By Prof. Busisiwe Mavuso
• In finalising the budget, the priority must be to stimulate growth through infrastructure investment.
• It requires investment by government and the private sector, as well as together through public-private partnerships.
• Growth has to contend with a world that is changing rapidly, and SA’s relationship with the US is a risk to that growth. President Ramaphosa has dealt with evolving political issues appropriately, signalling his intention to follow “diplomatic decorum” and reaffirming his commitment to strong bilateral relations with the US.
In the debate over last week’s budget, a key question is how to support the urgently needed growth imperative. Economic growth enables delivery for the people of South Africa, creating jobs and generating revenue that government can spend on services, making future budgets easier. To create that growth, we need to invest in infrastructure. In the debate over the budget that we’re now going into, that must be front and centre.
Infrastructure can be funded in three ways: by the government, by the private sector, and by both working together in public-private partnerships (PPPs). The private sector has for many years been the dominant investor in infrastructure, but its focus is naturally on building the infrastructure that enables the activities of firms, such as broadband and private electricity generation. Social infrastructure, from hospitals to court buildings, and government-run network infrastructure like railways and powerlines, requires government to play a role directly. The growth of the economy fundamentally depends on this type of investment – it expands the capacity of the economy to produce more goods and services, ultimately creating work opportunities.
Long-awaited revisions to the regulations governing PPPs were published last month, which should make it easier for government and the private sector to partner to accelerate infrastructure investment. There are two main improvements. First, smaller PPPs, valued at under R2bn, now have a smoothed process for approvals. Second, there is an improved mechanism for the private sector to make unsolicited proposals, which is key for new innovations and ideas to come to life. But while these are a significant improvement, it still requires the public sector to embrace PPPs as an effective way to get new projects off the ground. The whole of government needs to elevate the option of PPPs, encouraging decision makers from councils to departmental accounting officers to use them as a path of least resistance to getting infrastructure happening. The amendments empower national departments to create dedicated units to support the development of PPPs, which can work with a national PPP within Treasury. These are very positive, but it will take political will from the whole of cabinet to make them more than possibilities.
This is fundamentally about getting growth happening, which has to contend with a world that is changing rapidly. South Africa’s relationship with the United States is clearly a risk to that growth. The political issues are evolving, and I think President Cyril Ramaphosa has dealt with them appropriately, signalling his intention to follow “diplomatic decorum” and reaffirming his commitment to strong bilateral relations with the US.
Our international relations elsewhere are positive, signalled with the announcement last week of a €4.7bn investment package by the European Union to support green energy and vaccine production during the first bilateral summit between the parties to be held in seven years. This signals the importance of international relationships with counterparts across the world, ones we will build this year through the hosting of the G20. The EU is helping to advance key national objectives including the just energy transition and healthcare access.
The situation with the US is regrettable but it is a reality we must work with. Our response must be to focus on the possible, working with American counterparts where we can. I noted last week that the US, through its Export-Import Bank, has reaffirmed its $4.7bn loan for the development of a liquefied natural gas (LNG) project in Mozambique that had stalled following a terrorist raid in the north of the country.
That shows the US is still open to business, but it is a different kind of business. That does not mean we should shift our priorities or strategy to fit US objectives, but it does mean that there is still opportunity where it makes sense to work with the US government. Of course, American and South African companies have strong relationships that will remain steadfast and business between our two countries will remain strong. But when we think about opportunities involving official US government backing, we must pivot, advancing projects that will fit the US agenda.
In the pursuit of economic growth, we must be agile and focused on the ultimate growth imperative. There is nothing to be gained by decrying the actions of counterparts. We must be ready to pivot to the kind of business that is possible in the world as it is, not as we wish it to be.
I hope all our parliamentarians keep this in mind as the budget heads into parliament to be debated and processed. While the legal guardrails help to ensure public finances cannot be radically undermined during the process, our lawmakers must shepherd the process in a productive way that enables growth.
