South Africa – Spending billions on improving public infrastructure
According to South Africa’s finance minister Enoch Gondongwana, the National Treasury is set to spend R 812 billion on public infrastructure projects such as roads, bridges and other major projects over the next 3 years. This is a 30% increase in comparison to that of the last term period, which ended in March 2022 and saw a spend of R 627 billion.
Goals of the upcoming investments
At the infrastructure Indaba in Johannesburg on Thursday, 18.08.2022, Gondongwana called the investment plans an important step and signal to investors, industry and society, that the government is committed to the acceleration of infrastructure development. Further goals of the investments are significantly increasing capital investment by public and private sectors which accounted for 13,7% of GDP in 2020, growing the economy and reducing unemployment.
Benefits of improving infrastructure to increase Foreign direct investment:
- Manufacturers will be able to easily to obtain raw materials and other components.
- Well-functioning ports will reduce the time where ships need to wait for long periods of time.
- Reliable infrastructure connects supply chains and enables companies to efficiently move goods and services across the country without unnecessary delays.
- Improved infrastructure in the costal regions could prevent severe damage to roads, bridges and buildings due to flooding.
- Improved infrastructure reduces the probability of power cuts and other inconveniences
- Improved infrastructure enhances the connectivity of many South Africans, improving their ability to take part in the economy
- Improved agricultural and rural infrastructure supports expansion of production and employment, small-scale farming and rural development
Challenges
While adding that government is taking measures to improve provision of public infrastructure and attract private capital, Gondongwana pointed out that the industry faces several challenges.
How South Africa is addressing these Challenges:
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Under-spending
- To address under-spending of budgets, Gondongwana said that a project pipeline is needed for the preparation and planning of major projects.
- The government is now assisting sponsors in developing project proposals through the Infrastructure Fund housed at the Southern African Development Bank.
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Shortcomings in maintenance
- The maintenance of infrastructure is critical to ensure that investment can be focussed on new infrastructure instead of replacing infrastructure that should have a remaining useful lifespan.
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Corruption
- The Ministry of Finance is taking steps to tackle waste and corruption in the procurement process.
- The first step is to work with the Auditor-General to continue transparent disclosure of minor violations, but outside the financial audit process.
- Secondly, the Ministry of Finance has incorporated the findings of the Zondo Commission reports, which highlight malpractices in government procurement, into the revised Public Procurement Act.
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Public-private partnerships
- Slow approval processes for small projects have reduced the value of public-private partnerships over the last years
- The Department of Finance is currently addressing this issue by simplifying the approval and compliance requirements for such partnerships
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