Infrastructure investment remains a priority

In line with the National Development Plan, investment in infrastructure remains a policy priority with public-sector infrastructure investment plans totalling R987.4bn over the medium-term.

According to the 2016 Medium Term Budget Policy Statement (MTBPS) tabled by Finance Minister Pravin Gordhan in Parliament yesterday, since 2009 the public sector has invested more than R1.6trn in infrastructure.

This has alleviated pressure on network industries and expanded capacity.

“In line with the NDP, investment in infrastructure remains a policy priority. Public-sector infrastructure investment plans total R987.4bn over the medium-term, of which R334bn is in transport and logistics, and R137bn in water and sanitation. Investment in energy infrastructure totals R243bn over the period,” said Gordhan.

National Treasury said the lack of adequate electricity supply has imposed severe costs on the economy.

It affirmed that the IPP programme which has been lauded the world over, will continue.

“Government has worked to stabilise Eskom and increase the participation of independent power producers (IPPs), which was initially focused in renewable technologies. The IPP programme, which involves large investments by the private sector, will continue, and will expand to include private investment in coal and gas.”

Further expansion of electricity generation capacity will be guided by the Integrated Resource Plan and the Integrated Energy Plan, which should be alert to the risk of over-investment.

The MTBPS highlighted that idle electricity capacity will require higher electricity prices, with negative consequences for economic growth.

In addition, integrated resource planning should take into account the falling cost of renewables and their possible use in generating baseload electricity.

Power utility Eskom has scaled up its maintenance work and energy availability improved from 70% in October 2015 to 81% in June 2016. The Medupi and Kusile power plants are expected to be completed by May 2020 and September 2022 respectively.

Three units of Ingula storage scheme, which is located in Ladysmith, KwaZulu-Natal, are already in commercial operation and the fourth will come on line in the first half of 2017.

The IPP programme has successfully introduced renewable power to the electricity grid. Of the 6376 MW of renewable power procured to date by the Department of Energy, 2220MW has come on stream.

IPPs have attracted R194bn in investment and created just under 27,000 jobs.

Over the past three years, Transnet has significantly increased its capacity through investment in new locomotives and rail infrastructure. Capacity has grown by 26.4 million tons in the general freight business, 9 million tons on the export coal line and 7.2 million tons on the export iron ore line.

Transnet expects to invest a total of R30 billion in its new multi-product pipeline, which is expected to be completed in 2022/23. The pipeline will boost capacity by 3.5 billion litres per year.

The MTBPS said the country’s large development finance organisations are also investing in infrastructure and economic development.

The Development Bank of Southern Africa disbursed a record R17.1bn during 2015/16, of which R8.1bn went to municipalities.

Over 250,000 households benefited from energy and water and sanitation projects.

Meanwhile, the Industrial Development Corporation approved loans of R4.9bn and R2.9bn for black empowered companies and black industrialists respectively to support greater participation of black people in the economy.

Review of incentive programmes

The 2016 MTBPS said incentives which government provides to support business are being reviewed with the review expected to be completed next year.

For example the Manufacturing Competitiveness Enhancement Programme – which is run by the Department of Trade and Industry – has approved projects worth about R28bn, supporting an estimated 200,000 jobs.

The Automotive Production and Development Programme – which is also run by the dti – has contributed to increased exports.

“Given increased pressures on the fiscus, these incentives, including direct transfers, tax and tariff rebates and concessional financing are being reviewed. The review is intended to assess performance, determine value for money, and analyse how the system as a whole supports the economy and job creation. The review is expected to be completed by October 2017,” said the MTBPS.