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Good, sobering and bad

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Good, sobering and bad

3rd July 2020

By: Terence Creamer
Creamer Media Editor

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News out of the inaugural Sustainable Infrastructure Development Symposium South Africa – held last week both physically at the Union Buildings, in Pretoria, and virtually with hundreds of online participants – was a mixture of good, sobering and bad.

The good news is that President Cyril Ramaphosa fully grasps the economic, employment and social multiplier effects of well-selected and shovel-ready projects and is, thus, keen to place infrastructure at the centre of South Africa’s postpandemic stimulus effort. As important was his acknowledgement that private-sector participation will be key not only to fund an infrastructure-led recovery, but to ensure that the projects are built and operated efficiently.

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Given South Africa’s fiscal squeeze, the weak position of most of the infrastructure-focused State-owned companies and government’s serious capacity constraints in the areas of project conceptualisation, preparation, implementation and operation, such a “new beginning for infrastructure development”, as the President described it, is both pragmatic and crucial.

It was equally positive that government was able to present an initial project pipeline of some 270 projects, collectively valued at R2.3-tillion across the energy, water, transport and information and communication technology network industries, as well as human settlements and agriculture. Even better was the fact that about 80 of these projects could be presented as being ‘investment ready’.

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The sobering news, however, came first in the form of the confirmation that, even prior to the pandemic, South Africa’s gross fixed capital formation (GFCF) had slumped to about half of the 30% of gross domestic product (GDP) target set in the National Development Plan.

It was further reinforced by African Development Bank president Akinwumi Adesina, who told the President that money had been “left on the table”, when Eskom failed to sign power purchase agreements for renewables projects, including a concentrated solar project that remained in limbo.

Even more sobering was investment envoy Jacko Maree’s gentle yet firm reminder that government had been talking about the importance of infrastructure and public–private partnerships (PPPs) for years, yet spending had not been sustained and the framework for accelerating PPPs was still not in place. “We all know that our construction companies are in terrible trouble, our engineering companies are in trouble, our steel companies are in trouble and our cement companies are in trouble. They can only re-tool, fix and re-engineer themselves if they know there is going to be a sustained round of projects.”

Maree noted, too, that, as South Africa’s debt-to-GDP ratio trended towards 100%, there was no way for government to finance the infrastructure required and that the private sector, thus, had to be liberated.

The bad news came in the energy breakaway session, where it was stated that the next bid window for South Africa’s most successful PPP programme to date, the internationally respected Renewable Energy Independent Power Producer Procurement Programme, would only be launched in the second quarter of next year. If true, this only serves to undermine the symposium’s entire message of using infrastructure as stimulus.

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