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20 Jan 2012 07:26
Massive infrastructure investment is at the heart of all of the government’s competing plans for economic development. Trillions are to be spent on new and upgraded rail lines, ports and power stations.
The financing burden will largely be borne by parastatal companies and government agencies, which will tap the bond markets and carry the debt on their own balance sheets, albeit with the full faith and credit of the South African state behind them.
Just what that faith means, in the midst of a chaotic series of reversals that have delayed the tolling of Gauteng’s gleaming new highways, must be very much open to question and, indeed, potential investors in the government’s big push are asking themselves right now how safe their money will be.
Moody’s has just put Sanral, which faces financial disaster in the face of the decision to suspend tolling, on a negative ratings watch—a particularly sharp way of putting the question.
And of course, the investors aren’t just the predators of the bond exchange, but ordinary pensioners looking for secure, steady returns.
This newspaper has consistently taken the unpopular view that tolling is among the best available mechanisms to finance roads.
Of course, there is much political capital to be had in opposing tolls, which are viscerally disliked by both suburban and township voters. The Democratic Alliance and Cosatu are equally opportunistic (and in the DA’s case hypocritical) in doing so. The same cannot be said for the transport ministry, which has effectively repudiated the position advanced by both national and provincial governments over the past five years and called into question the credibility of all state-backed infrastructure-finance mechanisms.
Its willingness to do so is all the more strange as government bids for more private investment in its schemes. The idea of prescribed assets long touted on the left—compelling pension funds to set aside a percentage of their assets for public-sector projects—is increasingly gaining ground in Cabinet.
The message of the toll debacle is: we want your money, but we can’t make any promises about what we’ll do with it or if we’ll be able to give it back.
Away from the roads, numerous infrastructure programmes rely either entirely or in part on revenue generated by user fees to pay back creditors. Electricity price increases are an obvious, politically unpopular example.
Of course, the government may opt to cushion prices with subsidies if it sees a wider economic benefit, but it should do so in line with policy. That means choosing to subsidise rail, for example, and charge for road use. Crucially, it needs to be clear and deliberate with citizens and investors.
If there were foolish or even corrupt choices made in the construction of Gauteng’s roads, we should be told. Right now, the government is saying nothing of the kind. It isn’t just Sanral that is put at risk in this debacle, it is the credibility of the state as a contracting partner. We need to be told how this credibility will be restored, urgently.
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