It was interesting to learn that South Africa’s National Treasury has moved ahead with the establishment a Capital Projects Unit to evaluate options for investments in liquid fuels supply capacity, as well as to review solar park proposals and to conduct prefeasibility reviews of major projects in the water and transport sectors.
But even more welcome was news that the department, which has a record of transparency and thoroughness, will introduce longer-term expenditure estimates for selected programmes and State-owned entities. In addition, it will monitor expenditure on a monthly and quarterly basis and provide analysis of expenditure trends.
My enthusiasm for the development lies in a desire for the country to avoid a repeat performance of the prevailing construction slump, which arose partly as a result of disparities between infrastructure announcements and implementation schedules.
The idea of the unit, it seems, is to ensure that investments proceed more smoothly, particularly when funds become available, as well as to help improve the management of public-sector capital expenditure (capex).
Poor management, together with funding problems, resulted in a capex decline during 2009 and 2010, despite a high-profile promise that infrastructure would be core to South Africa’s countercyclical economic stimulus package, as the global economic crisis bit.
Given that funding for some of the big-ticket programmes is now in place, and some key employment, industrialisation and growth objectives have been tied intricately to the public investment plan, it would be devastating for poor implementation to again put sand in the wheels.
Indeed, public-sector spending on infrastructure is expected to average between 8% and 9% of gross domestic product over the current three-year expenditure period to March 31, 2014, when more than R800-billion is expected to be spent on both economic and social infrastructure.
South Africa’s State-owned enterprises, primarily Eskom and Transnet, are expected to spend more than R600-billion on various projects over the coming five years.
Still, there is a real risk that the delivery picture will not match up to the artist’s impressions.
Should that be the case, it will lead to huge frustration among industry practitioners, who have already warned that the problem of budget overruns and poor service delivery could grow unless government takes active steps to recruit and retain a better cadre of technical professionals.
The National Treasury’s response is, therefore, appropriate and timely. It also meshes neatly with the centrality given to infrastructure in delivering on the New Growth Path’s aspiration to create five-million jobs by 2020.
Hopefully, this new systematic monitoring capacity will help ensure that the mismatch between announced budgets and actual expenditure is dealt with decisively, so that we do not again descend into a construction sector recession when there is a justifiable expectation of acceleration.