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Pretoria - Public sector capital expenditure of more than R600bn is planned over the next three years, the medium-term budget policy statement (MTBPS) said.
Over the medium term, capital formation was on average forecast to add about one percentage point to gross domestic product (GDP) growth.
As state-owned enterprises increased capital investment spending, they were likely to require additional domestic and international borrowing, the MTBPS said.
The cost of borrowing abroad had risen significantly in the past month due to tight credit conditions in developed-country capital markets.
A year ago, SA was able to borrow at a spread of just 0.65 percentage points above the rate of the US government, but today that spread had increased to more than four percentage points.
Government would have to rely on the depth and resilience of the rand-denominated capital market rather than borrowing in foreign currency.
In addition, there would be government support for the borrowing programmes of state-owned enterprises. These would include guarantees. Government was also exploring ways of using its development finance institutions, such as the Development Bank of Southern Africa, to support public investment.
In addition to capital investments by Eskom, Transnet and the Airports Company South Africa, which were well under way, the Gauteng freeway improvement programme and investments by several municipalities in bus rapid transit systems were raising spending on infrastructure, the MTBPS said. These investments by municipalities complement the 2010 Fifa World Cup projects.
Between 1994/95 and 2003/04, government capital spending as a percentage of total expenditure was broadly stable. Since 2003/04, fiscal policy had sought to reprioritise government spending towards capital investment.
As a result, government's share of capital spending had been rising since 2004/05. Capital spending as a percentage of total government spending had increased from 6.3% in 2004/05 to 9.3% by 2007/08. This rising trend was expected to continue over the medium term, with capital expenditure reaching almost 11% of spending by 2011/12.
- Fin24.com