The transport department is in the process of issuing requests for information regarding potential investment by third parties in the rail and port sector.
This investment is crucial if SA is to improve its underperforming freight logistics, which is a restraint on economic growth.
Transport minister Barbara Creecy said the process would “allow the department, and by extension Transnet, to gather information on projects for potential third-party involvement so that later this year we will be able to put out requests for proposals that are informed by societal and market appetite.
“Later on, we will also put out a similar request for information for the passenger rail environment, and this will document various opportunities for private-sector participation in the Prasa [Passenger Rail Agency of SA] network.”
Creecy said a private sector participation (PSP) unit was being established by the department under the auspices of the Development Bank of Southern Africa. Once established, the unit would help to direct and co-ordinate private sector investments in priority rail projects requiring capital investment.
The policy framework for third-party access to the rail network was outlined in a Transnet Network Statement published in December.
An operating division for the Transnet Rail Infrastructure Manager, which was already operating independently from Transnet Freight Rail, would be established on April 1 and a wholly owned subsidiary on September 30, Creecy said.
The minister said SA’s competitors in the broader Southern African region had taken advantage of challenges in the SA logistics sector.
“Projects such as the Lobito Corridor connecting the Democratic Republic of Congo and copper belt with ports in Angola and improving port infrastructure in neighbouring countries such as Namibia and Mozambique show that SA faces losing its competitive advantage. Urgent reforms must be implemented in our transport sector to ensure that our economy does not stagnate or lose out on growth opportunities.”
Creecy was speaking on Friday at the Cape Town launch of the World Bank report “Driving Inclusive Growth in SA”, which identifies four priority policy areas SA must focus on to stimulate economic growth, namely:
- Improving the efficiency of public spending and leveraging private resources to enhance economic growth and job creation;
- Delivering quality infrastructure;
- Promoting efficient and equitable urban development and mobility; and
- Injecting dynamism in the private sector to create jobs and productivity gains.
World Bank lead economist Jacques Morisset said spending efficiency by the government was a necessity given the rapid contraction of the fiscal space in SA as the debt-to-GDP ratio has soared. It could also be a game changer.
“There is evidence from many countries that if public resources are used well, they are a powerful engine of growth. Some studies estimate that if you increase public expenditures by 1%, you can attain a boost in economic growth of a similar magnitude. That is what people call the fiscal multiplier.
“SA used to experience that positive effect in the past, but unfortunately what we have seen in recent years is a weakening of that effect to a point that actually that multiplier has turned negative.”
Too much public money was spent on consumption rather than on capital investment, which laid the foundation for growth, Morisset said.
The report said that addressing the two fundamental shortcomings in SA of limited market competition, and institutional inefficiency and ineffectiveness could contribute to higher economic growth. The challenge was not the lack of financial resources but rather their efficient use. Another problem, Morisset said was that where SA did spend money on the right things — such as health and education — it did not get good value for money.
Finance minister Enoch Godongwana also addressed the launch, agreeing that SA had to make public spending more efficient.
The minister has committed to the National Treasury undertaking a spending review, which is one of the demands of the DA during the discussions on the budget, which is scheduled for tabling in parliament on March 12. The DA has proposed a three-month emergency spending review to identify wasteful and failing programmes.
The DA has also proposed immediate cost-cutting measures that it believes will free up at least R60bn without cutting essential services. These include a reduction in government advertising, travel and catering expenditure, a hiring freeze for all non-essential government positions for 12 months and a national audit of ghost employees.
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