Billions in finance available for SA infrastructure

South Africa is peering over the edge of a fiscal cliff with no easy way down. Rating agency Moody’s projects economic growth of 0.7% for 2020, a paltry figure that will inevitably lead to higher levels of unemployment and greater social inequality. Reviving this country’s ailing economy has become the hallmark of the Ramaphosa presidency.

There are many places to start, but tackling the infrastructure backlog as a means to kick-start the economy is one way.

The problem is the state does not have the funds, nor the means to do so.  

So it was that on Tuesday President Cyril Ramaphosa brought together a high powered group that included the heads of SA’s four big banks, the heads of multilateral development banks like the World Bank and International Finance Corporation, and DFIs like the German Development Bank and the African Development Bank Group at Tuynhuys, the Cape Town office of the Presidency. It was an impressive turnout – about 200 people attended.

They were there to talk about infrastructure and, more specifically, how to intensify infrastructure investment in South Africa. This included discussion on the urgent reforms identified by the government as prerequisites for reviving infrastructure investment which has slowed abysmally over the past decade.

The meeting followed Ramaphosa’s restatement in this year’s State of the Nation Address that infrastructure development is front and centre of government’s growth and job creation agenda and follows months of behind the scenes work by the Presidency, National Treasury, the Department of Public Enterprises and the Department of Public Works and Infrastructure.

Of all the places to start, it’s not the worst.

“These multilateral development banks have let it be known that they have R140-billion to invest in infrastructure in South Africa this calendar year, but they need bankable projects,” said Dr Kgosientso Ramokgopa, head of the Investment and Infrastructure Office in the Presidency, following the Tuynhuys gathering.

“This meeting was unprecedented,” he added. “We saw key players in the finance sector coming together under one roof to ensure the government can meet its economic goals.”

Ramaphosa told the assembled gathering that there was considerable work to be done. 

“We have seen a deterioration of some of the most important assets in our country. Where infrastructure is not maintained it has a huge impact on the ordinary lives of people – water is an example.”

There are many reasons for this state of affairs, but the haemorrhaging of technical and financial engineering skills from the public sector has certainly contributed to the dire state of public infrastructure. Further, the lack of planning, asset management and the absence of credible project pipeline has resulted in an erosion of confidence by funders and absence of projects, he said.

South Africa’s legislation governing infrastructure management compounds the problems. It is some of the most elaborate and complex in the world. The unintended consequence of this, Ramaphosa said – and the Public Finance Management Act is just one example – is that terrible delays in decision-making occur. 

“This is a picture I’m determined we should correct immediately,” he said.

The meeting resulted in two critical outcomes.

The private sector organisations present, which, aside from the banks, included the Consulting Engineers of SA and Business Unity SA, have agreed to help government recreate the capacity that has been lost in terms of technical and financial engineering capacity. 

“They will make resources available ahead of the president’s Sustainable Infrastructure Development Symposium, which is scheduled for May,” said Ramokgopa.

“This expertise will be deployed so that when we go into the symposium, we will have shovel-ready projects to show to the financiers.”

There is no limit to the projects that need financing, but for the time being the focus will be on SA’s network industries – water, energy, ports and rail, roads and internet connectivity. Priority will also be given to agri-projects as well as those involving human settlement.

Parallel to all of this, work will begin on revisions to the Infrastructure Bill to ensure that it supports, rather than hinders all of these plans – specifically as it relates to public-private partnerships and the involvement of the private sector.

It is easy to dismiss this as another of Ramaphosa’s infamous talk shops. But Chris Campbell, CEO of Consulting Engineers SA, who presumably would be instrumental in plans going forward, is cautiously optimistic. 

“This is the beginning of a process. It is groundbreaking to have all of these funding agencies and government and ourselves in one room. That has not happened in the longest of times. It inspires confidence. Now we must make this process unfold... not in years to come but now,” he says.

“There is a recognition that infrastructure is a catalyst to grow our economy.”

Maintaining positive momentum is a responsibility that falls on the shoulders of Ramokgopa. It is a big task. BM