Government turns to private sector on infrastructure development,

Public investments have fallen by 2.6%

THE GOVERNMENT has called on the private sector to complement its infrastructure investment in view of low levels of business and consumer confidence.

The National Treasury said yesterday that the government was taking steps to improve investment and restore confidence.

In its medium-term budget policy statement (MTBPS), the Treasury confirmed that the government was finalising a regulatory framework for private sector participation in infrastructure projects.

The Treasury said there were also means to address legislative and regulatory uncertainties that held back investment in mining, agriculture and key technology sectors.

“Over the medium term, public sector infrastructure investment will continue to support domestic demand, bolster productive capacity and contribute to social inclusion. It is essential that private investment is encouraged to complement these efforts,” the Treasury said.

It said incentives that the government would introduce were measures to support businesses, including direct transfers, tax and tariff rebates and concessional financing.

“The review is intended to assess performance, determine value for money and analyse how the system as a whole supports the economy and job creation,” it said. The review would be completed by October next year, Treasury said.

The Treasury said investment by public corporations fell 2.6 percent in the first half of this year.

Public sector infrastructure investment will continue to support domestic demand.

It said between 2012 and last year, government investment growth averaged 8.6 percent but slowed to 5.8 percent in the first half of this year. “The slowdown reflects general delays, declining revenue growth and deteriorating balance sheets at some state-owned enterprises,” the Treasury said.

While investment in manufacturing and transport services fell in the first half of this year, there was growth in electricity and social services investment mainly as a result of capital outlays on renewable energy and public infrastructure, the Treasury said.

The Treasury said public sector infrastructure spending was projected at R987.4 billion over the next three years, most of which would be focused on energy infrastructure (R243bn), transport and logistics (R334bn), and water and sanitation (R137bn).

It said continued investment in these sectors would boost internal and external trade efficiency.

In the first half of this year, capital investment declined by 2.6 percent, compared with a 3.6 percent increase in the first half of last year. “The contraction resulted from reduced private investment in a climate of weak business confidence,” the Treasury said.

It said expanded private sector investment would improve productive capacity and that tackling corruption would discourage rent-seeking, lower transaction costs, reduce uncertainty and prevent the wastage of both public and private resources.