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Public Paralysis

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Public Paralysis

9th December 2011

By: Terence Creamer
Creamer Media Editor

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The maddening gap between the South African government’s words and aspirations on infrastructure development and actual implementation persists.

For years now, Ministers have been hammering on about the importance of addressing South Africa’s economic and social infrastructure backlogs in supporting growth and job creation. They have also been punting what has been calculated to be an R800-billion to R1-trillion public infrastructure roll-out as core to stimulating the country’s flagging manufacturing sector.

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However, on the ground, the construction sector remains under pressure, owing largely to chronic underspending on capital budgets by key State-owned companies (SoCs), national infrastructure departments, as well as undercapacitated provincial and local governments.

A recent World Bank report indicates that there has been a “striking” slowdown in infrastructure spending by both government departments and the SoCs over the the past few years. “Shortfalls in spending in energy and in water and sanitation are largely responsible,” the bank noted in its latest ‘South Africa Economic Update’, released in November. During the 2010/11 fiscal period, the public sector spent R67-billion less on infrastructure than envisaged in the Budget for that year.

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Compounding matters is the current public–private partnership (PPP) paralysis, which seems to have spread in a way that is directly proportional to rising public anger over the perceived unreasonable prices associated with the introduction of open-road tolling in Gauteng.

As a result, there have been several PPP project delays and cancellations, the highest profile of which was the recent decision by the Department of Correctional Services to cancel the already much-delayed private prisons contract. But the inertia is also strangling sectors as diverse as energy, transport and public property developments.

Now, it is quite possible, especially in the context of poor public-sector capacity, that some of these projects were poorly conceived and may have been structured in ways that favoured private developers over taxpayers – a scenario that can quite easily arise owing to the complexity associated with PPPs.

That said, the prevailing paralysis is also having serious con- sequences. It is undermining the way the South African market is perceived by potential domestic and international private infra- structure investors, while, in some instances, worsening already serious infrastructure bottlenecks.

To its credit, government does appear to be aware of the downside risks and the uncertainties. That is also why the Presidential Infrastructure Coordinating Commission, chaired by President Jacob Zuma himself, has been established.

But greater urgency is needed to ensure South Africa’s approach to PPPs is clarified. There is also a pressing need to communicate that approach without delay. Failure to do so will result in yet a further retreat from South Africa by local and global infrastructure practitioners alike.

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