South Africa risks another wasted year
The South African government has put a spin on infrastructure projects worth billions of rands as a way to drag the economy out of stagnation – but the PR belies the reality that not much has been done over the last few years to get anything done.
This is according to Intellidex analyst Peter Attard Montalto, who warned that parts of the country are at risk of becoming ‘uninvestable’ if the government doesn’t get to grips with its crumbling infrastructure.
“Several years have been wasted on the promotion of infrastructure PR over reality,” Attard Montalto said.
In a note published this week, Attard Montalto said that parts of South Africa have got visibly worse, and the country as a whole is likely to start seeing the gap between provinces start to widen as more people emigrate or semigrate to areas that can deliver services.
“Internal migration as well as emigration are accelerating based on the latest Stats SA data and forecasts, as well as anecdotally, and will create a shift in productive skills availability between provinces,” he said.
While this may not reflect in data on a country level, the analyst warned that the widening inequality between provinces would create increasingly challenging social and political risks.
“Budget allocations will have to be rethought in this environment, as will how the private sector can work with and fund increasingly dysfunctional municipalities and provinces. If answers aren’t found to these problems in 2023, then areas of the country will start to become uninvestable.”
Infrastructure push
Even before the economic turmoil presented by the Covid-19 pandemic, president Cyril Ramaphosa promoted and pushed various infrastructure projects as core to the country’s route out of stagnating economic growth.
The government’s infrastructure spending is set to increase from R66.7 billion during the 2022/23 fiscal year to R112.5 billion by 2025/26. But despite this rising investment, many of the projects are yet to even materialise.
The Department of Public Works has published its draft development plans through to 2050 – and while many of the lofty goals come with short-term targets to hit over the next three years, the documents do not give much in the way of realisable targets.
Whether it plans to establish more municipal electricity distributors, reimagine the country’s public transport networks or build more schools – the government’s plans require years of more planning, more talking, and developing more policies and frameworks to get anything off the ground.
Meanwhile, infrastructure in South Africa continues to decline.
According to the South African Institution of Civil Engineering (SAICE)’s 2022 Infrastructure Report Card, infrastructure in South Africa is in crisis.
The report assessed 32 different infrastructure segments and found only 15 to be “satisfactory” or above (graded C or above), with the remaining segments falling into being ‘at risk of failing’ (D) or ‘unfit for purpose’ (E).
South Africa’s overall infrastructure rating was a D, indicating that infrastructure is not coping with normal demand and is poorly maintained.
“It is likely that the public will be subjected to severe inconvenience and even danger without prompt action,” it said.
According to Attard Montalto, the government faces challenges in what it can do to address the issue, given the damage done already affecting provinces and migration patterns, the infiltration of corruption and ‘business mafias’ in the infrastructure sector, as well as the political challenges presented by two key elections on their way.
The analyst said that progress is being made, especially in the energy sector, but unless this momentum can be carried into 2023, the country faces more wasted years.
“Next year could be a lost year if not seized by the scruff of the neck,” he said.
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