There is no doubt that the emerging thrust of GNU economic policy is infrastructure spending, targeted to stimulate economic growth and cushioned by much-needed cost-cutting measures in public expenditure especially in wasteful and dubious procurement, and wanton perks for ministers, premiers and mayors.
That is the aspiration, and South Africa of course is not alone in this policy ambition. Even the UN Sustainable Development Goals (SDGs) agenda has its SDG9 dedicated to “Industry, Innovation and Infrastructure”.
Governments all over are at it, including the new Labour government of Prime Minister Sir Keir Starmer in the UK, where the whole basis of pushing back against 14 years of Tory austerity (read state capture and corruption in the case of South Africa) and an alleged £22bn black hole in the public finances, and resetting the economy seems likewise to be staked on achieving GDP growth rates the developed economies and for that matter South Africa could only dream of.
How uncanny that the IMF’s July 2024 World Economic Outlook growth projections for the UK and South Africa are almost the same, 0.7% for the UK and 0.9% for South Africa in 2024, rising to 1.5% and 1.2% in 2025.
Perhaps Finance Minister Enoch Godongwana and UK Chancellor of the Exchequer Rachel Reeves, who coincidentally are poised to deliver the 2024 Medium-Term Budget Policy Statement (MTBPS) to the National Assembly in Cape Town, and the first Labour government budget in almost 15 years, respectively, both at the end of October, should compare notes, given that both their aspirations and challenges are daunting.
Whether it is the ANC or the DA pushing the infrastructure initiative in the GNU is immaterial. Both are rightly enthusiastic, perhaps too keen, and beholden to the infrastructure financing and delivery ecosystem, which includes governments and their agencies, multilaterals, investment banks, private equity, hedge funds and even philanthropic capital.
The aim is to crowd in vital financing especially from the private sector, the single largest vehicle for investment given that governments simply cannot afford to pay for infrastructure from national budgets and tax revenues, given the competing demands.
The one upside is that load shedding has been far less frequent in 2024 and there are prospects for a pick-up in private-sector investment in energy infrastructure.
The Institute for Race Relations (IRR) last week launched its Blueprint for Growth 5 on “South Africa’s Growth through Infrastructure”, written by Anlu Keeve, which recommends a range of initiatives including “transparent Public Private Partnerships (PPPs) and ramping up private power generation”.
Currently, according to the Blueprint, total public sector infrastructure spending for the 2024/25 – 2026/27 period is projected to be R943.8bn.
While I agree that “the objective must go beyond simply prioritising infrastructure”, recent history is littered with spectacular failures of PPPs involving investment banks and private equity purveyors, and privatisation of critical infrastructure in water, electricity, rail transport and telecoms utilities.
Alternative financing schemes would include accessing the capital markets through issuance of infrastructure-linked bonds/Sukuk, such as those issued to finance the arterial road rehabilitation and construction project in Nigeria, which includes a social-cum-financial inclusion element; infrastructure funds to crowd in asset management resources, build-operate-transfer (BOT) and build-operate-own-transfer (BOOT) schemes already suggested by Deputy President Paul Mashatile, blended finance and green finance, and the involvement of pension or retirement funds in investing in infrastructure projects.
Godongwana’s MTBPS could be an important indicator as to the GNU’s infrastructure ambitions. It raises the spectre of several metrics relating to infrastructure, especially to what extent he will rein in public spending.
* Parker is an economist and writer based in London.
Cape Times