Plenty of promises, but not much faith
You can forgive the construction sector’s scepticism about infrastructure pledges, given the years of underspending. But if the Treasury is to be believed, the money is there
The state wage bill gobbles up an increasing share of public funds, leaving little for building and services
If there’s one statistic that sticks out in the sea of numbers presented in this week’s budget, it’s that the real value of the construction sector in South Africa is still similar to what it was 14 years ago.
“Weak investment, low confidence, unsustainable undercutting on tender prices, and an increase in organised crime underpin the prolonged poor performance,” says the National Treasury.
Given that diagnosis, it’s hard to believe the country could turn into a building site any time soon, though the Treasury says the outlook for 2023 “looks slightly more optimistic, as public and private investment in capital infrastructure begins to materialise”.
It’s not as if the Treasury is unaware of the economic devastation wrought by years of underspending on public infrastructure.
According to the Budget Review, public sector capital investment between 2011 and 2021 averaged just 5.6% of GDP, compared with 11% from the private sector.
“Total investment is well below the National Development Plan target of 30%,” says the Treasury. “To reach this target, public sector investment in infrastructure would need to grow from 3.8% of GDP in 2021 to 10% of GDP by 2030, while private sector investment would need to grow from 9.3% of GDP in 2021 to 20% in 2030.”
In other words: a 163% jump in public spend and a doubling in outlay from the private sector.
The lack of spend is evident in the country’s crumbling roads, unbuilt dams, schools and clinics and the general decay now hobbling all economic activity.
One of the reasons for this is that the state wage bill consistently gobbles up an increasing share of public funds, leaving little for building and services.
Again, 31.4% of total revenue will go on wages this year.
Yet, the Treasury has now earmarked R903bn that will be spent on infrastructure over the medium term, with the largest portion — R448bn — to be spent by stateowned companies, public entities and through public-private partnerships.
Strategic projects will be mainly in water and sanitation, energy and transport. According to the Treasury, “projects worth R134.2bn are in procurement, R232.3bn are in construction and R3.9bn have been completed”.
One of the country’s more immediate problems — besides electricity and water — is Transnet, where the Treasury plans to “assess” the country’s freight corridors and ports “to identify interventions to improve and optimise freight infrastructure”.
It’s something the Minerals Council South Africa has been pleading for. “The urgency of including the private sector on
the country’s railways cannot be understated,” it said after the budget speech.
According to the council, “bulk commodity exporters forfeited revenue of R50bn in 2022 when deliveries of minerals by train to ports are measured against targets. In 2021, the loss was R35bn. Minerals Council members are reporting full stockpiles at their mines that they cannot send to ports.”
Finance minister Enoch Godongwana’s sentiments on infrastructure were, however, greeted with justifiable scepticism from the private sector.
Chris Campbell, the CEO of Consulting Engineers South Africa, says: “Implementation, implementation, implementation — it is one thing to allocate funds for infrastructure spend but it helps no-one if it is not implemented to its fullest in the most value-for-money-driven manner.”
Maintenance, too, has taken a back seat for years. Godongwana does, however, seem to realise the imperative of addressing this. In his speech, he said: “Our focus is not only on building new infrastructure, but also on maintaining existing infrastructure. We do this to ensure that it lasts long and performs to the required standard.”
Which would make a nice change.