Finance minister Enoch Godongwana spoke recently of an infrastructure-led recovery. So too did President Cyril Ramaphosa, in a keynote address to yet another investment symposium this week.
But there’s no infrastructure-led recovery, and another conference won’t magic that one up. At least, not until the government itself does the hard slog that’s needed to support the spin.
The government announced plans for an infrastructure fund three years ago, and a year ago also set up Infastructure SA in the presidency to fast-track priority projects and raise private sector finance for them. But hardly anything has come to the market so far. SA’s creaking infrastructure in key network industries such as transport, energy and broadband is as much of a constraint on economic growth as it ever was.
And the numbers continue to tell a dire story. The last time fixed investment spending showed real growth was in 2015. It has declined since, plummeting last year and continuing to slide — by 6.8% in the first half of 2021, even though the economy grew by 7.5% over the period. As a ratio of GDP, investment is now hardly more than 14% — way below SA’s emerging market peers.
Not all investment spending is infrastructure spending, so the numbers on infrastructure will be even worse — especially when it comes to the public-private partnerships that were huge in the first decade of democracy but have barely been seen since.
It’s not entirely bleak, says Nedbank, which monitors capital projects. There have been some bits and pieces of spending, on local roads, for example. And at this week’s jamboree, which was the second Sustainable Infrastructure Development Symposium after the first in 2020, public works minister Patricia de Lille profiled spending on rural bridges and small harbours, as well as upgrades to toll roads.
However, most of the projects so far are what the infrastructure folk would call “social infrastructure”, funded by public rather than private money. Some on her list, in housing and office space, are arguably more real estate than infrastructure. And useful as they all may be, they are not necessarily the kind of “transformational” infrastructure that will move the dial on economic growth.
Amid a bunch of rather confusing numbers at the Sustainable Infrastructure Development Symposium it was not altogether clear why the government felt the need to pitch a second round of 55 infrastructure projects when it has yet to deliver 2020’s first round of 62 projects. Delivering a so-called pipeline of projects, however laudable, is not the same as delivering projects to market that the financiers can finance and the contractors can start to gear up for.
Nor do the private players who are ever more desperate to invest in bankable projects necessarily want to see 100 of them — “just do one” is the cry, one that can have a broad economic impact, helping to remove constraints and lift the economy’s potential to grow.
A major cause of government’s inability to get these projects to market and take advantage of the rich pool of private finance potential is simply the state of the state itself. Weak capacity in local, provincial and national government departments means the quality of project preparation, and even of feasibility studies, is often poor.
Another constraint is that the regulatory frameworks needed to make projects viable and bankable are uncertain or even unfriendly. The SA National Roads Agency has good new toll road projects ready to go, for example, but they are not going to happen as long as government can’t make up its mind about tolling. Nor is much-needed large scale private investment into SA’s ports and railways going to happen until Transnet actually starts concessioning out to the private operators, as long promised. The government’s complex bureaucracy for public-private partnerships doesn’t ease the process either, though there is an intention to streamline it.
Then there’s the objective overload, which weighs on so many of the government’s efforts to do anything. It can’t just deliver a tight list of priority infrastructure projects in the most optimal and cost effective way, but at the same time has to make sure it does localisation or some other policy objective, or that particular groups are preferred for contracts — preferences that may or may not be transparent.
Of course, as Infrastructure SA’s Kgosientse Ramokgopa emphasised at this week’s symposium, the government has to look to the “political economy” of infrastructure. But it seems the politics all too often gets in the way of the projects, opening the way for them to be held to ransom by vested interests.
Infrastructure SA was meant to help tackle all this, with the help of plenty of experienced people seconded by the private sector as well as the authority of the president. But progress is superslow, and conferences such as this week’s can’t help. The government’s credibility problem is growing, and though private players will make sure they appear and make nice at these conferences in public, frustration is growing in private at how much time and effort have been invested with no return.
Arguably too, the time and trouble Infrastructure SA and its government colleagues have spent on fancy brochures and event management might have been better spent on working aggressively within the government to make key projects happen, and soon. SA’s economy is still bouncing back from the Covid-19 pandemic and is in recovery mode this year, despite the lack of investment. But momentum is already slowing. It could really do with some serious infrastructure investment.
• Joffe is editor at large.
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.