Infrastructure ‘needs private sector’

25 October 2012

The government is considering a bigger role for the private sector and the country’s development finance institutions in order to boost funding for South Africa’s infrastructure drive, says Finance Minister Pravin Gordhan.

Gordhan’s Medium Term Budget Policy Statement, which he presented in the National Assembly in Cape Town on Thursday, reveals that the pace of public infrastructure spending has picked up over the past 12 months.

Gordhan told Parliament that the Presidential Infrastructure Co-ordinating Commission (PICC) had reviewed the details of 18 strategic infrastructure programmes, which would add to the current R845-billion infrastructure build programmes already in progress.

Build programmes to accelerate investment

He said the build programmes would accelerate energy, transport, water and housing investment, open up mining and industrial opportunities and give greater impetus to building economic linkages across southern Africa.

“Strategic infrastructure programmes represent large and long-term financial commitments,” he said, adding that the budget provided for part of the funding required, while state-owned enterprises were making substantial investments in their areas of responsibility.

While the bulk of infrastructure spending was financed from the balance sheets of state-owned companies, the fiscus funded the provision of social infrastructure, delivered primarily through provinces and municipalities, he said.

Private sector investment down in 2011

The Medium Term Budget Policy Statement noted, however, that growth in private sector investment had slowed over 2011, as South African businesses refrained from developing new projects in an environment of weaker business confidence.

In contrast, gross fixed capital formation by the public sector grew at 10.9% during the first half of this year, with Eskom, Transnet and the SA National Roads Agency Limited (Sanral) accounting for 95% of all capital spending by state-owned enterprises.

Government spending on water, sanitation and road infrastructure had also picked up, supporting a nascent recovery in South Africa’s construction sector.

The National Treasury believes that as the economic environment improves, rising confidence should result in a gradual improvement in private sector gross fixed capital formation.

It said that, with private businesses accounting for about 71% of economic activity and over 75% of jobs, it was crucial to create a buoyant private sector that worked in partnership with an effective government.

Domestic growth is expected to remain modest next year and to increase over the next three years, but Gordhan added that faster growth was needed to create the jobs South Africa needs.

Source: SANews.gov.za