By now we should know that infrastructure investment, while obviously necessary, isn’t a cure-all for economic ills.
From 2005-17 the government and state-owned company investment climbed by three quarters in real terms. The subsequent decline still left it 30% higher than in the mid-2010s. Yet boosting infrastructure spending by hundreds of billions did not prevent load-shedding, port delays and water disruptions, or see a jump in employment or economic growth.
The medium-term budget policy statement (MTBPS) seems to have learnt little from this experience. Admittedly, its new infrastructure push is partly sleight of hand, designed to direct attention away from swingeing cuts to public investment in human and social services. Still, even given that caveat it seems wilfully blind to the hard trade-offs around SA’s build programme.
The infrastructure malaise is largely rooted in the failure to transform delivery systems after 1994. The transition to democracy meant infrastructure providers — from state-owned companies to water boards and municipalities — suddenly had to serve not just a privileged enclave but the entire population.
In 1996, 90% of non-African households had electricity and running water. For African households the figures were just 44% for electricity and 27% for piped water inside homes. Almost 30 years later African households still lag behind. A total of 93% now have electricity, but only 36% running water. For non-African households the share with electricity has risen to 98%, with piped water also up slightly.
Too often it focused instead on the immediate construction stimulus. That approach laid the basis for poor design, cost overruns and ultimately white elephants. For businesses and households the consequences were higher tariffs and often less reliable services.
The 1994 social pact assumed that the extension in infrastructure would ultimately fund itself by opening up new economic opportunities to historically oppressed and excluded people. In practice, joblessness has been stuck around 40%, GDP growth has remained mediocre and household incomes are far below the levels required to pay for the new services. In 2023 among households in the poorest 60% one in eight still experienced hunger at least sometimes. Half of these households did not pay for water and one in eight did not pay for electricity.
As in most of postcolonial Africa, infrastructure planners initially paid for new services largely by skimping on maintenance on bulk infrastructure and existing networks. However, from the late 2000s the government committed to increasing its spending on bulk supplies. But it did not spend much time asking what projects could build a more inclusive and dynamic economy. Too often it focused instead on the immediate construction stimulus. That approach laid the basis for poor design, cost overruns and ultimately white elephants. For businesses and households the consequences were higher tariffs and often less reliable services.
The MTBPS suggests the solution is more private investment, pointing to Gautrain and tollways as exemplary successes. But private suppliers need either paying customers or subsidies. The Gautrain charges fares that would bankrupt most SA commuters and still requires a subsidy of more than R2bn a year. The tollways work well on long-distance routes, but extending them to Gauteng roads provoked a taxpayers’ revolt that is costing the provincial government about R12bn.
The explosive expansion in renewable energy in the past decade suggests private investors can have a constructive role for some kinds of public infrastructure. But even there lower income households and small businesses have benefited only indirectly, from reduced pressure on the national grid.
For more dynamic and inclusive growth SA needs a more realistic approach to infrastructure provision in general, and private partnerships in particular. Both are imperative for economic development. But they cannot offset inadequate investment in human and social capital. Moreover, they have to meet the needs of historically excluded households and emerging industries, not just the already well off and established businesses.
Above all, new projects must prioritise long-term economic and social development, not the immediate impact on construction employment, suppliers and private profits. Targeting higher infrastructure spending as an aim in itself will only end, again, in tears.
• Makgetla is a senior researcher with Trade & Industrial Policy Strategies.
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