Infrastructure expenditure by the public sector is expected to total R903bn over the next three years, with R263.6bn earmarked for 2023/2024.
That is the National Treasury’s estimate of the expenditure of national, provincial and local government, public entities, public-private partnerships and state-owned companies, which will be the largest contributor to capital investment.
According to the Budget Review tabled in parliament on Wednesday, national departments will be responsible for R54.6bn of the spending over three years, provincial departments R209.8bn, local government R190.3bn, public entities R124.4bn, public private partnerships R21.9bn and state-owned companies R302bn.
The projects will include energy (R157bn), water and sanitation (R132bn), transport and logistics (R351bn), health care (R42.8bn), education (R60.6bn), human settlements (R45.9bn), administration services (R37.8bn) and other sectors.
Spending on economic infrastructure, mainly by state-owned companies, accounts for just over 78% of the R903bn, and will be used to expand power generation capacity, upgrade and expand the transport network, and improve sanitation and water services.
The dedicated chapter on public sector infrastructure in the Budget Review notes that the government’s ability to invest in new infrastructure has been constrained over the past decade by weak economic growth, rising spending pressures, inefficient delivery, and the cost of financial support provided to state-owned companies.
“Private-sector investment has also fallen for a variety of reasons. As a result total capital investment has been adversely affected,” the Budget Review reads.
It notes that between 2011 and 2021 public sector capital investment averaged 5.6% of GDP while private capital investment averaged 11%.
“Total investment is well below the National Development Plan target of 30% and has been declining since 2015,” the budget documents state. “To reach this target public-sector investment in infrastructure would need to grow from 3.8% in 2021 to 10% of GDP by 2030 while private-sector investment would need to grow from 9.3% of GDP in 2021 to 20% in 2030.”
Treasury notes that poor value for money has tended to characterise many public investment projects, illustrating weaknesses in the planning, procurement, construction and operational management of projects.
The Budget Review says the government is working on several reforms to strengthen public investment management and the associated value chain. “Many of these involve pooling resources with the private sector in blended finance initiatives aimed at funding and implementing infrastructure projects more effectively,” it adds.
The reforms include improving the regulatory framework for public private partnerships.
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