New leaders, same goals, new stimulus

In 2012, the Mail & Guardian sat down with Economic Development Minister Ebrahim Patel in his office at 120 Plein Street, Cape Town, to talk about infrastructure.

The interview delved into government’s drive to shift government spending towards investment, to be spearheaded by the Presidential Infrastructure Co-ordinating Commission (PICC). It would include the development of 18 strategic infrastructure projects that covered energy, water, logistics corridors, municipal development and more.

The state would look to more partnerships with the private sector to improve project delivery, including financing from pension funds to match the long-term investment horizons of these projects. Funding would also come from alternative partners such as the other Brics (Brazil, Russia, India, China) nations. The PICC would act as a “clearing-house” for projects to unlock administrative blockages, promising improved efficiency and co-ordination. The state also promised to address administrative prices — such as rising electricity costs — to reduce the burden these were placing on economic activity.

Sounds familiar?

When President Cyril Ramaphosa announced the government’s fiscal stimulus package last Friday, which is underpinned by a major infrastructure drive, the echoes of past promises were eerie.

But Patel told the M&G this week that things will be different this time, not least because of strong political backing and the strengthening of the PICC.

“The PICC structures work best when underpinned by strong and consistent political support. The announcement by the president provides the necessary backing to it,” Patel said.

From the 2016-2017 period, investment in public infrastructure began to decline, Patel said, despite significant growth up until then. The fall was partly driven by slower spending by state-owned entities (SOEs), thanks partly to “weakened governance, impaired balance sheets and shift in focus … ascribed to state capture and corruption”, he said.

Weakening governance at SOEs —and also at departments and municipalities — became a key problem for the PICC, for which Patel’s department would become the secretariat.

“[It] limited the effectiveness of efforts to integrate projects to maximise their impact, or fund new projects in the… pipeline,” he said.

The stimulus plan will strengthen the PICC by, among other things, the development of technical capacity that can be drawn on by the dedicated infrastructure execution team to be set up in the presidency.

Fostering greater private-sector partnership will also be a key feature, said Patel, an example of which is the PICC teaming up with the civil engineering profession to identify infrastructure maintenance problems.

Added to this, the stimulus plan is addressing policy issues that have created bottlenecks, said Patel, including providing more regulatory clarity for the mining sector and finalising energy policy, notably the integrated resource plan.

A cursory examination of some of the major strategic infrastructure projects illustrates how they became associated with state capture and maladministration,rather than economic development and growth.

Transnet’s procurement of billions of rands worth of new rolling stock, which fell under the rubric of the development of a Durban-Free State-Gauteng logistics and industrial corridor, have become case studies for state capture.

The development of the Mzimvubu dam has been dogged by controversy about cost overruns and allegations of fishy funding plans.

Eskom’s construction of power stations Medupi, Kusile and Ingula was well under way before they were included as part of the strategic infrastructure projects.They have seen persistent delays and ballooning costs and the company itself has been brought to its knees by alleged corruption.

Public Enterprises Minister Pravin Gordhan also argues that things are different this time around.

Ahead of the stimulus plan’s launch the government had taken “decisive steps to rebuild investor confidence, confront corruption and state capture head-on, restore good governance at SOEs and strengthen… critical public institutions like Sars [the South African Revenue Service], the Hawks, the State Security Agency and the NPA [National Prosecuting Authority],” he told the M&G.

Changes at Eskom, “which was brought to the brink of collapse by state capture”, said Gordhan, are a case in point. The new board appointed in January, along with the new permanent chief executive, is instituting “a culture of effective and transparent governance, including ensuring that those who were engaged in fraudulent activities are brought to account”.

As a result there has been a positive change in investor sentiment towards the utility, he said. It was able to raise R43-billion between January and March, after previously being locked out of capital markets.

“The difference between this and previous interventions is that there is a determination and an urgency, led by President Ramaphosa,”said Gordhan.

The establishment of the South Africa Infrastructure Fund will reduce the current fragmentation of infrastructure spend and ensure more efficient and effective use of resources, said Gordhan.

The R400-billion meant to seed the fund will, it appears, be made up largely by the infrastructure spend already budgeted for by the state over the next three years. About R834-billion for infrastructure was allocated in the February budget for this period.

But this includes spending by SOEs, other public entities and public-private partnerships. When these are excluded national, provincial and local government departments will spend a little over R395-billion on public-sector infrastructure.

The stimulus plan will also reprioritise R50-billion for job creation, health, education and social infrastructure improvement.

But where this money will be found is unclear, particularly given the already deep cuts announced in the budget in February driven by the introduction of fee-free higher education and declining tax revenues.New fiscal pressures must also be factored in, notably the recent public-sector wage settlement.

Credit ratings agency Fitch said this week that the plan is “unlikely to deliver a significant boost to economic growth”.

Several of the measures relate to existing proposals and others will take time to finalise and to have an effect, it said in a statement.

But the reprioritisation of spending could be positive for economic growth, said Azar Jammine, chief economist at Econometrix, particularly if there was “appropriate reprioritisation” away from wasteful, irregular and unauthorised expenditure.

Although government has made similar promises in the past, “under a new leadership we may be more successful in that regard”, said Jammine.

“The objectives and motives behind this are more genuine than they were in the past.”

These are unprecedented times, and the role of media to tell and record the story of South Africa as it develops is more important than ever. But it comes at a cost. Advertisers are cancelling campaigns, and our live events have come to an abrupt halt. Our income has been slashed.

The Mail & Guardian is a proud news publisher with roots stretching back 35 years. We’ve survived thanks to the support of our readers, we will need you to help us get through this.

To help us ensure another 35 future years of fiercely independent journalism, please subscribe.

Lynley Donnelly
Lynley Donnelly
Lynley is a senior business reporter at the Mail & Guardian. But she has covered everything from social justice to general news to parliament - with the occasional segue into fashion and arts. She keeps coming to work because she loves stories, especially the kind that help people make sense of their world.

Coalition politics and law: The fight over Tshwane

With coalition politics on the rise, particularly in local government, this kind of court case is likely to become more common

High court declares Dudu Myeni delinquent

Disgraced former SAA chairperson Dudu Myeni has been declared a delinquent director by the...

SANDF inquiry clears soldiers of the death of Collins Khosa

The board of inquiry also found that it was Khosa and his brother-in-law Thabiso Muvhango who caused the altercation with the defence force members

No back to school for teachers just yet

Last week the basic education minister was adamant that teachers will return to school on May 25, but some provinces say not all Covid-19 measures are in place to prevent its spread

Press Releases

Road to recovery for the tourism sector: The South African perspective

The best-case scenario is that South Africa's tourism sector’s recovery will only begin in earnest towards the end of this year

What Africa can learn from Cuba in combating the Covid-19 pandemic

Africa should abandon the neoliberal path to be able to deal with Covid-19 and other health system challenges likely to emerge in future

Coexisting with Covid-19: Saving lives and the economy in India

A staggered exit from the lockdown accompanied by stepped-up testing to cover every district is necessary for India right now

Covid-19: Eased lockdown and rule of law Webinar

If you are arrested and fined in lockdown, you do get a criminal record if you pay the admission of guilt fine

Covid-19 and Frontline Workers

Who is caring for the healthcare workers? 'Working together is how we are going to get through this. It’s not just a marathon, it’s a relay'.

PPS webinar Part 2: Small business, big risk

The risks that businesses face and how they can be dealt with are something all business owners should be well acquainted with

Call for applications for the position of GCRO executive director

The Gauteng City-Region Observatory is seeking to appoint a high-calibre researcher and manager to be the executive director and to lead it

DriveRisk stays safe with high-tech thermal camera solution

Itec Evolve installed the screening device within a few days to help the driver behaviour company become compliant with health and safety regulations

The best local and international journalism

handpicked and in your inbox every weekday