/ 22 March 2012

Infrastructure must bring private sector into the fold

The government’s planned R3-trillion spend on infrastructure must include the private sector if it is to lead to job creation, an economist said on Thursday.

“Up to R3-trillion in infrastructure spending is proposed and, if properly implemented and other outstanding issues addressed, could halve structural unemployment by 2025,” said Annabel Bishop of Investec in a report on the outlook for infrastructure.

She said spending on infrastructure created a “virtuous cycle”.

“The workers employed range from low to highly-skilled, with many currently unemployed and unskilled typically finding work,” Bishop said.

“The resultant salaries and wages boost income levels in the economy and retail and wholesale trade sales [and hence employment in these sectors], in turn spurring demand for production and ultimately more infrastructure provision as individuals become wealthier.

“This virtuous cycle is key to lifting the majority of South Africans out of poverty,” she said.

To initiate this cycle, the government needed to award infrastructure tenders to the private construction sector, Bishop said.

“Indeed, the public sector continues to battle to spend even the previous smaller levels of funds earmarked for infrastructure.

“And, with the exception of the 2009 recession [when business activity contracted], the private sector in South Africa remains the largest contributor to overall growth in fixed investment, while general government is the laggard.”

Partnering with the public sector
Her report was released on the same day that government spokesperson Jimmy Manyi urged businesses to partner with the public sector.

“Cabinet calls on all sectors, from business and civil society to individual South Africans, to play your part in partnering with government as investors and social partner,” he told media following Cabinet’s fortnightly meeting on Tuesday.

Manyi said this would “enhance” the infrastructure plans announced by President Jacob Zuma in his State of the Nation address.

Bishop said the private sector was battling with other issues government needed to address.

These included the high and rising costs of building materials, and the increasing costs of bulk infrastructure services like storm water drains and water connections.

“Clearly the rapid pace of escalation in other operating costs from electricity, water, rates and taxes, to transport and other export costs is also obstructive.”

She said the government’s belief in the capability of the private sector was too limited.

‘Stop micro-managing’
According to the budget, the government envisages private sector involvement in the electricity and telecommunications areas, and ports.

“The private sector’s ability to deliver means it should be allowed to do so nationally, from transport, health and education to other areas of service delivery. Government needs to step back and stop micro-managing,” Bishop said.

However, the main problem with the government’s build programme was a lack of skills.

“Inadequate managerial capacity results in monies earmarked for infrastructure not being spent while high levels of corruption cause obstructions to competitive and productive industry.”

She urged the government to cut spending on employees and focus rather on building managerial capacity to effect the infrastructure spend programme.

“The longer allocations for infrastructure lie unused [including delayed borrowings], even in the public corporations themselves, or worse, are stolen via corruption, the more expensive it becomes to eventually build the necessary infrastructure,” Bishop said.

Manyi said a date and venue would soon be announced for a meeting between Zuma, business leaders and others on the planned multi-billion rand infrastructure roll-out. — Sapa