Mboweni confirms R100bn allocation to infrastructure spending



29-10-2020
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Moneyweb
Source

Government has confirmed in its Medium-Term Budget Policy Statement (MTBPS) its commitment of R100 billion over 10 years to the Infrastructure Fund, of which R18 billion is over the medium term.

The MTBPS said this blended finance fund will complement the government’s plans for economic recovery, which were developed in conjunction with its social partners in business, labour and civil society and designed to crowd in private-sector finance and expertise to support infrastructure delivery.

The allocation to the Infrastructure Fund follows the government in July unveiling 50 Strategic Infrastructure Projects (SIP) and 12 special projects involving a total investment of R340 billion, as the first tranche of a massive infrastructure expenditure programme to drive the post Covid-19 economic recovery effort.

Six sectors

It said at the time these initial SIP projects are expected to create an estimated 275 700 jobs in six sectors: water and sanitation, energy, transport, digital infrastructure, agriculture and agro-processing and human settlements.

Dr Kgosientso Ramokgopa, Head of the Investment and Infrastructure Office in the Presidency, said these “are projects that are shovel ready, so in the next three months we will be able to go into the ground … and ensure that we are able to stop the haemorrhaging of jobs in the economy”.

The MTBPS said in the short term, the economic recovery plan will focus on building infrastructure, expanding electricity generation, allocating digital spectrum, supporting rapid industrialisation, and creating “mass employment”.

It said the government will at the same time roll out structural reforms, such as modernising network industries, reducing barriers to entry, and increasing regional integration and trade.

“The National Treasury estimates that, in combination, these reforms can raise growth to over 3% over the next 10 years and create more than one million jobs.”

‘Detailed implementation schedule’

The MTBPS said the plan is accompanied by a detailed implementation schedule that will be overseen by a council chaired by the president and will be supported by a leadership team that coordinates reporting and identifies areas where more effective partnerships are required.

The government’s focus on public infrastructure investment follows a sharp drop in this form of investment in recent years, which was mostly driven by declines in spending by state-owned companies.

Between 2016/17 and 2019/20, total public infrastructure spending fell from R250 billion to R183 billion, or from 5.7% to 4% of GDP, the MTBPS said.

It reported that the real gross value added in the construction sector fell 19.2% in the first half of 2020 relative to the corresponding period in 2019, adding that the sector has contracted for the past eight quarters.

Challenges

“The lockdown resulted in a near-complete shutdown of the construction sector, which employs over one million people.

“Employment fell by 10.8% in the first half of 2020 compared with the same period in 2019.

“Uncertainty, low investment and electricity supply interruptions are expected to hamper recovery over the medium term,” it said.

Consolidated expenditure by function in the MTBPS revealed that economic development at 4.6% and community development at 4.3% are the fastest growing functions.

It said this is mainly due to above-inflation growth in road infrastructure and expanded access to basic services in line with the economic recovery plan.

The MTBPS said it appears that government is overpaying for goods and services in several high-spending procurement areas, including infrastructure and information and communications technology.

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