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INFRASTRUCTURE DEVELOPMENT
 
SA should focus on infrastructure to unlock resource riches
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6th June 2012
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South Africa had to take a fresh look at what its competitive advantages were and focus on developing and maintaining infrastructure that could unlock it, Minister in the Presidency responsible for National Planning, Trevor Manuel, said on Wednesday.

He told delegates at the yearly Bureau for Economic Research (BER) conference, in Johannesburg, that South Africa also had to consider how these competitive advantages, such as coal, iron-ore and manganese, could be used in the short term to finance further infrastructure development.

“Sufficient rail and port infrastructure is required to improve our export capacity,” the Minister noted.

The inefficient coordination of South Africa’s infrastructure had to be rectified, the efficiency of State-owned enterprises and government departments had to be improved and a clear regulatory environment was required.

Manuel said the National Planning Commission’s proposed National Development Plan (NDP) would allow for improved coordination, by providing a policy framework through which decisions regarding projects and financing could be made.

He added that improved infrastructure could also be achieved if the State played its role by reducing the cost of borrowing for State-owned enterprises. “Macro economic stability has to be achieved so that development can take place.”

The role of infrastructure in improving the quality of life of South African citizens would depend on the extent to which the government partnered efficiently with entities that would become allies in the endeavour to improve on the output of the country.

“Transformation will emanate from the quality of partnerships we can build,” Manuel pointed out.

He also highlighted the underspending of infrastructure budgets across all nine provinces.

The Minister attributed the lack of spending largely to a capacity deficit at local government level in dealing with economic and social infrastructure.

“In broad terms, our projections are that infrastructure spent will contribute about 10% of gross domestic product (GDP) and gross fixed capital formation will rise from 19% to 35% of GDP in the long term. But this will be challenging, depending on our capacity to allow for this spending,” Manuel indicated.

ECONOMY

The somewhat brighter global prospects during early 2012 may have contributed to a rebound in domestic business confidence in the first quarter; however, prolonged industrial action in the mining industry proved to be a major drag on South Africa’s GDP in the first three month of the year.

After accelerating to 3.2% quarter-on-quarter in the final quarter of 2011, South Africa’s GDP growth eased to 2.7% during the first quarter of 2012, as prolonged industrial action in the platinum mining sector resulted in mining sector value added plunging to almost 17% quarter-on-quarter.

Economic growth increased by 2.1% year-on-year in the first quarter of this year, down from 2.6% in the final quarter of 2011.

At a projected 5% during 2012, fixed investment was expected to increase 0.6 percentage points faster than forecast in January. The impact was to push the growth in gross domestic expenditure to above 4% from 3.9% expected at the beginning of the year.

Further, because some of the increased fixed investment would be reflected in higher imports, it had a marginal impact by pushing the GDP growth forecast for this year up to 2.9% from the 2.8% expected in January. However, the growth outlook for 2013 has remained unchanged at 3.6%.

Meanwhile, Europe continued to pose a threat to world growth and the momentum in key emerging countries such as China and India moderated.

The outlook for Europe remained uncertain with contingency plans being made in the event of Greece leaving the eurozone after the country’s coming election on June 17.

BER senior economist Hugo Pienaar said Greece’s exit was likely and that the stress of this on the global economy could lead to another recession.
 

Edited by: Mariaan Webb

 

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Trevor Manuel
 
Picture by: Duane Daws
Trevor Manuel