CAPE TOWN – Infrastructure development through private public partnership is critical to help grow the economy and a R500 billion pipeline of projects has been identified, Finance Minister Tito Mboweni said yesterday.
The government would set aside R100bn over the coming decade to co-finance programmes and projects. Some R500 million would be spent in the current financial year on pilot projects, he said in the Medium-Term Budget Policy Statement (MTBPS).
Mboweni admitted that public sector infrastructure projects were plagued by poor planning and implementation. One of the results was under-spending on projects, which reached 20 percent of capital budgets last year, he said.
Progress had been made to establish an infrastructure fund, which would attract capital using a “blended finance” model, said Mboweni.
Blended finance refers to development finance organisations and other financial institutions providing some of the funding required on government infrastructure projects.
The fund would be hosted by the Development Bank of Southern Africa and be led by Dr Sean Phillips.
The implementation team for the fund was already at work and had identified policy and regulatory hurdles, he said.
“We are working with the private sector to make this fund a success… substantial conversations have taken place with banks and other financial institutions,” he said.
Over the last two years a number of South Africa's biggest construction groups have faced bankruptcy and severe financial problems, while thousands of jobs have been lost, due primarily to slumping government spending on infrastructure.
Optimum Investments chief economic adviser Dr Roelof Botha said a renewed focus on infrastructure would boost the construction industry .
Botha said the planned infrastructure spending and the public private partnerships envisaged in the fund “have laid the foundation for the resuscitation of the construction sector”.
He said he was also optimistic about the skills transfer capabilities of the infrastructure fund, because part of the problem of large unspent government funds for infrastructure was that implementing agencies, such as municipalities, often did not have the skills to undertake infrastructure projects.
“Infrastructure spending leads to economic growth and it creates jobs and wider tax revenue base.
"The construction sector was the most job intensive in the economy,” he said.
Morag Evans, the chief executive of Databuild, a knowledge hub for the construction and related industries, said the government would make progress on infrastructure spending if it actually spent the funds allocated for this on projects such as roads, reservoirs, and low-cost housing.
Evans said there had been a steady flow of construction projects being put out to tender recently, of which many had been successfully awarded, which she expected would gain momentum and which would boded well for the future of the construction sector.
Mboweni also said that toll roads would remain a key funding mechanism for highway upgrades and he appealed to motorists to pay their tolls.
Outa said they were bemused by Mboweni’s determination to see the e-toll scheme remain in place.
Outa head Wayne Duvenage said: “The reality is compliance is at an all-time low of 20 percent. It will be interesting to see how the government proposes to address this, as it has failed to do so for six years.
“We believe Transport Minister Fikile Mbalula is due to make a major announcement on e-tolls today. If recent comments by the various ministers are anything to go by, we are not expecting him to cancel the scheme, despite the fact that in virtually all of the government's engagements with civil society and business organisations they were called on to scrap it,” said Duvenage.