South Africa’s Public Enterprises department will talk through the possible pitfalls of the massive injection of capital into government’s infrastructure programme, said Minister of Public Enterprises Alec Erwin on Tuesday.
“It is very important that the Treasury does what it now does, which is to monitor the borrowing programme [associated with the infrastructure drive] so we don’t get bunching or spiking that may have adverse effects on either interest rates and the capital market or on currency flows.
“Everyone is conscious of this. If we think there are difficulties emerging we will have to address that at the time. The issue of whether you could get bottlenecks in the supplier industry is really one which we are looking at.”
He said that his government was talking “to the industry” and working with the Department of Trade and Industry and the Industrial Development Corporation. He said the government’s view was if they saw a bottleneck ahead of the programme, they should tell government.
He noted that there would be increased demand over the months and years ahead for casted products used in rail infrastructure and power stations.
“Suddenly you have quite a big jump in the need for casted products … and South Africa’s casting industry has declined to virtually nothing.”
Erwin, who has been Public Enterprises minister since 2004, said government was trying to assess how to revive the casting industry and this job had been passed on to the Department of Trade and Industry. It was estimated that some 40% of capital goods for the infrastructure programme would need to be imported, but if it could be reduced to 30%, this would be an achievement.
“At the end of the programme we would like to achieve a very big contribution [made by] the domestic economy.”
Government has budgeted R370-billion over the current medium-term expenditure framework on infrastructure — with the aim of reducing the cost of doing business in South Africa and to boost economic growth to an annual 4,5% from 2005 to 2009, rising to at least 6% from 2010 to 2014.
Erwin said that the modelling exercise included government, a team of international and local experts, including academics, and private sector economists who carried out detailed research, identified policy gaps and policy options.
“The modelling and scenario planning will be a two-year programme starting from January 2006, ending in the middle of 2008. The first growth workshop took place between 16 and 20 January 2006.” — I-Net Bridge