Pretoria - The government’s approved and budgeted infrastructure plans amounted to R845bn over the medium-term expenditure framework (MTEF) period, Finance Minister Pravin Gordhan
said on Wednesday as the state showed it was steadfast in building proper infrastructure and a strong economy.
But Gordhan admitted there were several weaknesses in the state’s infrastructure capacity, saying spending had lagged behind plans.
SA’s investment in infrastructure gained momentum in the years leading up to the 2010 Soccer World Cup and is set to expand as the foundation of a national growth and development strategy.
The country’s electricity, water, transport and telecommunications networks are being extended, education and health capacity is being expanded and human settlements are being built and upgraded to strengthen the fabric of communities.
Speaking at the presentation of the 2012 budget in parliament, Gordhan said 43 major infrastructure projects had been identified, adding up to R1.3 trillion in expenditure.
Gordhan said just under R300bn would be invested in the energy sector and R262bn in transport and logistics projects.
The presidential infrastructure coordinating commission (PICC) had made considerable progress in identifying projects and clarifying long-term investment plans to drive economic change.
These projects would be funded in various ways and the fiscus would meet the costs of public service facilities such as schools and courtrooms, hospitals and rural roads.
The other funding method would see public entities such as Eskom and Transnet financing their investments from internally generated surpluses and borrowing from the capital market.
“This means they have to generate sufficient revenue from tariffs and charges to repay debt over time, and cover operating and maintenance costs,” Gordhan said.
He said in some cases a mix of tax finance and cost recovery would be appropriate.
Private sector investment played a major role in several sectors. Access to telecommunications services was financed by private operators and the airlines industry had several private sector players, he said.
“The first round of over 1 200 MW of renewable energy projects was recently successfully tendered to independent power producers,” Gordhan said.
“Private sector capacity can also be mobilised through construction and operating concessions. For example in the management of industrial development zones, freight logistics and ports operations.”
He said the Development Bank of Southern Africa would play a coordinating role in raising finance in partnership with multilateral finance institutions, foreign investors and other investment funds.
South Africa had deep and liquid capital markets, through which long-term capital would be raised at competitive rates by government, state enterprises and the private sector.
“Our development finance institutions are capable of raising capital and co-financing investments of the private sector, state entities and municipalities,” Gordhan said.
“These are considerable strengths – they mean that we do not have to rely on expensive external finance or complex structured arrangements.”
However, the key consideration was the impact and economic viability of the country’s infrastructure investments.
The PICC would ensure expert project assessment, subject to appropriate standards of review and public accountability - a critical requirement before investment decisions are taken.
“However, we are aware of several weaknesses in the state’s infrastructure capacity. In the past, spending has lagged behind plans,” Gordhan said.
“Our estimate is that in 2010/11, R178bn was spent out of a planned R260bn, or just 68%. We have to do better than that – state enterprises, municipalities and government departments all need to improve their planning and management of capital projects.”