South Africa's spending on all public infrastructure - including power, transport, water, health and education - is forecast to be R811,2-billion between now and March 31, 2014, with expenditure by State-owned enterprises (SoEs), such as Eskom and Transnet, accounting for some R428-billion of that.

But in releasing the latest Medium-Term Budget Policy Statement (MTBPS), Finance Minister Pravin Gordhan acknowledged that priority had to be given to addressing government's capacity to plan and implement infrastructure projects, which were prone to delays and cancellations.

During the 2009/10 fiscal period alone, some R12,4-billion budgeted for capital projects was recorded unspent, excluding under spending by the SoEs.

Gordhan said that government is adopting a new approach to budgeting and planning for major projects, together with dedicated technical support for under spending departments, agencies and municipalities.

"South Africa needs a culture of responsible stewardship of public resources geared towards obtaining better-quality frontline services for every rand spent."

The South African construction industry has been cautioning that the flow of public tenders and contract awards has slowed sharply since the completion of the FIFA 2010 World Cup projects, and that the anticipated Eskom and Transnet project flow has also been slower to scale-up than had been anticipated.

Gordhan also made no specific reference in his MTBPS address to Parliament about the finalisation of the funding plan for Eskom, which faces a R110-billion funding shortfall in the next three years on a R553-billion capital programme.

He did confirm, though, that energy investment would comprise 40% of the total infrastructure spend, with transport contributing 26% and water 11%.

Over the next three years, provinces and municipalities will account for 75% of general government's infrastructure spending, with R287,8-billion being spent mainly on health and education infrastructure, roads and public transport.

Municipalities, where delivery capacity is regarded as particularly weak, are expected to spend R137,8-billion on infrastructure over the period ahead.

Should government departments and the SoEs actually delivery on these spending targets, the MTBPS estimates that public-sector infrastructure expenditure will rise to an average of 8,4% of gross domestic product (GDP) over the next three years - a material increase on the 4,6% of GDP in 2006/07.

However, the total public-sector borrowing requirement would also be higher than total borrowing by general government, reflecting the capital expenditure programmes of the SoEs.

The public-sector borrowing requirement is expected to be 10,1% of GDP in 2010/11 and decline to 6,1% in 2013/14. Borrowing by enterprises, such as Transnet and Eskom, will continue to support their capital programmes, with Transnet planning to enter the international bond market this year and Eskom early next year.

In total, the SoE's are expected to add over R320-billion to public sector debt between 2010/11 and 2013/14.

WATER & HOUSING

Emphasis is also given in the MTBPS to the issues of water and housing.

It states that investment in water infrastructure is crucial to address an estimated refurbishment backlog of R10-billion and adds that continuous investment and stronger regulation will help to reverse current trends and "prevent what would otherwise become a crisis in the future".

A review of water pricing is also under way to realign prices, owing to the fact that tariff caps and exemptions in the current pricing strategy impede the efficient allocation of water. "Cost-reflective tariffs are necessary to moderate demand, ensure the long-term sustainability of water-related infrastructure and preserve the natural environment.

Government will also invest in bulk water infrastructure, increase the number of dam rehabilitation and water conveyance projects, and establish a water regulator.

"Provision will also be made for the maintenance and supply of bulk water infrastructure to reduce backlogs, and to enable the construction and rollout of seven proposed water augmentation schemes," the MTBPS says.

The statement is warns that, while progress has been achieved in the delivery housing, "the pace of delivery appears to be slowing, despite growth in the funding of conditional grants that also extend subsidies to households". The slowdown is partly attributed to planning and coordination weaknesses.

Several reforms to financing arrangements are proposed to address coordination problems, including scaling up delivery in informal settlements and upgrading those settlements.

"Steps are being taken to change the financing arrangements for human settlement, infrastructure and transport. The goal is for cities to have more responsibility for these functions, leading to improved integration, outcomes and efficiency in connecting households to services and economic activities."

But the provincial conditional grant for human settlements, which has grown by over 20% a year since 2007/08 and currently exceeds R20-billion a year, and will also continue to increase over the period ahead.