Infrastructure, industrial growth central to Economic Reconstruction and Recovery Plan

15th October 2020 By: Simone Liedtke - Writer

President Cyril Ramaphosa has earmarked infrastructure development as one of the first and most important parts of the country’s Economic Reconstruction and Recovery Plan.

Considering that infrastructure has the immense potential to stimulate investment and growth to develop other economic sectors, while simultaneously creating sustainable employment (direct and indirect), the President said the reconstruction and recovery plan would see a “robust pipeline" of projects that would "completely transform the landscape of our cities, towns and rural areas”.

Addressing Parliament on October 15, he said that, by the end of June, South Africa had 276 catalytic projects, with an investment value of R2.3-trillion. A list of 50 strategic integrated projects and 12 special projects was gazetted in the month thereafter, in July.

These catalytic projects have been prioritised for immediate implementation, with all regulatory processes fast-tracked, thereby enabling R340-billion in new investment.

The projects are at various stages of the project lifecycle, and those that are already in construction will see the future phases fast-tracked for quicker implementation. This includes some human settlements projects which have already received bulk financing to unlock them.

“We are exploring the use of credit-enhancing instruments to unlock bulk water infrastructure and national road improvement projects, and our infrastructure build programme will focus on social infrastructure such as schools, water, sanitation and housing for the benefit of our people,” Ramaphosa said.

Critical network infrastructure (such as ports, roads and rail) that are key to economic competitiveness would be placed at the forefront, he added, noting that steps had been taken to remove constraints that have, in the past, hampered infrastructure delivery.

“To ensure there is active implementation of our infrastructure build programme, we have established Infrastructure South Africa and the Infrastructure Fund with the capacity to prepare and package projects,” the President stated.

This approach was already encouraging private investors to help South Africa build capability for infrastructure delivery within the State and to develop blended financing models, he added.

The Infrastructure Fund will provide R100-billion in catalytic finance over the next decade, leveraging as much as R1-trillion in new investment for strategic infrastructure projects.

Several of these projects are already under construction and include human settlements projects such as Matlosana N2, in North West; Lufhereng, in Gauteng; Greater Cornubia, in KwaZulu-Natal; and Vista Park, in the Free State.

Together, these represent an investment value of R44.5-billion.

In total, government has gazetted 18 housing projects to the value of R130-billion, which will, together, deliver more than 190 000 housing units.

Transport projects currently under construction include the N1 Polokwane and N1 Musina roads with a total value of R1.3-billion.

Ramaphosa also averred that, within the next six months, government would embark on the modernisation and refurbishment of the commuter rail network, including the Mabopane line in Tshwane and the Central line in Cape Town; while also expanding the national rural and municipal road rehabilitation and maintenance programme using labour-intensive methods.

The next six months will also see the fast-tracking of implementation of gazetted strategic infrastructure projects through the approval of credit enhancing instruments, the provision of bulk infrastructure, and the speedy processing of water-use licences, environmental-impact assessments and township establishment processes.

The infrastructure procurement framework would also be adapted to enable more public−private partnerships and unlock new funding, the President said.

Another key intervention in the recovery plan is a drive for industrial growth, which is set to place the South African economy “on a new trajectory” and support “massive growth” in local production, making South African exports much more competitive.

Building on the work that was being done in several areas before the pandemic struck, pledges of about R664-billion in new investment had been secured with R170-billion of capital expenditure pledged during the first two South African investment conferences.

South Africa currently imports about R1.1-trillion of goods, excluding oil, each year, but Ramaphosa averred that, if South Africa were to manufacture just 10% of these goods locally, it was estimated that the country could add up to two percentage points to the yearly gross domestic product (GDP).

The rest of Africa currently imports R2.9-trillion worth of manufactured goods from outside the continent each year.

If South Africa were to supply just 2% of those goods, it would add 1.2 percentage points to the country’s yearly GDP, and if the country should succeed in reaching the R1.2-trillion of new investment target by 2023, “it could add around 2.5% to our [yearly] GDP”.

To realise this huge potential, Ramaphosa said social partners had agreed to prioritise a range of consumer and industrial products for local procurement.

Together with business and labour, government will soon be publishing localisation targets for goods in areas like agroprocessing, health care, basic consumer goods, industrial equipment, construction materials and transport rolling stock.

“We will enforce government policies to ensure that all public infrastructure projects use locally-made materials, including steel products, cement, bricks and other components. We will support the efforts by organised business; we are planning to establish supplier development programmes for large companies and in key sectors,” he elaborated.

Ramaphosa further welcomed the commitment by trade unions to ensure their investment companies increasingly invest in companies that buy from local manufacturers, adding that the National Economic Development and Labour Council (Nedlac) agreement commits all companies and government entities to publicly disclose in their annual reports the value of procurement from local producers and on steps to be taken to improve localisation.

Social partners have also agreed to support a massive ‘buy local’ campaign for this festive season, with a particular call to support women-owned enterprises, small businesses and township enterprises.

Additionally, there are also currently master plans in the automotive, clothing and textile, poultry and sugar sectors which government is working towards finalising.

“A central pillar of this work is the transformation of our economy, creating space for new black and women entrants and take deliberate steps to change ownership and production patterns,” Ramaphosa said.

In promoting localisation and industrialisation, he urged South Africa to focus on, in particular, the development of small, medium-sized and microenterprises (SMMEs), which will take place alongside the development of rural and township economies.

Through a focused support programme, government aims to support SMME participation in the manufacturing value chain, which Ramaphosa said would include targeting specific products for manufacture by SMMEs for both the domestic market and for export.

He added that it would also include the provision of business infrastructure support, financial assistance through loans and blended funding, facilitating routes to market, and assistance with technical skills, product certification, testing and quality assurance.

“Economic growth cannot be realised without the inclusion and active participation of women,” Ramaphosa averred, noting that, among the other outlined measures, government will be working with women-empowered companies to progressively reach a target of directing at least 40% of procurement spend to such enterprises.

“This is also a vital part of our programme to end gender-based violence and femicide, which is fuelled by gender inequality, particularly economic disparities between men and women and gender-nonconforming persons,” Ramaphosa stated.

“In addition to these priority interventions, we will create enabling conditions for a competitive, inclusive and fast-growing economy.”