A renewed focus on infrastructure will form the backbone of President Cyril Ramaphosa’s economic stimulus package, which was announced at the Union Buildings in Pretoria on Friday.
The highly-anticipated stimulus package is aimed at reigniting economic growth and creating jobs, at a time when the country has slipped into a technical recession, and consumer and business confidence remain weak.
“Infrastructure expansion and maintenance has the potential to create jobs on a large scale, attract investment and lay a foundation for sustainable economic expansion,” Ramaphosa told gathered journalists.
Key Cabinet colleagues from the economic cluster, including Finance Minister Nhlanhla Nene, Economic Development Minister Ebrahim Patel and Public Enterprises Minister Pravin Gordhan flanked Ramaphosa when he made the announcement.
As part of the package a South African Infrastructure Fund will be launched which will include a R400-billion contribution from the national fiscus over the coming three years of the medium–term expenditure framework.
This will be used to leverage additional resources from development finance institutions, multilateral development banks, and private lenders and investors the president said.
The fund is intended to reduce the current fragmentation of spending on infrastructure, and will ensure more efficient and effective use of resources.
As part of the commitment to delivery, a dedicated execution team will be established within the presidency with the project management and engineering expertise to ensure implementation of these projects.
“The team will identify and quantify ‘shovel ready’ public sector projects, such as roads and dams, and engage the private sector to manage delivery,” he said.
Ramaphosa tipped the Brics New Development Bank (NDB) as a likely contributor to the fund, saying that the NDB “ has a facility that can be made available to us”.
He added that the government was seeking ways to avoid having to provide a sovereign guarantee as the state’s lending capacity was constrained.
Other potential investors long-term included pension funds Ramaphosa said, who had shown “keen interest as well”.
“We want them to participate with us in building the core infrastructure assets for the nation,” he said.
Ramaphosa acknowledged that the state’s ability to increase spending or take up more borrowing to boost growth was limited.
As such, much of the money for the stimulus package will come through re-prioritising spending from other areas of the budget.
The details of where exactly the money will come from will be made clearer in the upcoming medium term budget policy statement (MTBPS), Nene said.
The MTBPS is scheduled for the October 24.
But Nene said that “a number of trade offs” will have to be made and funds will likely be reallocated from non-performing government programmes.
Alongside the renewed emphasis on infrastructure, the stimulus package will also include economic reforms aimed at addressing policy constraints that have placed a strangle hold on investment.
These include immediate changes to the country’s visa regime – including the revision of requirements for highly skilled foreigners who want to live and work in South Africa.
In a bid to reduce the cost of business, Ramaphosa said that the state is also committing to review a range of administered prices including electricity, ports as well as railway tariffs.
The reforms will also include addressing concerns over the mining and minerals regime.
Parliament has been asked to halt the processing of the mineral and petroleum resources
development act amendment Bill, which has contributed “a lot of uncertainty in the sector”. A separate piece of legislation will be drafted for regulating the oil and gas industry – a proposal that has long been discussed but has yet to materialize.
The stimulus package was launched ahead of a jobs summit as well as an investment summit that government will hold with business and labour leaders.
“We want to go to that conference saying to investors and potential investors, we have cleared the decks on the policy side. South Africa is open for business and investment, let us now start talking about how you will be able to invest to help us grow our economy and be able to create jobs,” he said.