy to have more efficient local government capacity,` BLSA SA CEO Busi Mavuso said on Thursday night. Ramaphosa also promised a large infrastructure build of R900 billion over the next three years, which he said could lift economic growth to 3%. `We are undertaking massive investment in new infrastructure while upgrading and maintaining our [existing] infrastructure. We are developing innovative ways of funding infrastructure ¦ engaging local and international financial institutions and investors to unlock R100 billion in infrastructure financing,` he said.BLSA, however, was `somewhat disappointed at the lack of ambition on infrastructure development`.As part of the reform programme over the past year, the government has revised regulations for public-private partnerships. It has attempted to replicate the successes of the Renewable Energy Independent Power Producer Project by launching a project preparation bid window to attract bids for infrastructure projects. Of the R900 billion, just over a third will be spent by state-owned enterprises. Ramaphosa said government would proceed to implement its proposed model of a state-owned enterprise holding company, under which companies such as Eskom and Transnet would be housed. A state-owned entity reform unit will be established to coordinate this work. Ramaphosa pledged that the government would harness technology to transform the way that government works, investing in digital public infrastructure and a new digital identity system. `These measures will transform the relationship between citizens and government and create one government that is accessible to every person at a touch,` said Ramaphosa.On Friday, Minister in the Presidency Maropene Ramokgopa will elaborate further on the government`s programme when she briefs journalists on the Medium-Term Development Plan. On 19 February, Finance Minister Enoch Godongwana will present the budget, which will elaborate on financing the government`s programme.