Finance minister Enoch Godongwana has outlined an ambitious infrastructure investment allocation to jolt the economy into higher levels of activity in line with President Cyril Ramaphosa’s announcements on infrastructure in his state of the nation address.
Godongwana said in his budget speech on Wednesday that infrastructure spending in the next three years will amount to more than a trillion rand, with R402bn for transport and logistics, R219.2bn for energy infrastructure, and R156.3bn for water and sanitation.
“Infrastructure is a key pillar of our growth strategy. It is the bedrock of economic development, a key source of jobs and an avenue to scale up service delivery. Allocations towards capital payments are the fastest-growing area of spending by economic classification.”
He said new regulations for public-private partnerships (PPPs) have been finalised to take effect from June with the aim of reducing procedural complexity, guiding the management of unsolicited bids and strengthening fiscal risk governance.
“The regulations also make provision for national departments to establish sector-specific PPP units. These units will drive private-sector participation, \[and create\] creative opportunities to optimise the balance sheets of financially distressed state-owned companies,” he said.
The budget review said the main budget adds R46.7bn to infrastructure plans over the medium term, partially offset by a draw down on the provisional allocation of R24.6bn from the infrastructure fund.
“Capital payments are the fastest-growing area of spending by economic classification. Government is also undertaking reforms to improve the efficiency of infrastructure financing and build the pipeline of blended finance projects.”
In the medium term, economic development is the fastest-growing function at an annual average rate of 8.1%, driven by higher allocations to infrastructure projects, the budget review said.
President Cyril Ramaphosa told the National Assembly on Tuesday that the government was working on eliminating weaknesses in the preparation of projects for private sector engagement.
"In part, the mistake and the fault has been on our side. And now that the regulations clearly articulate this and the minister of finance will speak more about it when he presents his budget, we have now identified much clearer funding instruments and funding vehicles. But at the same time project preparation really becomes the key.”
The budget review said the municipal turnaround strategy focuses on addressing critical maintenance backlogs, ensuring skilled personnel are in place and fast-tracking infrastructure investments to stabilise service delivery.
“A recent report on water-sector investment requirements estimated that R256bn will be required annually between 2023 and 2050, totalling R7.2-trillion, to achieve water security and access for all. The national water programme aims to address investment gaps, with initial commitments from the New Development Bank and the City of Cape Town,” the review said.
It said the stronger outlook will be supported by the global recovery, lower interest rates, an increase in major export commodity prices and the rollout of public infrastructure investment.
The review included three scenarios for the growth outlook of South Africa. The upside scenario models a rapid infrastructure investment programme, supported by up-scaled capital spending by public entities to increase energy, fix rail and ports, and develop infrastructure.
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