A silver lining in an otherwise miserable and somewhat cloudy affair
The real shock in the Budget on Wednesday was not the 8% increase in taxes on booze and smokes, nor the absence of an increase in the sugar tax – though furious press releases from lobbyists in this regard would suggest otherwise. It was the token R10 to R30 a month increases allocated to social grant recipients. When challenged on it in the post-Budget press conference, Finance Minister Tito Mboweni came out swinging, arguing that government does not have to be apologetic about it. “The allocations we made were what we could afford. There is no social contract that says we must increase grants by X amount every year.”
If government needed a sharp reminder that the era of wasteful spending and policy paralysis had to come to an end, this was it. For 18 million, people grants are the thin line between survival and starvation. They are not and can never be a “nice to have”.
What is needed, is growth. And while National Treasury is pencilling in economic growth of 3.3% this year, this falls to 1.9% in the following two years – which is below the rate of inflation – a subpar outcome in a world where growth will average 4%.
Infrastructure as a means to kick-start growth has been policy for at least two years. Capital spending by the public and private sectors, which amounted to 17.9% of gross domestic product in 2019, needs to grow to 30% by 2030 to meet national needs and kick-start growth. But just saying something doesn’t make it happen. In fact, as research house Intellidex points out, the Budget revealed how policy intentions are not translating into reality. Most shocking was that the 2019/20 expenditure outcome was 27% below the estimate made in the 2020 Budget. And along with it are substantial downward revisions of the next two years’ expected spending – particularly among distressed state-owned enterprises and at the local government level.
The biggest issue is that government lacks the wherewithal – financial and otherwise – to make it happen and business lacks the confidence to pick up the slack.
Government has therefore recognised that public-private partnerships (PPPs) are the only way to go. SA has a successful history in this regard.
The post-apartheid era has seen the completion of 34 PPP projects valued at R89.3-billion. But these transactions have been declining, partly because of a goit-alone mentality on the part of government, and partly because complexities created by, among other things, the Public Finance Management Act, make such projects almost impossible to get off the ground.
National Treasury has quietly been working on reforms with the World Bank for two years. Most of these are to simplify processes and reduce the burden of viability assessments while speeding up procurement decision-making. As this is backroom work it has felt as if the government has been tinkering around the problem, creating the Infrastructure Fund, as well as Infrastructure South Africa as a new overarching institution, while achieving little in terms of PPP reforms – which are the bottleneck.
However, a positive signal on this front is that a whole chapter in the Budget Review focused on PPP framework reforms, says Intellidex. The outcome is a world-class document on reforms to change several aspects of the PPP framework.
What is now needed is the political momentum to see the reforms through, potentially via the Public Procurement Bill, which was tabled in February last year.
Treasury also published a list of projects that have been added to the Infrastructure Fund pipeline for PPPs. While many are in the “pre-feasibility” conceptual stage, or under feasibility review, there are three areas in which progress is being made: student housing, broadband for government facilities and the water infrastructure programme. Money has been allocated for project preparation for these. One hopes that with the support of the 27 seasoned infrastructure secondees provided by the private sector to Infrastructure SA, the pipeline of “shovel-ready” projects will start filling.
For instance, in the water sector, 11 strategic projects with an estimated value of R105-billion have been prioritised and four are ready for investment. On the energy front, three projects have been gazetted that will generate an estimated 2,569MW of electricity. Total investments, to be funded by the private sector, amount to R52.4-billion. In the transport sector, road builders like Raubex are already reporting increased levels of activity.
The sector has a total of 15 gazetted projects to the value of R47-billion. Thirteen projects worth about R19-billion have been prioritised and will create nearly 10,000 jobs during construction. As these projects come on stream they will inject capital into the economy and create jobs.
It is no coincidence that National Treasury said it would publish draft amendments to Regulation 28 of the Pension Funds Act for comment this week.
The proposed amendments seek to make it easier for retirement funds to increase investment in infrastructure.
Progress in enabling the funding and rollout of infrastructure is the silver lining in the 2021 Budget, which in all other respects was a miserable affair.
What is now needed is the political momentum to see the reforms through, potentially via the Public Procurement Bill, which was tabled in February last year
Sasha Planting is an associate editor at Business Maverick.