Private sector help needed for infrastructure
IN A MAJOR policy shift, the government is looking for greater private sector involvement in the planning and delivery of multi-billion rand social and economic infrastructure to pull the economy out of recession.
The government yesterday said today’s Investment Conference would be used to design an infrastructure fund to attract private and development-finance capital to run public infrastructure projects.
The President in September announced an economic stimulus and recovery plan anchored on re-prioritising public spending to support economic growth and job creation.
At the heart of the plan was the establishment of an infrastructure fund and investing in municipal social infrastructure improvement.
The Treasury said a central policy objective was to promote an increase in capital investment by the private sector.
Finance Minister Tito Mboweni said increased investment in social and economic infrastructure would be a focus of economic recovery over the medium term. He said this would require an increased role for the private sector and better implementation of the government’s existing plans.
“We want to enable investment in public infrastructure by commercial banks, developmental institutions and pension funds. This will require both innovative finance mechanisms and accompanying regulatory reforms,” Mboweni said.
The Treasury said it would report on progress made in the negotiations between the government, the private sector and multilateral developmental banks in the February 2019 Budget.
The Treasury said public infrastructure expenditure over the next three years was estimated to be R855.2 billion, of which state-owned companies accounted for R370.2bn. The Treasury has proposed reprioritisation of R32.4bn over the next three years.
It said of this amount, R15.9bn would be redirected towards faster-spending infrastructure programmes, including R3.4bn for school infrastructure and eradicating pit latrines, and the Expanded Public Works Programme.
The Treasury further said changes to grant structures amounting to R14.7bn would be used for upgrading of informal settlements, while housing subsidies amounting to R1bn would be centralised to better support middleand lower-income home buyers.
In another policy shift, the government said it would avoid committing scarce public resources to large infrastructure projects that are commercially sustainable.
“Government will remove regulatory impediments that stand in the way of projects in sectors such as housing, telecommunications and transport.”
The government has also undertaken to establish a project preparation facility, with funding set aside over the medium term. “Many public infrastructure projects have been marred by weak project preparation, planning and execution caused by lack of technical expertise and institutional capacity,” the Treasury said.
The government hopes the facility would arrest lengthy project delays, over- or under-spending, and quality concerns.
The facility will bring together the National Treasury, the Government Technical Advisory Centre, the Presidential Infrastructure Co-ordinating Commission, the Development Bank of Southern Africa, the Association for Savings and Investment South Africa, the Banking Association of South Africa, the South Africa Venture Capital and Private Equity Association and the New Development Bank.
To mitigate against the perennial corruption concerns, government said it would publish online expenditure reports of current infrastructure projects.
The government has also undertaken to publish a list of projects suitable for private-sector and development finance support.
Construction companies have particularly been starved on major projects since the 2010 World Cup boom.