/ 18 November 2020

Government gets $2bn more in pledges towards infrastructure development

Rising current expenditure will curtail longer-term infrastructure development.
The New Development Bank pledges billions of dollars towards infrastructure development in South Africa.

The New Development Bank has pledged $2-billion towards infrastructure development in South Africa. This is on top of the $3-billion the bank has already committed to the country in the past two years towards infrastructure development. 

This was announced by Monale Ratsoma, the director general of the bank’s African regional centre, in an infrastructure webinar at the third South Africa investment conference. Ratsoma added that much of the investment would require regulatory intervention from the government, such as offering guarantees.

To kick off the two-day conference, several sessions in mining, land reform and small-business growth opportunities were held on Tuesday.  

In his newsletter this week, President Cyril Ramaphosa said this year’s conference is about “implementation, and on turning commitments into brick and mortar projects in our cities and towns. It will highlight our progress in driving the economic reforms that are needed to unlock investment and growth.”

Ramaphosa said that the 2018 and 2019 South Africa investment conferences had generated investment pledges of R664-billion. Overall, the investment conferences aim to secure R1.2-trillion in investments over five years. 

Ndabezinhle Mkhize, the chief investment officer at Eskom pension and provident fund, said that pension funds have been investing in infrastructure for several years, but that it is essential to expand that investment. 

His comments follow those of Kgosientso Ramokgopa, chief executive of Infrastructure South Africa, which is tasked with driving the implementation of the infrastructure-investment plan, who said earlier this month that pension fund managers had now joined the talks on infrastructure investment. 

Mkhize said that pension funds usually come in towards the tail end of a project, when it has passed the “idea” stage, and sometimes even after construction.

He added that pension funds have a role in terms of shaping what kind of funding goes into the projects: for example, how much of the funding will be inflation-linked debt and how much will be fixed-rate debt.

Mkhize said that the government should focus on digital infrastructure, with Covid-19 showing the importance of this.

Focus on implementation

Meanwhile, Ramokgopa told the panel that, moving forward, there needs to be the implementation of the government’s plans.  

He said: “We [the government] are very big on talk and policy articulation and that there is very little attention on application and delivery.” 

Ramkgopa said that partnering with the private sector will help with this. Beyond implementation, he added that structural reform is needed to allow the private sector to invest. 

He mentioned reforms specifically around the issuing of licenses and permits. He explained that, for instance, when a person requires a water licence, they must register at the national department of water. However, if they need licensing for a municipal connection, they must go to a local authority. 

“You can see that the private sector with their good intentions is undermined by the level of bureaucracy that is in government,” he said.   

Ramokgopa said there has to be “a reconfiguration of the institutional framework in the state to allow a single window of entry”.

Ramaphosa, however, highlighted that, in the aftermath of the pandemic, more countries were vying for investment, and this will make the process much more difficult.

However, foreign direct investment flows into South Africa have risen sharply, from R26.8-billion in 2017 to R70.6-billion in 2018.

“To achieve our goal, we have to work together as government, business, labour and all of society to ensure that the seeds of local and international investment land on fertile soil,” he said.  

Ramaphosa said that, over the past 10 months, the pandemic forced many promising investments pledged at previous conferences to be scaled back or put on hold. But these investments only amount to about one-tenth of the total investment commitment of R664-billion and the rest are going ahead.