Business Leadership South Africa (BLSA) on Friday launched a report on solutions to boost infrastructure investment to drive the economic recovery. Picture: Karen Sandison/African News Agency(ANA)
Business Leadership South Africa (BLSA) on Friday launched a report on solutions to boost infrastructure investment to drive the economic recovery. Picture: Karen Sandison/African News Agency(ANA)

BLSA report outlines solutions to boost investment in country’s infrastructure

By Edward West Time of article published Mar 29, 2021

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CAPE TOWN - BUSINESS Leadership South Africa (BLSA) on Friday launched a report on solutions to boost infrastructure investment to drive the economic recovery.

Although the government has made much of infrastructure development to boost the economy following the Covid-19 crisis, and also in preceding years, there has been little in the way of implementation.

While business, government and social partners all agree that greater investment is important, over five years infrastructure investment volumes have fallen further from the National Development Plan’s target of 30 percent of gross domestic product (GDP) a year.

The report, compiled by Intellidex, said investment had fallen from 20.3 percent of GDP in 2015 to 17.9 percent in 2019, and more recent data suggested it had fallen further in 2020.

BLSA said investment in South Africa by the state, state-owned enterprises (SOEs) and the private sector needed to grow by R1.6 billion a day, from an average R2.5bn to R4.1bn a day.

To understand what that amounts to, R1.6bn a day funds a solar plant that powers 20 000 houses, or a new university, every day.

The report was commissioned by BLSA to support the government’s efforts to drive infrastructure investment.

Factors identified in the report that had contributed to the falling investment included skills shortages, weak balance sheets of SOEs, excess capacity in the private sector, complex procurement regulation and poor investment-driving policies.

The 2021 Budget, which came after the report was finalised, showed that public sector expenditure in 2020 also fell far short of budgeted amounts.

The report recommended several interventions.

These were focused on mobilising private sector funding and supporting public sector capacity.

The first was better structural reforms in the energy and mining sectors, and in spectrum availability, to boost private sector investment – this could be achieved at no cost to government.

The report called for greater use of public-private partnerships (PPPs) to bring together the strengths of the public and private sectors.

Reforms to the PPP framework were required, with complexity aligned to project size and risks, and for PPPs to be used more by SOEs to overcome balance sheet constraints to investment.

The report also recommended reforms to the on-budget procurement framework to reduce the skills constraint faced by public institutions in procuring infrastructure.

“We all know infrastructure investment is key to unlocking our economic potential, yet the reality is we have been falling short of our own goals,” BLSA chief executive Busi Mavuso said in a statement.

“We need key policy reforms to unlock infrastructure investment.

“There is a lot that business can do, from funding and building infrastructure to operating it, and we want to work with the public sector to achieve far greater investment levels,” she said.

Some structural policy change suggestions included opening up own generation licensing for companies to easily build new energy generating plants of over 1MW.

Licensing spectrum should be made available for cellular networks to expand capacity and grow 5G networks, including digital migration of television signals, which would substantially free up more capacity.

Concessioning by SOEs, particularly of ports and rail, would allow private companies to use existing infrastructure to facilitate greater economic activity.

The collapse of mining exploration investment reflected the long-running policy uncertainty, and finalising the Mineral and Petroleum Resources Development Act and mining charter would remove this uncertainty, the report said.

Finalising the land expropriation bill and proposed amendments to section 25 of the Constitution to recommit to property rights was also necessary, because the more robust the protection afforded property rights, the lower the risks facing investors and therefore the higher the volumes of investment.

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BUSINESS REPORT

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