Johannesburg: Departments and municipalities that persistently failed to spend, underspent, or misspent their capital expenditure budgets risked losing their allocations, Finance Minister Pravin Gordhan said on Wednesday. He warned, too, that officials would be held liable for such misdemeanours and that the National Treasury would proactively monitor adherence to policy and jobs targets associated with the projects to ensure value for money.
Delivery departments and the State-owned companies (SoCs) were also urged to materially improve on their delivery of South Africa’s R845-billion infrastructure pipeline over the coming three years.
The Budget Review actually lists 43 major infrastructure projects, which would collectively involve investment of R3.2-trillion, with the R845-billion related specifically to projects scheduled for implementation by March 31, 2015. Included in the list were energy projects valued at nearly R300-billion and transport and logistics investments worth R262-billion. The list also included a so-called nuclear fleet build, with an estimated project cost of R300-billion.
But it was estimated that only 68%, or R178-billion, of the planned R260-billion set aside for infrastructure in 2010/11 was actually implemented as planned, owing to weaknesses in the State’s infrastructure capacity. “We have to do better than that – State enterprises, municipalities and government departments all need to improve their planning and management of capital projects,” the Minister told lawmakers during a Budget address in Cape Town.
Besides the delays, cost overruns also had to be brought under control, which would require improved planning, as well as better project management.
Particular attention would be given to bolstering capacity at the municipal level, where it was reported earlier that 25% of funds allocated for capital projects last year had not been spent.
A new 'Cities Support Programme' would be rolled-out in eight metropolitan authorities this year, focused on improved spatial planning, public transport systems and management of infrastructure utilities. In addition, a Municipal Infrastructure Support Agency would be established to increase planning capacity in rural municipalities.
"We are aware of several weaknesses in the State’s infrastructure capacity," the Minister said. But he promised that action would be taken to step up the quality of planning, costing and project management, "so that infrastructure is delivered on time, and on budget".
Gordhan stressed that not all the projects would be funded by government directly, with the fiscus expected mainly to meet capital costs of public-service facilities, such as schools and courtrooms, hospitals and rural roads. The SoCs, particularly Eskom and Transnet, would finance their investments from internally generated surpluses and borrowing from the capital market.
“South Africa has deep and liquid capital markets, through which long-term capital can be raised at competitive rates by government, State enterprises and the private sector. Our development finance institutions are capable of raising capital and cofinancing investments of the private sector, State entities and municipalities. These are considerable strengths – they mean that we do not have to rely on expensive external finance or complex structured arrangements.”
In some cases, a mix of tax finance and cost recovery would be pursued, whereby Budget contributions could be made to support commuter transport services, as well as the delivery of electricity and water service delivery to low-income communities.
The newly formed Presidential Infrastructure Coordinating Commission, or PICC, would ensure expert project assessment, subject to appropriate standards of review and public accountability. It would also ensure that “no good project will be short of funding”.
PRIVATE SECTOR ROLE?
But Gordhan also stressed that there would be a role for the private sector in the delivery of infrastructure, particularly in the areas of renewable energy, telecoms and aviation investments.
“Private sector capacity can also be mobilised through construction and operating concessions, for example in the management of industrial development zones, freight logistics and ports operations,” he said.
His comments come against a backdrop of some uncertainty about the future role of public-private partnerships, with many projects having been either cancelled or delayed. They also came amid anxiety over the user-pays model being proposed for a number of roads projects, particularly the Gauteng toll roads.
Gordhan effectively reaffirmed government's earlier decision to support the toll scheme, which had been built by the South African National Roads Agency Limited (Sanral), but whose February implementation had been delayed, owing to disquiet from Gauteng residents and the trade unions.
However, he also moved to ease the toll burden by making a “special appropriation” of R5.8-billion in favour of Sanral, which would be used to lower the R20-billion debt associated with the project and reduce the “toll burden” on motorists.
“This will reduce the debt to be repaid through the toll system, and will make a steeper discount possible for regular road users,” Gordhan said, while refraining from offering an indication as to the new implementation date.
Reinforcing the emphasis given to infrastructure delivery in President Jacob Zuma’s recent State of the Nation address, the Minister listed public infrastructure as one of six “levers of economic change”.
The others included: support for industrial development and special economic zones, investment in science and technology, support for emerging farmers and land reform beneficiaries, expansion of employment programmes, improvements in further education and skills development.
“An expansion in infrastructure investment is one of the central priorities of the 2012 Budget,” he stressed, noting that the programme would stretch over the next 20 years.