2 years ago

Opportunity Issue 98

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Opportunity magazine is a niche business-to-business publication that explores various investment opportunities within Southern Africa’s economic sectors and looks to provide its readers with first-hand knowledge about South African business. Opportunity also looks to present South African business to international markets that may have interests in investing in South Africa. The publication is endorsed by the South African Chamber of Commerce and Industry (SACCI).


INFRASTRUCTURE One of the major areas of focus of the national infrastructure programme is student accommodation, as illustrated by this new development at the University of Fort Hare. Credit: Stag African Addressing Chatham House, the London-based think-tank, on prospects for the growth of the domestic economy, especially in the aftermath of the Covid-19 pandemic, Mashatile noted that the current health crisis has exposed gaps in the provision of infrastructure and basic needs such as healthcare, education, public transport, roads, water and housing. Unofficial estimates are that the country may need about US0-billion to recover from the coronavirus outbreak. “Our point of departure is that the new economy we are building must be more inclusive, resilient and sustainable. We have taken the view that in building a post Covid-19 economy, we need to go back to the fundamental insights contained in the Reconstruction and Development Programme (RDP) of the early 1990s.” Increased spending on infrastructure is therefore a sure signal that the domestic economy is on an expansion trajectory and economic activity is on the rise. In the long run, improvements in productivity may be achieved and this will drive sustainable economic growth, which leads to a faster pace of job creation. The ultimate result is to achieve stabilisation and recovery of government finances. Amid a mixture of economic misfortunes include worsening unemployment, rising poverty and inequality, and sovereign debt downgrades by three rating agencies, South Africa also experienced a record contraction of the Gross Domestic Product (GDP) in the second quarter at the worse-thanexpected 51% at seasonally adjusted annual rate — which is disconcertingly the fourth consecutive quarterly contraction. Enter the Covid-19 pandemic era and a major spanner is thrown into these works, already in disarray. Unlike in the past where a smorgasbord of unrelated avenues were being touted as the panacea for the ailing economy, there is now a single view that massive investment in infrastructure will undoubtedly turn the fortunes of the economy around. Some of growth path alternatives punted as a saving grace for the near-parlous economic situation included the tourism and hospitality, beneficiation and trade sectors. However, none of these have delivered as expected. There are strong indications that players in both the public and private sectors agree on this issue. The ruling party has been among the leading proponents of this bricks-and–mortar approach as a way of negotiating the economic pathway. Paul Mashatile, ANC Treasurer-General, recently went public and punted infrastructure spending as the main tool that will ensure that the ruling party keeps most of its electoral promises and thus fulfils its mandate. “When voters cast their votes, it is not so much about what a party promises to deliver but they are actually looking at what has been done,” he said. Private sector role Against this background, government has engaged the private sector and the multilateral development banks and designed an infrastructure project pipeline totalling more than .5-billion (an estimated R350- billion), focusing on network industries such as rail and ports, energy, ICT, water, sanitation and human settlements. In the 2021 Budget the government’s Infrastructure Fund was allocated a whopping R18-billion over the next three years, This is part of the R100-billion committed by government over a period of 10 years. Managed by the Development Bank of Southern Africa (DBSA), the fund intends to leverage R10 from the private sector for every R1 spent by government. The ultimate aim is to achieve a R1-trillion infrastructure spending programme and transform public infrastructure financing through this blended finance approach. The DBSA advanced close to R635-million as part of the capital to set up this R100-billion fund. An estimated 177 projects across the public and private sectors are already under consideration. Having taken some time prior to being established after being mooted by the President in September 2018, work has now started on three major projects: student housing, water infrastructure and digital infrastructure. The establishment of the Infrastructure Investment Office (IIO) last year by President Ramaphosa is further evidence that economic recovery may hinge overwhelmingly on big investment in this area and adds further impetus to the infrastructure spending drive. Led by Dr Kgosientsho Ramokgopa, the former Gauteng MEC for Economic Development, this agency hit the ground running with the hosting of the Sustainable Infrastructure Development Symposium (SIDS) in June 2020. Notwithstanding all these laudable initiatives on the part of government, the main challenge appears to be the details of the financing of infrastructure spending. While experts are upbeat about this economic direction, some have expressed concerns that the tight national purse may affect the efficacy of this drive. Says Siyanda Mflathelwa, Senior Infrastructure Finance Transactor at Rand Merchant Bank, “The government has stated that infrastructure development is one way to revive the ailing economy. Given the fiscal 26 |

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