IRDC director says the fund needs to look at infrastructure assets as revenue-generating assets.
The Infrastructure Research Development Centre (IRDC) said on Wednesday the infrastructure fund announced by President Cyril Ramaphosa should be used as an investment, rather than expenditure, and that the country needed to use infrastructure projects to generate revenue.
Ramaphosa announced last month that government would set up a South Africa Infrastructure Fund in a bid to transform its approach to the roll-out, building, and implementation of infrastructure projects, with a contribution in excess of R400 billion from the fiscus over the medium-term expenditure framework period.
Bongani Mankewu, executive director of IRDC and a strong advocate for rail infrastructure development, said that the fund would do well for new project-level funding but had to ensure that value-chain businesses, especially in manufacturing, and industries around these infrastructure projects generate a return on the investment.
Mankewu said that the domestic railway engineering and manufacturing industry has all but collapsed because hundreds of millions of rand in investment injected by entities like Transnet and Prasa were used to import components and skills rather than using existing local infrastructure as a result of the government and businesses working in silos.
“The infrastructure fund is a good idea. Our view is that whenever an infrastructure fund is established, it needs to look at infrastructure assets as revenue-generating assets. We need not look at it as an expenditure. Yes, we agree that there is going to be a social aspect to it because we have these two paradigms of infrastructure: schools [and] clinics that you cannot put a return on investment on,” Mankewu said.
“But the commercial infrastructure must, therefore, offset what has been lost on the social infrastructure without it being extremely expensive. The commercial infrastructure must generate revenue. We have to get to a point where we run away from our infrastructure projects as projects for beauty.
“Over time they must have an impact on the economy. So that R400 billion must be viewed as an investment and ensure it impacts on the ecosystem of the economy.”
The IRDC focuses on rail and ports infrastructure in sub-Saharan Africa.