Skipping round a week of intense meetings in Johannesburg in the past week I was generally the more optimistic one, relatively speaking.

There seems to be a residual and hard-to-budge gloom and scepticism, even in the face of some narrow evidence of progress in reforms. What freaks me out as an analyst is the risk that we miss some turning point as animal spirits kick into gear to cause growth to leap meaningfully higher. But it seems there is little risk of that at the moment. Investment interests remain narrow and largely energy (and load-shedding mitigation) focused.

That we are now on a downward path towards the substantive end to load-shedding seems to be largely brushed over; indeed we can see less impact from reductions in load-shedding into output data in recent months. Equally, that logistics reform policy is turning out to be quite radical and progressing quite nicely has not caught the wider zeitgeist yet.

This seems to come down to a glass half full/glass half empty problem. There is always a slew of problems still developing and extra miles of reform seen ahead. That the Transnet situation is deteriorating rapidly in real time — even if the medium-run path out looks more set — sees focus on the short term.

The slew of recommendations from the latest Harvard report adds to the sense that there is so much more to do than is on the agenda. The current Operation Vulindlela agenda is deliberately narrow to ensure success — which it is showing — but we should not forget the broader range of issues. Indeed, this is why despite being optimistic about the Operation Vulindlela reform agenda we struggle to see medium-run growth higher than 2% because the wider range of issues impose binding constraints.

The Harvard recommendations, however, very much preach to the converted in small slices of the public sector. A bit like a new Washington Consensus, it will fail to move the wider public sector or implacable adherents to 1960s thinking more broadly. Still, they are taken seriously by the private sector and come well timed before party manifestos are launched in the new year. Some of the debate around the elections will be influenced by the recommendations, though to say the marginal voter would be influenced would be a step too far.

At the core of the Operation Vulindlela agenda and the progress it has made in the past three years is the idea of reshaping institutional design in various sectors with the unbundling of entities, wrapping in the efficient inclusion of the private sector and layering on top rules of the game played out through robust regulatory roles. This is as true of water reforms (which have largely flown under the radar in media coverage) as it is electricity and logistics.

As we peel back the onion of reforms (with each layer exposing new challenges to be overcome) some core and more simple issues emerge. The main one being state capacity. Who on earth is going to run all these new regulators at senior levels and drive their work at more junior levels? There is no clear pipeline and, as National Prosecuting Authority (NPA) cuts show, forming pipelines of new talent and entrants into the public sector has become increasingly difficult.

The department of public service & administration reform efforts on the public sector capacity problem seem to be an overly codified and legalistic view of things. You really need a wall of young, talented graduates — perhaps with global training, as well as a mix of senior locals and foreigners — to bridge such institutions until they are self-sustaining.

The same is true for boards and noneconomic capacity, as seen recently with forcing out of the head of State Security Agency (SSA). We should also not forget that the Reserve Bank is having its own dramas on this front, having not been able to expand the membership of the monetary policy committee in recent years.

This capacity issue is likely to be one of the defining issues of the new administration, with decent people worried about working in a coalition environment.

This perhaps highlights an issue poorly reflected in the economic literature: if economies and institutions and public sectors slide for too long, then turning sentiment during the recovery is all the harder because there is always so much to do.

This is why I often describe my optimism as “narrow”. I am above consensus still on growth and think it can sit much closer to 2% in 2024. Reserve Bank rate cuts from the third quarter can support eventually a little more household growth — but overall the story will remain one of resilience as we’ve seen in 2023.

The election, however, risks further damaging sentiment as we get more fear in the ANC developing into more mad pronouncements from the government. The constant blaming of everything on apartheid is an unhinged story investors have heard for far too long from government ministers, who travel overseas making the case that somehow people should treat SA as a charity case and buy its bonds because of the legacy of apartheid. This sob story narrative does not go down well, especially compared with the more robust narratives emerging from others like Kenya. It is exactly the same on just transition funding.

Equally, I had to chuckle at the madness of the electricity minister offering bonuses to Eskom generation employees that already exist and were reintroduced — based on diesel savings, exactly as the minister seemed to think he had suddenly thought up — by former Eskom CEO André de Ruyter.

The nauseating spin is all quite normal into an election but risks hampering sentiment. This was not the case in 2019, of course, where the narrative was “purer” about solidifying the end of state capture. Now there is a complex mix of detailed and positive reform communications with investors and business and political promises that often overlap and conflict.

The road is there, though, to keep things edging forward. If the National Treasury successfully shows R21bn of intra-year cuts and R69bn of gross underlying cuts for next fiscal year. If there is a solution to the Transnet going-concern problem and year end redemptions problem. If a slew of important Operation Vulindlela-related reform legalisations (across a range of areas including transport and electricity) is passed and a range of regulations (especially the department of home affairs reluctant visa reforms) gazetted. These can be the breadcrumbs to the other side of the elections.

In the interim, we need to remember the maxim of ANC conferences for election periods: “most of the mad rhetoric won’t be implemented”, reinvigorate fact/reality checking, keep your eyes on what is happening and then hold your breath till after the elections! Only then might sentiment properly turn if fiscal and governance/political cliff edges are avoided.

• Peter Attard Montalto leads on political economy, markets and the just energy transition at Krutham (formerly known as Intellidex), an SA research-led consulting company.