The recent budget recommitted the government to outsize infrastructure investment. Even excluding spending by Transnet and Eskom, it proposes a 20% increase in spending on water, in real terms (deflated with CPI); almost 15% on transport, both road and rail; and 5% on energy.
Government spending on other functions is expected to increase by just 1.3%, or slower than population growth. In per person terms the police and health budgets inch up, but education spending shrinks. Virtually all economic services will see an absolute decline in expenditure in constant rand.
These trade-offs underscore the importance of getting the build programme right. We need to learn from experience, which has been less than reassuring. From 2005 to 2015 public investment in fixed infrastructure, including government departments and the state-owned companies, climbed 73% in real terms before falling back 23% from 2015 to 2019. The investments in the most recent big infrastructure push certainly brought lasting benefits, but they fell far short of expectations.
Eskom and Transnet are the most obvious cases. In the decade to 2015 R1-trillion was invested in constant 2025 terms. The failure to achieve the anticipated outputs was a major factor behind the extraordinary disruptions to electricity and rail in the 2020s. Eskom’s huge new coal plants were delayed by years and even now do not produce at full capacity. Transnet bought 1,000 new locomotives, but still ended up with ongoing breakdowns. Meanwhile, both companies rapidly increased tariffs, largely to cover the cost of debt finance for their investments.
At this point you’re probably rolling your eyes and fuming about state capture. Certainly that played a key role. But corruption was enabled by the chase to increase fixed investment as quickly as possible, which in effect weakened controls on what projects to build, their design, and how much to spend.
In theory, infrastructure projects should pay for themselves over the long run, either by improving services and cutting costs for producers, or by upgrading living conditions and consequently productivity for working people. If this calculus holds, infrastructure investments effectively repay their financing without constraining other government spending.
In the 2010s, however, many projects underwent at best cursory cost-benefit analysis. Some megaprojects will thus never break even, either directly or by boosting economic growth or social cohesion. For instance, in its Gauteng roads programme the SA National Roads Agency (Sanral) essentially bet, without much actual research, that consumers and businesses would be happy to pay for reduced delays. Like Gautrain, it now provides high-quality infrastructure, but at a prohibitive cost. The resulting consumer resistance means Gautrain and Sanral still rely on billions in taxpayer subsidies.
The cost-benefit calculus requires minimised costs and adequate benefits. However, in the 2010s build programme the government seemed to prioritise higher investment figures over rigorous quality and cost controls. Most visibly, Eskom invested in huge specially designed coal plants — two of the 10 largest in the southern hemisphere — rather than hedging its bets with smaller, easier-to-build plants using proven designs.
That decision ultimately contributed to long delays and repeated breakdowns. The Zondo state capture commission found that Transnet paid 20% commissions to intermediaries for its locomotives procurement, which vastly increased the cost. But Transnet did not secure adequate maintenance capacity, which meant breakdowns repeatedly interrupted services a decade later.
The build programme of the 2010s occurred under unusually favourable economic conditions, during an international metals price boom that vastly increased government revenues. Today’s straitened conditions mean getting it wrong will impose more severe burdens in terms of infrastructure breakdowns, foregone spending on social and economic services and subsidies for white elephants.
To minimise the risks far more rigorous and transparent processes are needed to select projects and to ensure their effective, timely implementation. Measuring success primarily in terms of growing infrastructure spend and construction employment can otherwise prove costly.
• Makgetla is a senior researcher with Trade & Industrial Policy Strategies.
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