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Infrastructure drive to stimulate SA’s economic growth – Stiglitz

The government’s massive infrastructure drive, still in its planning stages, will create a virtuous cycle, stimulating both supply and demand, according to Nobel prize winning economist Joseph Stiglitz. Presenting the keynote speech at the start of a conference on infrastructure and development in Boksburg yesterday, he highlighted the benefits of the ambitious programme.

On the demand side, it would create jobs and, at the same time, the improved infrastructure would increase the production capacity of the economy, he said.

19/04/2012 Professor Joseph Stiglitz during the second annual economic development conference held at Boksburg Ekurhuleni. (954)Photo: Leon Nicholas. Credit: INLSA

The combined impact would lift the level of economic activity, Stiglitz said.

Economic Development Minister Ebrahim Patel, who is hosting the two-day conference, provided the background to the programme of 645 infrastructure projects distributed across the country.

The line-up of speakers, which includes cabinet ministers, academics, and leaders of industry, labour and civil society, are providing input in a series of panel discussions.

Work on some of the 17 “strategic integrated projects” is due to start this year and, in some cases, interim team managers have already been appointed, according to Patel. And five-year road maps are being developed for each project.

Important “enablers” are being assessed. These include supply lines for construction and inputs such as wood, cement, steel and bitumen. Issues such as port charges and water pricing are being reviewed. And plans to expand rail lines have been complemented by a decision to increase the number of trains.

Yesterday the Passenger Rail Agency of SA called for proposals for plans to build 7 224 rail coaches that will cost an estimated R123 billion.

Patel said infrastructure was a “jobs driver” and noted that, without the programme, the pace of infrastructure development and spending would fall from 9.1 percent of gross domestic product this year to 8.1 percent next year.

He identified problems experienced in the past. These included “weak implementation capacity in parts of the state and poor project planning. Projects are not always strategic, integrated or aligned with national priorities. Poor co-ordination slows projects and limits their impact,” he said.

In response to these challenges, the government has set up the Presidential Infrastructure Co-ordinating Commission. And it is in the process of developing a single plan that will “be monitored and centrally driven”.

Patel also spoke of the need to develop a “20-year planning framework beyond one administration to avoid stop-start patterns”.

Stiglitz said the infrastructure programme would have a “crowding in” effect – in other words it would attract investment from the private sector.

He said it would strengthen the capacity of the economy to do smart manufacturing and raise private sector productivity. And he said returns on government investment were higher than on private sector investment.

To underscore the point, he referred to the role of government investment in generating innovation – including the internet, which was initially funded by the US government.

In an interview after his address, Stiglitz spoke of the critical role of education in economic growth. “Quality education,” he stressed.

A skills shortage has repeatedly been identified as an obstacle to growth, a point Patel highlighted. He said: “The main requirement (for the programme) will be for engineering professionals and project managers.” An infrastructure skills plan is to be developed as part of the overall programme.

Stiglitz, a former World Bank vice-president and now an economics professor at Columbia University, is the government’s representative on the expert panel examining the supply chain implications of the Walmart-Massmart merger. The deal was challenged by Patel, among others. Page 22

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