State finance institutions mooted to help fund infrastructure

Government is exploring options aimed at boosting infrastructure funding through enhancing the role of the country’s development finance institutions and by mobilising private-sector capacity, the Minister of Finance Pravin Gordhan said yesterday.

Gordhan’s Medium Term Budget Policy Statement, which he presented in the National Assembly, reveals that the pace of public infrastructure spending has picked up over the past 12 months.

He told Parliament that the Presidential Infrastructure Co-ordinating Commission (PICC) had reviewed the details of 18 strategic infrastructure programmes, which would add to the current R845 billion infrastructure build programmes already in progress.

He said the R845 billion build programmes would accelerate energy, transport, water and housing investment, open up mining and industrial opportunities and give greater impetus to building economic linkages across Southern Africa.

“Strategic infrastructure programmes represent large and long-term financial commitments,” he said, adding that the budget provides for part of the funding required, while state-owned enterprises are making substantial investments in their areas of responsibility.

While the bulk of infrastructure spending is financed from the balance sheets of state-owned companies, the fiscus funds the provision of social infrastructure, delivered primarily through provinces and municipalities, he said.

The Medium Term Budget Policy Statement, however, said growth in private-sector investment had slowed over 2011, as local businesses refrained from developing new projects with an environment of weaker business confidence.

In contrast, gross fixed-capital formation by the public sector grew at 10.9% during the first half of this year, with Eskom, Transnet and the SA National Roads Agency Limited (Sanral) accounting for 95% of all capital spending by state-owned enterprises.

Government spending on water, sanitation and road infrastructure had also picked up, supporting a nascent recovery in the construction sector.

The National Treasury believes that as the economic environment improves, rising confidence should result in a gradual improvement in private-sector gross fixed-capital formation.

It said with private businesses accounting for about 71% of economic activity and over 75% of jobs, it was crucial to create a buoyant private sector that works in partnership with an effective government.

Domestic growth is expected to remain modest next year and likely to increase over the next three years, but Gordhan added that faster growth was needed to create the jobs South Africa needs. – SAnews.gov.za