Infrastructure: ‘we have the resources’

22 February 2012

The state will have about R4.5-trillion in resources to draw on, using a range of financing methods over the next three years, to fund the country’s key infrastructure projects, says South African Finance Minister Pravin Gordhan.

Gordhan revealed the figure in a media briefing in Cape Town shortly before delivering his Budget speech in Parliament on Wednesday.

The Budget Review lists 43 major infrastructure projects, each of which will take between seven and eight-and-a-half years to complete, together requiring R3.2-trillion in spending over the next few years.

In his Budget speech, Gordhan said the government had already approved and budgeted infrastructure plans over the next three years to the value of R845-billion – R300-billion of which is in the energy sector and R262-billion in the transport and logistics sector.

He said the infrastructure mega-projects announced by President Jacob Zuma in his State of the Nation address earlier this month would be financed using the fiscus, public entities’ balance sheets, taxes, private-sector investors, and by raising funding from multilateral finance institutions and foreign investors.

Improving infrastructure delivery

The government would also improve the delivery of infrastructure through a range of measures, Gordhan said, adding that the government would crack down on departments and municipalities with a poor record for spending funds made available to them to improve infrastructure.

The fiscus would meet the cost of public-service facilities such as schools, courtrooms, hospitals and rural roads, he said.

Public entities such as Eskom and Transnet would finance their respective investments from their own surpluses and by borrowing from the capital market – by issuing low-term bonds.

“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 that in some cases a mix of tax finance and cost recovery would be appropriate, but he added that the government contributed to the costs of commuter transport and electricity and water services to poor communities through allocations in the Budget.

Local, foreign investors also key

Local and foreign investors would also be key, and Gordhan noted that private-sector investment already played a substantial role in several sectors, such as the airline industry and telecommunications sector.

The first round of over 1 200MW of renewable energy projects was also recently tendered to independent power producers.

Gordhan pointed out that the use of construction and operating concessions – for example the management of industrial development zones, freight logistics and port operations – was another way to rope in private investors.

The Development Bank of Southern Africa (DBSA) would play a key role in raising finance in partnership with multilateral finance institutions, foreign investors and other investment funds, he said.

‘Deep and liquid capital markets’

Added to this, he said South Africa had deep and liquid capital markets through which long-term capital could be raised at competitive rates by the government, state enterprises and the private sector.

He said the country’s development finance institutions were capable of raising capital and co-financing investments involving the private sector, state entities and municipalities

“These are considerable strengths – they mean that we do not have to rely on expensive external finance or complex structured arrangements,” he said.

R3.2-trillion ‘mega-projects’

The bulk of the R3.2-trillion in mega-projects would be spent on electricity (R1.945-trillion), while R583-billion would be spent on transport, R213-billion on liquid fuels, R185-billion on new schools and R110-billion on new clinics and hospitals.

The remainder – R169-billion – would be spent on housing, telecommunications and water.

Of the total amount, R1.082-trillion would be spent on the concept stage, R921-billion on pre-feasability and feasibility studies, R378-billion on construction and R328-billion to fund on-going programmes.

The remainder – R499-billion – would be spent on tendering, financing and detailed design.

The mega-projects include a Durban-Free State-Gauteng logistics corridor, a southeastern development node and projects in the North West, Limpopo and on the West Coast.

Source: BuaNews