Infrastructure key to SA’s economic welfare — Cyril Ramaphosa

The government will have to galvanise all sectors in a bold effort to turn around the economic fortunes of the country.

This is what President Cyril Ramaphosa told business leaders at a meeting in Cape Town yesterday.

The meeting was between government, financiers, organised business and infrastructure industry, where Ramaphosa spoke about the importance of infrastructure as an economic driver for the country.

“I have previously described infrastructural investment as a critical driver of future growth in an economy that has been stuck in a low-growth trajectory for the past 10 years.

“Infrastructure plays a significant role in a country’s economic welfare.

“The provision of superior quality infrastructure allows an economy to be more efficient; it has the effect of improving productivity, and raising long-term growth and living standards,” Ramaphosa said.

“However, it does not follow that more infrastructure in-and-of itself will translate into higher long-term growth.

“It is having the right kind of infrastructure investment that will increase an economy’s productive potential,” he said.

Painting a gloomy picture of the harsh economic realities of the country, Ramaphosa said public infrastructure spending had decreased in recent years to an average 13% of total spending.

The 2019 Budget Report states that public investments have been declining and transfers to local governments for investment projects are underutilised.

The government’s purse has been squeezed even further by bailouts to state-owned entities like Eskom and SAA.

Things must change, Ramaphosa said.

“Overall infrastructure investment needs to grow to 30% by 2030 to achieve the NDP growth targets.

“Multilateral development banks, development finance institutions and the private sector all have a critical role in financing and implementation of this investment.

“In recent years, government has witnessed the accelerated deterioration of some of its most important assets required to improve the quality of life of the people.

“The rapid deterioration of municipal water infrastructure such as waste water treatment works and water treatment plants undermines the economy and threatens access to basic services.

“The disintegration of provincial and municipal roads will affect the efficiency of the road network, stunt economic growth and increase the cost of transport for all road-users.

“The story of failing power plants is well documented, causing great harm to the economy and raising the country’s risk profile.

“The haemorrhaging of technical engineering and financial skills in the public sector has contributed significantly to the bleak state of public infrastructure.

“Decimation of these necessary skills in the public sector has undermined planning, prudent asset management, and the production of a credible and transparent project pipeline.

“The net effect has been the collapse of industry, divestment from the country and erosion of funder confidence,” Ramaphosa said.

“This is a picture we want to correct and correct immediately,” he said.

Immediate interventions required to address the situation include:

• The creation of technical and financial engineering capacity by creating a legally permissible transitional dispensation to ramp up state capacity in the technical and financial areas, working with the private sector to recreate necessary skills in the public sector;
• Develop a detailed Infrastructure Investment Plan that outlines a public-private partnership framework and removes policy bottlenecks in engaging with private sector;
• Initiate policy and regulatory reforms to make it easier to do business in SA;
• Rethinking the public sector financing space through initiatives like the Infrastructure Fund which is a way of crowding-in private sector participation in the rollout of public infrastructure; and
• Revise the public sector infrastructure institutional framework.

“A review of distribution of functions and roles across different institutions and optimising processes and controls to ensure optimal infrastructure investment is critical,” Ramaphosa said.

“This will include mainstreaming the Infrastructure Fund concept into the institutional and decision-making process.

“The recently-established investment and infrastructure office in the presidency will spearhead the revision exercise with a view to ensuring better co-ordination and alignment, and positioning the presidency as the strategic centre for investment and infrastructure in the country.

“I will be releasing an infrastructure investment policy statement, which, among other things, will provide an ‘ecosystem’ within which good infrastructure investments (including PPPs) are undertaken, remove ‘institutional confusion’, and create an oversight mechanism.

“This policy will help build consensus, and provide clarity to all stakeholders on how infrastructure projects should be conceived, how government support mechanisms should be structured and how the infrastructure project life cycle should be streamlined.”

A Sustainable Infrastructure Development Symposium would be convened to come up with projects of national significance, Ramaphosa said.