/ 17 October 2006

SA municipalities to raise R20bn

South African municipalities will raise up to R20-billion to fund major infrastructure projects over the next three years, a National Treasury official said on Tuesday.

South Africa is planning massive capital expenditure to help push economic growth to at least 6% by 2010 in an attempt to cut widespread poverty.

“Over the medium term, we’d aggregate own resources of municipalities [starting with] grants, leveraging and borrowing … of approximately R15-billion to R20-billion in new money,” TV Pillay, chief director of local government in the National Treasury, told reporters in Cape Town.

Pillay said the money raised through bond and commercial bank lending would mostly be used to finance capital expenditure projects.

“We are looking at a mixture [of sources] … municipalities are [now] able to go into the bond market. We have engaged with the bond market …,” he said.

Asked if the municipalities would issue bonds to raise the capital, Pillay said: “Yes.”

South Africa’s municipalities, particularly in the major cities, are expected to help fund expensive upgrades of stadiums and transport networks ahead of the country’s hosting of the 2010 Soccer World Cup.

The government has already announced plans to invest about R700-billion over the next seven years to revamp the transport and electricity sector and on other major infrastructure projects.

The spending is part of a drive to further lift growth and cut stubbornly high unemployment in Africa’s biggest economy. Official data showed the economy expanded by 4,9% in 2005 — its fastest rate in more than two decades. — Reuters