South Africa will have an infrastructure investment gap of R4.8 trillion by 2030 from the aspirational target in the National Development Plan (NDP) unless the country increases its investment in infrastructure.
This is according to Dr Hurbert Joynt, programme manager for Infrastructure South Africa’s Centre for Excellence, who reiterated that the aspirational target in the NDP is for gross fixed capital formation to comprise 30% of GDP by 2030.
In a presentation and progress report on the rollout of SA’s infrastructure investment plan, Joynt told a National Council of Provinces select committee last week that this infrastructure investment gap forecast is based on existing investment patterns and what the current target needs to be to meet the GDP gross fixed capital formation target.
The government in July 2021 gazetted 62 Strategic Integrated Projects (SIPs) valued at R340 billion to drive South Africa’s post Covid-19 economic recovery.
This was followed in October 2021 by the government unveiling a pipeline of 55 new catalytic infrastructure projects from various sectors valued at about R595 billion that it estimated would create 538 500 employment opportunities.
However, the government admitted at the time there was a funding gap of about R441 billion for the 55 new projects being presented to the market.
Joynt said gross fixed capital formation in the recent past was above 20% but is currently at 14.3% although the trendline is starting to move upwards again.
“It is a massive target but with all the infrastructure investments [planned] will definitely augment and assist the growth in gross fixed capital formation,” he said.
Billions to trillions
Joynt said that in terms of expenditure by government, it is also clear that national, provincial, local government, state-owned enterprises (SOEs) and public-private partnerships (PPPs) will have to contribute about R600 billion in terms of the existing spend but “will also have to increase that component to R1.6 trillion going forward”.
“So it’s quite a daunting task ahead but that is one of the reasons why Infrastructure South Africa, together with the Infrastructure and Investment Office in the Presidency, also developed the Country Investment Strategy to ensure that we do attract additional infrastructure and other investment to the country.”
Joynt said it is quite clear that there is some underspending in terms of approved budgets, stressing that it is not always the case that money is unavailable.
He said public infrastructure investment expenditure was previously above 7% of GDP but is currently at about 3.3% while the NDP target is 10%.
“So, again, we are far below the target,” he said.
Public infrastructure purse
Joynt said it is clear from the Medium Term Expenditure Framework (MTEF) and allocation of budgets that local and provincial governments, as well as SOEs, sit with the bulk of the public infrastructure purse.
Going forward in terms of MTEF estimates, it is also clear that this expenditure will definitely increase “as we look towards the next three years in the MTEF”.
He said there are small signs of gross fixed capital formation growth, especially in 2022 (it has been growing at 3.6%), warning that substantial investment will however be required to meet the aspirational targets of the country.
“But we are striving and developing different approaches and the Country Investment Strategy will also assist us in this regard.”
Joynt added that it is clear from first quarter GDP data that the construction industry is not performing well. He attributed this to the fact South Africa’s economy had negative growth in the first quarter and underwhelming residential building and construction work.
No ‘principal custodian’
Head of Infrastructure and Investment in the Presidency Dr Kgosientsho Ramokgopa stressed that his office is not the principal custodian of the planned infrastructure investment projects.
He said these projects still reside with the mandate of the owners, such as the Ministry of Transport.
“Although we are responsible for reporting on those [projects], the procurement exercise, the responsibility to ensure there is participation of local communities, the pace of delivery and quality of delivery still resides with the department.
“It’s an area where we think we should improve the coordination of the delivery of these projects,” said Ramokgopa.
He referred to the cancellation by the South African National Roads Agency (Sanral) of projects valued at more than R16 billion a few months ago.
“That sets back the infrastructure investment programme.
“Although the office was successful in raising money in the debt capital market, the procurement still resides somewhere else.
“That is something that requires attention going forward,” he said.
Where are things now?
Tshepo Chuene, a member of the Presidential Infrastructure Coordinating Commission, said projects in the pipeline are with the technical working groups.
These groups review the business case of the projects to:
- Ensure that the finances are credible;
- That the management structure has sufficient capacity to implement the projects without unnecessary delays;
- Identify any project risks and challenges; and
- Assist where there are blockages.
Chuene said there are 328 projects in the pipeline, most within the energy sector, followed by human settlements, transport and social infrastructure.
‘Big milestone’ target
He announced that it has been deemed feasible for the National Department of Public Works to implement efficiency measures in the use of water and electricity.
This programme will involve the installation of photovoltaic (PV) and water savings measures in the department’s national portfolio of government buildings.
Cheune said the plan is for the first request for proposals (RFP) for this programme to be issued before the end of this month.
“That is the big milestone we are targeting in the current term to ensure that there is an RFP out to attract the private sector to participate,” he said.
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