In an effort to boost the sluggish economy, government has announced that it will immediately prioritise infrastructure – through the establishment of the South Africa Infrastructure Fund.
“With a view to unlocking the potential to create more jobs on a large scale, we have decided to set up a South Africa Infrastructure Fund, which will fundamentally transform our approach to the rollout, building and implementation of infrastructure projects,” President Cyril Ramaphosa said.
The Infrastructure Fund forms part of government’s stimulus package adopted by Cabinet in an effort to boost growth.
On Friday morning, President Ramaphosa announced five measures of the stimulus package with infrastructure taking the lion’s share of the package.
“Infrastructure as we know, is a key driver of economic growth. Infrastructure expansion and maintenance has the potential to create jobs on a large scale, attract investment and lay a foundation for sustainable economic expansion,” said the President.
Through the fund, government aims to reduce the current fragmentation of infrastructure spend and ensure more efficient and effective use of resources.
R400 billion channelled to Infrastructure Fund
Contribution from the fiscus towards the Infrastructure Fund is set be in excess of R400 billion.
“We will use it [R400 billion] to leverage additional resources from developmental finance institutions, multilateral development banks and private lenders and investors,” said the President.
Finance Minister Nhlanhla Nene said budget will be reprioritised from other government programmes to fund the stimulus package.
“Working with the Department of Performance and Monitoring and Evaluation, we are working on moving funds. This would be from underperforming programmes and a number of trade-offs will be made. These would be projects that were budgeted for but could no longer be priorities.
“These will be released during the Medium Term Budget Policy Statement,” said Nene.
Execution Team to monitor progress
To ensure the funds are used effectively, and projects are completed on time and within budget, an Infrastructure Execution Team will oversee implementation.
The Infrastructure Execution Team will be based within the Presidency.
“Alongside this fund, there will be an execution and implementation unit that will make sure that we implement projects on time and within budget and never have overruns that are unnecessary,” said the President.
The team, which is set to be announced by the Presidency, is said to consist of highly skilled professionals with extensive project management and engineering expertise to assist with project design.
“The team will identify and quantify ‘shovel ready’ public sector projects, such as roads and dams, and engage the private sector to manage delivery,” said the President.
The Presidential Infrastructure Coordinating Commission will work alongside the Infrastructure Execution Team to streamline coordination across the three spheres of government.
As part of the reprioritisation of spending, additional infrastructure funding will be directed towards provincial and national roads, human settlements, water infrastructure, schools, student accommodation and public transport.
In support of the stimulus efforts, the Industrial Development Corporation aims to increase its approvals to R20 billion over 12 months, an increase of 20% on the previous year.
“This funding will target the productive sectors of the economy, including manufacturing, mining, industrial infrastructure and sectors in distress.
“Cutting across all these measures are a series of interventions to ensure that growth is labour intensive and that young people in particular are drawn into the labour market,” said President Ramaphosa.
Among the measures are the extension of the Employment Tax Incentive for a further 10 years, with a review after five years.
Other measures include greater support for public employment programmes, additional support for the clothing and textiles sector, and the use of funds from the Unemployment Insurance Fund to support labour activation programmes.
President Ramaphosa said the stimulus package measures provides fertile ground for the upcoming Jobs Summit and Investment Conference in October.
He said they want to go to the conference ready to say “the country is open for business.”
“We want to go to the Conference having cleared the decks on the policy side and saying to investors – South Africa is now open for business and as they say, anytime is tea time.
“It is better to go into the Jobs Summit armed with interventions that are ready, than to go to a Jobs Summit and theorise, we want to go into the Job Summit and say these are the type of jobs that can be implemented,” said the President.