South Africa's interventions to grow the formal, or 'first' economy, for the coming year are based on objectives to increase investment, lower the cost of doing business, improve economic inclusion and provide the skills required by the economy, President Thabo Mbeki said today (Friday) during his State of the Nation address in Parliament.

Mbeki pointed out that government has, since May 2004, developed strategies and investment plans upward of R180-billion to upgrade the country's infrastructure in terms of transport logistics, electricity and water resources.

State-owned transport utility Transnet has already approved business plans for new investments in the Durban and Cape Town harbours, as well as the construction of a new pipeline between Durban and Johannesburg, Mbeki stated.

“As it brings three previously decommissioned power stations into operation, Eskom will add R5,86-billion to the GDP (gross domestic product) by 2007, with new jobs created peaking during the same year at 36 000,” he noted, adding that bold steps have also been taken to further liberalise the telecommunications sector.

“We believe that the unacceptable situation, in which some of our fixed line rates are ten times those of developed countries, will soon become a thing of the past.”

Mbeki expressed hope that the delays, arising from legal processes, in setting up the second national operator to rival fixed-line monopoly Telkom would be resolved in due course.

Meanwhile, he revealed that government's capital investment programme would be accelerated, focusing on housing, rural and urban infrastructure, public transport and the national logistics system, water and electricity.

To partly facilitate this, urgent steps will be taken to strengthen the public-private partnership mechanism in government by December 2005, Mbeki said, adding that new steps are also being considered, together with international investors, to improve foreign capital inflows.

“In order to further improve the capacity of government to service the needs of investors, specialist capacity in the Department of Trade and Industry will be beefed up.”

He pointed out that the success in the growth of the 'second economy' should be measured not merely in terms of the returns that accrue to investors or the job opportunities to those with skills.

“Rather, it should also manifest in the extent to which the marginalised, in the wilderness of the second economy, are included and are at least afforded sustainable livelihoods,” Mbeki argued.

During the last nine months, he noted, government put the Expanded Public Works Programme into operation and has, to date, spent more than R1,5-billion and created more than 76 000 job opportunities. The programme has also begun to afford thousands with skills.

“A critical element in assisting those in the second economy is provision of information, particularly regarding how they can access economic opportunities. In this regard, the targeted communication campaign on economic opportunities occupies a central place.”

Mbeki commented that, to better understand the dynamics in the second economy and ensure effective targeted interventions, a socioeconomic survey of these communities would be conducted during the course of this year. These surveys will then be carried out in three-year intervals.