South African policymakers should seek to address factors impeding private sector infrastructure expenditure, particularly given that private gross domestic fixed investment (GDFI) is twice that of the public sector with a commensurate impact on infrastructure input supply industries, Infrastructure Inputs Monitoring Project’s (IIMP’s) Dr Zavareh Rustomjee argues.

Addressing a recent Infrastructure Dialogues gathering, Rustomjee noted that, while public expenditure on infrastructure almost matched the total private spend in 2010, owing to the downturn, private expenditure, particularly on buildings, still constituted a large part of private sector fixed investment.

Therefore, “unblocking impediments to private investment is equally important”.

A new report by Investec economist Annabel Bishop goes even further, arguing that government and the State-owned enterprises (SoEs) “shoulder the minority of the country’s infrastructure needs, while the private sector remains the biggest investor”.

The Investec report acknowledged that investment by the SoEs “has risen somewhat as a proportion of total”, but that of government spending has tapered off. Further the dominance of consumptive-type expenditure within government is resulting in the funding burden for infrastructure being transferred to consumers, which was raising the price for consumers.

The IIMP report states that, together, public and private expenditure on infrastructure form a significant proportion of total GDFI, accounting for R311-billion out of a total R355-billion in 2010 in 2005 rands.

Rustomjee, who has significant public and private sector experience and was South Africa’s first post-apartheid director-general of Trade and Industry, said the research had also been able to confirm the size and importance of the building and construction sector’s contribution to fixed investment.

The sector comprises about 50% of total GDFI and despite cyclical growth patterns, between 30% and 35% of total GDFI is spent on labour-intensive building and construction activities yearly, which have strong backward linkages with input industries, such as steel, aluminium, cement, bricks, timber, glass, plastic pipes, aggregates and sand, bitumen, capital equipment, transport and logistics, energy and water requirements.

“A very high priority should therefore be accorded to initiatives that unblock public and private sector building projects,” Rustomjee said.

Government expenditure on buildings plays a consistent underpinning role in national fixed investment, having contributed about 13.5% of total national GDFI over a decade during which total real expenditure more than doubled from R28.5-billion in 2001 to R48.6-billion in 2010.

Private expenditure on buildings also constitutes a large part of private sector fixed investment and is spread across individual sectors, with a significant contribution being made by the finance and insurance and business services sectors.

On the supply side, the IIMP does not see any major constraints, besides the supply of bitumen and steel rebar.

Therefore, Rustomjee argues that the main policy focus should be on the demand and delivery end of the equation, particularly given the positive multiplier impacts of infrastructure expenditure.

In the public sector, the focus should be on improving capacity and the ability of departments and agencies to spend allocated funds and to halt the diversion of infrastructure funds to other activities.

Public sector procurement efficiency also requires attention, as did input pricing.

But efforts, he believes should also be made to address factors impeding private sector infrastructure expenditure.

The IIMP input coincides with attempts within government to shift the focus away from consumptive expenditure towards capital expenditure, in a bid to safeguard jobs and stimulate growth in a way that buffers South Africa from the worst of the anticipated global downturn.

In fact, President Jacob Zuma has argued that the current plans for large-scale infrastructure developments in South Africa, such as electricity plants, rail and road upgrades and water management schemes, will sustain between 50 000 and 100 000 jobs in construction up to 2015.

Zuma has also argued that, in light of the economic slowdown, it is necessary for the public and private sectors to “work harder and more creatively” to alleviate the impact of the slowdown in the global economy.

Government has promised a continued focus on the infrastructure development programme, which would be further enhanced by the Presidential Infrastructure Coordinating Commission, which Zuma himself is chairing.

The commission which was unveiled following the midyear Cabinet lekgotla, would be supported by a management committee, chaired by Rural Development and Land Reform Minister Gugile Nkwinti, as well as the secretariat.

Zuma says it will seek to unblock obstacles to the delivery of infrastructure and short-term jobs.