SA to spend R800bn on infrastructure

23 February 2011

South Africa will spend more than R800-billion on new power stations, road networks, dams, water supply pipelines, rail and port facilities, schools and hospitals over the next three years, says Finance Minister Pravin Gordhan.

Delivering his Budget speech to Parliament in Cape Town on Wednesday, Gordhan said this spending “builds on the steady progress made over the past decade, which saw the contribution of government and public enterprises to gross fixed capital formation rise from 4 percent of GDP in 2000 to 8.6 percent in 2009.

“These are long-term investments in the future of our country, and in the capacity of the economy to grow and create jobs for generations to come.”

Major projects

Gordhan detailed several major projects under way, including:

  • The Medupi power station, which will generate 4 700 MW of electricity at a projected investment cost of R125-billion.
  • The R23-billion Transnet multi-product pipeline, which will secure South Africa’s inland fuel supplies.
  • The R21-billion freeway improvement scheme, which has already significantly eased congestion on the roads in Gauteng, the country’s busiest province.
  • An 18-year, R86-billion programme by the Passenger Rail Agency of South Africa to replace its aging coach and locomotive fleet.

Gordhan said additional allocations of R10.3-billion would be made over the next three years for transport infrastructure and services, including R3.8-billion for maintenance of the coal haulage road network, financed from the increased levy on electricity collected from Eskom.

An additional R1.5-billion would also be allocated to provinces for road maintenance and weighbridges, as part of a new conditional grant for roads infrastructure.

A further R2.5-billion goes to municipalities for public transport systems and infrastructure.

Consolidated government transport spending will amount to R66-billion next year, rising to R80-billion by 2013/14.

Post-World Cup lag

“While infrastructure spending in the lead-up to the Soccer World Cup assisted in moderating the impact of the recession on South Africa, there has been an apparent deterioration in government construction spending over the past year,” Gordhan noted.

“The challenge of intensifying infrastructure spending over the period ahead will require attention to planning, budgeting and contract management in national and provincial departments and municipalities.”

Gordhan said cities would receive special focus from the government, pointing out that it was cities that had “immense potential for inclusive growth” and were home to many of the country’s poor.

Direct responsibilities for city councils

Funds would be allocated directly to cities to upgrade informal settlements, and the Department of Housing would accredit municipalities which demonstrated their capacity to manage the low-income housing subsidy system.

“The public transport function, including the management of rail, has been delegated by Minister Ndebele to metropolitan municipalities in terms of the National Land Transport Act,” Gordhan added.

“These are steps that create direct responsibilities for city councils, and open up opportunities for accelerating investment and change in the urban landscape and how cities promote their local economic development.”

Reducing bottlenecks in planning

Meanwhile, the National Treasury is developing a new framework for appraising public sector infrastructure projects, which is aimed at reducing bottlenecks in infrastructure planning.

Added to this, the national government has realigned infrastructure grants to provinces, while the Department of Cooperative Governance will set up a specialist support unit to help rural municipalities plan and contract projects.

These measures are aimed at improving infrastructure planning, which remains poor in the public sector, particularly in municipalities.

The National Treasury pointed out that during the 2009 financial year, the public sector failed to spend R12.4-billion of budgeted capital expenditure.

Source: BuaNews