Ramaphosa eyes lofty growth, employment goals through infrastructure investment | Fin24
 
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Ramaphosa eyes lofty growth, employment goals through infrastructure investment

Feb 18 2020 21:37
Phumi Ramalepe

Infrastructure investment needs to grow to 30% in the next decade in order to reach the National Development Plan's growth targets, President Cyril Ramaphosa has said, adding that development banks, development finance institutions and the private sector will have a significant role to play.

To this end, an Investment and Infrastructure Office has recently been established in the Presidency, with the aim of streamlining processes and identifying projects of "national significance and enhance quality, sustainability and capacity" via a Sustainable Infrastructure Development Symposium, the president said. 

Currently, public infrastructure spending amounts to 13% of total spending and has been on the decline in recent years. 

Speaking at a special meeting on Tuesday in Tuynhuys, Cape Town, in which financiers and major players in government were brought together to discuss challenges facing public sector infrastructure and funding, the president said infrastructure alone would not be able to guarantee higher long-term economic growth. 

However, meaningful infrastructure would have the potential to strengthen the economy by 2020, bringing the country a step closer to achieving the NDP's commitment for the economy to attain 5.5% year-on-year economic growth, a 6% unemployment rate and 30% gross fixed capital formation to GDP, he argued. 

The country's economic growth forecast was this week slashed to below 1% by Moody's. Unemployment stands at 29%. 

'Haemorrhaging' skills

The president also lamented the "haemorrhaging" of technical engineering and financial skills in the public sector, which he said had "contributed significantly to the bleak state of public infrastructure".

The president proposed a number of interventions to eliminate barriers to infrastructure investment.

The first of these was the creation of technical and financial engineering capacity to address the skills gap.

Secondly, he said a detailed infrastructure investment plan must be developed, which he argued would send a positive signal to investors and lenders as well as reviving the "stagnant" construction industry. It would also contribute towards improving skills and institutional capacity, he argued. 

Another key item on the agenda is to initiate policy and regulatory reforms, as "there is need for a speedy, robust and transparent decision-making process," said Ramaphosa.

"Our public sector policy and regulatory universe is among some of the most elaborate and prohibitive in the world," he said. "It has the unintended consequences of delaying and derailing investments at great cost to the economy."

The public-private partnership legal environment also requires revision, he said. This and and the public sector financing space needs work, according to the president. 

Optimising processes

Ramaphosa also gave more details regarding an Infrastructure Fund announced in 2018. The fund will have four main elements, he said, namely pipeline and project preparation, a budget facility, a strategic intervention unit and a project account which will deal with ring-fenced funding for projects. 

Lastly, according to Ramaphosa, it would be necessary to review the the "institutional framework" surrounding public infrastructure - that is, check for institutional overlap and unclear processes, check the distribution of functions and roles across different institutions, and optimise processes and controls to ensure optimal infrastructure investment. This would be a key role of the recently-established Investment and Infrastructure Office, he said. 

He would also be releasing an Infrastructure Investment Policy Statement, he added, which would help build consensus and clarity.

cyril ramaphosa  |  investment
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