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Johannesburg – Banks, including the proposed Brics development bank, could play a decisive role in funding South Africa’s infrastructure revolution.
At an infrastructure conference last week there was little unanimity as to the best type of funding.
According to department of trade and industry deputy director general Nimrod Zalk, his department would prefer local finance despite the availability of foreign capital.
This, he said, was how to avoid the conditions and risks attached to exchange rate fluctuations. Government is also able to work with the private financial sector by means of bonds.
Eskom CEO Brian Dames said the country definitely needs foreign finance, but he also warned that anyone providing funds will also have a private agenda, which includes job creation for their own country.
Professor Joseph Stiglitz, the American who won the Nobel prize for economics in 2001, expressed support for plans that provided for, inter alia, pension funds and banks being obliged to invest in infrastructure.
South Africa is unique among developing countries because it exports capital equal to about 1% of its gross domestic product, said Stiglitz.
The broad proposal to spend enormous amounts on roads and railways in SA well as power and water infrastructure is, in his view, praiseworthy and a “model” for other economies.
Countries that in these difficult economic times cut state spending and employment are undermining their own futures.
Infrastructure is a sensible investment at this precise point because the global economy has massive underutilised resources, said Stiglitz.
He added that South Africa can borrow money today at lower rates than the return on infrastructure, even if it cannot negotiate the near-zero interest rates obtaining in America.
Stiglitz welcomed the proposal by the Brics (Brazil, Russia, India, China and South Africa) for a new development bank as a means of investing their trade surpluses in the developing world, rather than in the developed world’s government bonds and companies.
In his view prescribed investment in infrastructure by, for example, pension funds and banks, had played a major role in the rapid development of Asian economies.
According to Stiglitz, the unprecedented economic boom in the United States after the Second World War and the current advance of Asian economies were largely the consequence of enormous infrastructural investment.
He said that their expansion on the back of exports would have been impossible without infrastructure like roads and harbours.
There is no lack of money, said Dr Iraj Abedian, chief executive of Pan-African Capital Holdings, during a panel discussion on infrastructure funding.
The nature of the project determines whether debt or tax revenues should be used, as well as the appropriate type of credit, he said.
“Roads are not the same as water and water is not the same as schools.”
It would be crazy to finance Eskom expenditure with short-term debt, he said.
Dr Hamid Rashid, regional consultant for the United Nations’ department of economic and social affairs, believes a state-controlled commercial bank such as in China and India should be considered in South Africa.
Unlike private banks, this type of bank has a long-term view.
It would be dangerous for a Brics bank to borrow in international currencies. If such a bank should be created, South Africa would need to borrow in rands to avoid the risk of unforeseen costs.
Where will the money come from and who should receive it?
These are burning issues raised by a host of interested parties in Boksburg last week at a conference on government’s infrastructure plans presented under the auspices of Minister Ebrahim Patel’s department of economic development.
The authority’s infrastructural plans are the crux of almost all economic planning in South Africa, including the industrial plan, which depends heavily on local procurement for infrastructural projects.
As the plan stands, there are 17 “strategically integrated projects” involving 645 individual construction projects.
About R840bn is expected to be spent in the next three years.
But there are clear differences of opinion as to where South Africa should raise the money, who should bear the costs and who should benefit from the spending.
At an infrastructure conference last week there was little unanimity as to the best type of funding.
According to department of trade and industry deputy director general Nimrod Zalk, his department would prefer local finance despite the availability of foreign capital.
This, he said, was how to avoid the conditions and risks attached to exchange rate fluctuations. Government is also able to work with the private financial sector by means of bonds.
Eskom CEO Brian Dames said the country definitely needs foreign finance, but he also warned that anyone providing funds will also have a private agenda, which includes job creation for their own country.
Professor Joseph Stiglitz, the American who won the Nobel prize for economics in 2001, expressed support for plans that provided for, inter alia, pension funds and banks being obliged to invest in infrastructure.
South Africa is unique among developing countries because it exports capital equal to about 1% of its gross domestic product, said Stiglitz.
The broad proposal to spend enormous amounts on roads and railways in SA well as power and water infrastructure is, in his view, praiseworthy and a “model” for other economies.
Countries that in these difficult economic times cut state spending and employment are undermining their own futures.
Infrastructure is a sensible investment at this precise point because the global economy has massive underutilised resources, said Stiglitz.
He added that South Africa can borrow money today at lower rates than the return on infrastructure, even if it cannot negotiate the near-zero interest rates obtaining in America.
Stiglitz welcomed the proposal by the Brics (Brazil, Russia, India, China and South Africa) for a new development bank as a means of investing their trade surpluses in the developing world, rather than in the developed world’s government bonds and companies.
In his view prescribed investment in infrastructure by, for example, pension funds and banks, had played a major role in the rapid development of Asian economies.
According to Stiglitz, the unprecedented economic boom in the United States after the Second World War and the current advance of Asian economies were largely the consequence of enormous infrastructural investment.
He said that their expansion on the back of exports would have been impossible without infrastructure like roads and harbours.
There is no lack of money, said Dr Iraj Abedian, chief executive of Pan-African Capital Holdings, during a panel discussion on infrastructure funding.
The nature of the project determines whether debt or tax revenues should be used, as well as the appropriate type of credit, he said.
“Roads are not the same as water and water is not the same as schools.”
It would be crazy to finance Eskom expenditure with short-term debt, he said.
Dr Hamid Rashid, regional consultant for the United Nations’ department of economic and social affairs, believes a state-controlled commercial bank such as in China and India should be considered in South Africa.
Unlike private banks, this type of bank has a long-term view.
It would be dangerous for a Brics bank to borrow in international currencies. If such a bank should be created, South Africa would need to borrow in rands to avoid the risk of unforeseen costs.
Where will the money come from and who should receive it?
These are burning issues raised by a host of interested parties in Boksburg last week at a conference on government’s infrastructure plans presented under the auspices of Minister Ebrahim Patel’s department of economic development.
The authority’s infrastructural plans are the crux of almost all economic planning in South Africa, including the industrial plan, which depends heavily on local procurement for infrastructural projects.
As the plan stands, there are 17 “strategically integrated projects” involving 645 individual construction projects.
About R840bn is expected to be spent in the next three years.
But there are clear differences of opinion as to where South Africa should raise the money, who should bear the costs and who should benefit from the spending.
