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Gordhan provides details on R846bn infrastructure plan

17th February 2010

By: Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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While the public sector continued with plans to spend R845,6-billion on infrastructure over the next three years, government had also started with extensive planning and consultation on the required infrastructure programmes for the coming ten to 20 years, Finance Minister Pravin Gordhan said on Wednesday.

The National Treasury pointed out that the R846-billion was lower than the initially expected R872-billion reported in the Medium-Term Budget Policy Statement at the end of 2009, mainly as a result of municipalities having difficulty in raising revenues, given that households have struggled to pay municipal bills owing to the strain put on them by the recession.

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Government's infrastructure spend had increased from the R787-billion budgeted in the previous Medium-Term Expenditure Framework (MTEF) period.

Infrastructure spending on economic services, including the provision of electricity, roads, pipelines, bulk infrastructure for water and sanitation and housing, would account for 85,3%, or R720-billion of the R846-billion spend, while 11,3%, or R93-billion, of the total would be spent on social services, including schools and hospitals.

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Not only would the infrastructure expenditure increase economic growth, but would also have a "significant impact" on the country's labour-creation programmes, noted the National Treasury.

In his 2010/11 Budget speech, Gordhan noted that a significant portion of the infrastructural expenditure would be undertaken by State-owned enterprises and would not be directly financed from the fiscus.

Expenditure by nonfinancial public enterprises, including power utility Eskom, Transnet and the South African National Roads Agency Limited (Sanral), would account for 53,6%, or R453,7-billion.

Eskom's construction activities of two new coal-fired power stations, the R125,7-billion Medupi power plant and the R140,7-billion Kusile power plant, as well as the construction of the R16,6-billion Ingula pumped-storage scheme, would account for 36,5% of the overall expenditure on infrastructure.

The upgrade of transport infrastructure and water supply capacity would make up "much of the balance", said Gordhan, adding that the cost of these investments would largely be funded through end-users and would "in several cases" require higher tariffs to be phased in over the next three years.

Eskom has already applied for a 35% a year increase in electricity tariffs over the next three years.

Gordhan also announced a proposal in his Budget speech that the taxes on fuel increase by 25,5c/l, of which 7,5c/l would contribute to the funding of State-owned freight logistics group Transnet's new multipurpose petroleum product pipeline between Durban and Gauteng.

The first phase of the R12,6-billion pipeline formed part of the overall infrastructure expenditure over the MTEF and would be completed by 2011.

It would initially have a capacity of 8,7-billion litres a year, before being expanded to a capacity of 12,2-billion litres a year by 2019 and to 26,2-billion litres a year by 2031.

The R25,2-billion Gautrain rapid rail link, Sanral's R22-billion first phase of the Gauteng Freeway Improvement Project, Transnet's R11,6-billion iron-ore line and its R7,9-billion Ngqura container terminal were all included in the expenditure on infrastructure over the MTEF.

Further, R14,7-billion would be spent on the Trans-Caledon Tunnel Authority's Mokolo Crocodile water augmentation programme and R13,7-billion on the second phase of the Olifants river water resource development project.

A further R7,4-billion would be spent on the Cornubia housing development, in KwaZulu-Natal and on the N2 Gateway housing development, in the Western Cape.

A collective R6,8-billion would also be spent on the construction and rehabilitation of a number of hospitals in the Eastern Cape, Limpopo province and in Gauteng.

EXPENDITURE BY OTHER ENTITIES

Meanwhile, the National Treasury pointed out that municipalities' expenditure on infrastructure, at 17,5% or R147,8-billion, would make the second-largest contribution to the overall national infrastructure expenditure, followed by provincial departments, which would spend about 17,3% or R146,4-billion of the overall infrastructure budget.

National departments would spend about R25,3-billion, extrabudgetary institutions R45,1-billion and public–private partnerships the remaining R27,4-billion.

 

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