The Financial and Fiscal Commission (FFC), tasked with advising the Treasury on its fiscal framework and intergovernmental relations, has raised concern about SA’s skewed spending priorities amid declining allocations to government programmes, including infrastructure development.
Commission officials told MPs during a National Council of Provinces meeting on inclusive economic growth at the weekend that declining allocations to important government programmes, such as infrastructure rollout and manufacturing incentives, is a big cause for concern as it could hamper growth.
In 2020, President Cyril Ramaphosa announced an ambitious economic recovery and reconstruction plan aimed at a mass employment programme through huge infrastructure projects as part of efforts to reindustrialise the economy and secure a reliable energy supply within two years. The objectives have not been met.
Commission chair Patience Mbava told MPs that declining allocations to growth-enhancing projects was a big concern.
She highlighted that while total public sector infrastructure investment had picked up in the 2021/2022 financial year with an investment of R249.5bn, it had decreased between 2018/2019 and 2019/2020 from R216.2bn to R187.4bn.
Infrastructure is key for national economic growth and development, unlocking of private sector investment and attracting foreign direct investment. It is crucial for households’ access to basic services and improvement of socioeconomic conditions and job creation, the commission stated.
With respect to shares of public infrastructure investment — while the share of provinces and municipalities are decreasing, shares of state-owned companies and public entities are increasing, indicating the government is implementing public infrastructure investment through public entities.
The commission said it is concerned about this trajectory given poor performance of state-owned companies and public entities. It added that the decreasing share of local government is a worry given huge infrastructure backlogs in municipalities, both new infrastructure and rehabilitation and maintenance of existing infrastructure.
The commission further highlighted that infrastructure spending is marred by delivery and management deficiencies.
It said government expenditure is not well aligned to the economic reconstruction and recovery plan.
SA has recorded abysmal growth rates for successive years, which also means that many of the key targets contained in the National Development Plan (NDP) — a long-term plan articulating the country’s vision to eliminate poverty and reduce inequality by 2030 — are unlikely to be met.
Adopted by the cabinet in 2012, the plan proposes creating 11-million jobs by 2030. To achieve some of these goals, the NDP notes that by 2030 GDP should have increased 2.7 times in real terms, which requires average annual GDP growth of 5.4% over the period.
Yet, amid the government’s failure to implement crucial structural reforms, growth has averaged less than 2% in recent years, with the economy slipping into a technical recession in 2019, after contracting in two successive quarters.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.