/ 27 February 2013

Budget 2013: Infrastructure spend in full focus

Finance Minister Pravin Gordhan.
Finance Minister Pravin Gordhan.

Solid implementation plans for the government's infrastructural development programme and the state's ability to fully spend its budgetary allocations will be in sharp focus when Finance Minister Pravin Gordhan delivers his budget at midday in Parliament on Wednesday.

Besides tax and forecast revisions the minister was predicted to unveil, an update on the progress of the government’s R845-billion infrastructure investment drive was expected by both analysts and opposition parties.

The plan – which was first announced in President Jacob Zuma's 2012 State of the Nation address – has yet to deliver tangible results for the country's infrastructure.

While government updates indicate the plan is making progress, the on-the-ground impression by construction companies illustrated a continual slow rollout of infrastructure spend.

For instance, the latest data from the South African Reserve Bank’s Quarterly Bulletin reported that government spending increased dramatically. But this was disputed by many construction and production companies, who claimed they were being forced to turn their attention outside of South Africa.

"We would like Gordhan to firmly assert the government's commitment to putting resources down on the productive side of the economy in his budget speech," said Coenraad Bezuidenhout, executive director of the Manufacturing Circle.

According to the department of public works, government struggled to invest adequately on infrastructure, leading to an estimated backlog of R1.5-trillion.

"We have supported this government's infrastructure programme as an effort to roll back this backlog, but our research shows that there has been an average underspend of 22% on infrastructure in the past four years," said Democratic Alliance spokesperson for finance Tim Harris.

Harris said issues related to inadequate infrastructure spend were directly related to government and parastatals' inability to adequately utilise their budgets. In 2010 parastatals only spent 60% of their infrastructure budgets, according to treasury data.

"This year we hope the finance minister tables reforms to improve the quality of spending by government and the parastatals," said Harris.

Harris's comments were mirrored by Adenaan Hardien, senior economist at Cadiz Investment Solutions. "It is one thing for government to say they will spend massive amounts of money but to actually put your hands in your pockets and do so is another thing," Hardien said.

Hardien said the country's economic growth was being inhibited by slow infrastructure spend and inability to spend money where allocated to do so.

"A key for growth in South Africa has been government's spending through investment and this would only be further driven by solid infrastructural spending," he added.