President Cyril Ramphosa has announced that SA is looking at 276 new infrastructure projects to revive the economy. Photo: GCIS
- SA unveiled its inaugural Sustainable Infrastructure Development Symposium with projects running to trillions of rands
- Other countries are also looking at infrastructure to lift their economies from the Covid-19 slump and therefore competition is rife
- The question is; has SA proven itself as an attractive and reliable investment destination to stand out from the crowd?
On Tuesday, President Cyril Ramaphosa announced during South Africa’s inaugural Sustainable Infrastructure Development Symposium that the country is looking to embark on 276 infrastructure projects, costing more than R2 trillion.
Of these, 88 are near financial close and 55 are ready to begin construction within three months, if funding from those who have expressed interest translate into signed agreements. But the government is keeping its cards close to its chest for now in when it comes to the amount that has been pledged.
It was only revealed that the symposium led by the head of presidency’s investment and infrastructure office, Dr Kgosientsho Ramokgopa and Minister of Public Works, Patricia de Lille, met with over 60 multilateral development banks, development finance institutions, commercial banks and private sector developers who expressed interest.
- READ | Ramaphosa: SA has secured billions in ‘firm’ funding commitments for infrastructure
Will SA be able to attract the required investment?
However, the business community is worried about SA’s ability to follow through. A history of corruption and cost overruns in public sector projects like Eskom’s power plants; a decimated construction sector; and the fact that the country’s economy is projected to contract by about 10% this year; have left some questioning if there will be enough investors looking in SA’s direction.
Even those advising the president on these matters think SA needs to get a lot of its ducks in a row first. A member of the president’s investment envoy, Jacko Maree, said local investors like the Association for Savings and Investment SA are also “very keen” to fund infrastructure.
However, inability to distil what’s most important – plus red tape which has seen projects worth multi billions of rands delayed due to “just waiting for one signature from Eskom” – is chasing many away.
“As a country, South Africa, we have a habit of trying to do too many things at the same time. I really do worry when I hear about hundreds of projects that are being considered. We have to prioritise,” he said.
Competition is stiff this time
SA has been canvassing the investment community for money for some time now. Ramaphosa led two investment conferences in 2018 and 2019 and investors pledged at least R653 billion in those.
- READ | Ramaphosa’s conference bags R363bn in new investments
This time, the country is joining a long queue of other economies who are all looking for funding too to try and stimulate their growth through infrastructure. For instance, the US is contemplating a US$1 trillion infrastructure programme to lifts economy from the doldrums and the UK is talking about a £100 billion programme in 18 months, said Maree.
Duma Gqubule, economist and founding director of the Centre of Economic Development and Transformation, said the fact that SA is now coming back looking for more funds, just six months after the last investment conference was worrying. He said there are no tangible projects yet to point at as fruits of the billions of rands pledged in these summits.
“How much double counting is there from those pledges that were made in the investment summits? How could we have new pledges six months later? And, after each of the summits, there has been a decline in investment in the economy. This year, our economy is going to collapse by 10%. How is anybody supposed to invest in an economy that is collapsing?” asked Gqubule.
Another PR exercise?
He said while the pledges could be made, the private sector investments will follow only if the public sector leads the charge. Without a fiscal stimulus package aimed at reviving infrastructure, it would be hard to see any of the pledges converted into meaningful investments.
“We need to limit the contraction of the economy so that we can still have an economy to invest in after all of this. We are approaching a stage where it’s going to become completely unviable and quite frankly, these PR exercises, just like the investment summit, the jobs summit are just a waste of time,” he said, adding that South Africans are tired of endless “gimmicks”.
But Dr Ramokgopa promised that a R100 billion government infrastructure fund will be coming to operation within the next seven days. This will be a 10-year fund, meaning it will be able give about R10 billion a year to support projects that need blended finance, where government puts finance first and takes the first losses to attract private sector players.
He added that government does not expect more than 60% of the identified projects to reach financial close. About 40% of them will probably be funded from the fiscus because they have no commercial returns.
