Accelerate Water Infrastructure Build in SA!

The rate of unemployment in South Africa is amongst the highest in the world, at 34.4% as at Q2, 2021 and on this blog I propose that a broad-based infrastructure build program would create new jobs and thereby reducing unemployment. 

Since 2015, consulting firm, Deloitte has been publishing a report with a focus on infrastructure and capital projects in Africa. The 2020 report. “Africa Construction Trends Report 2020” tracks 385 projects whose value is greater than US$50 Million and must have broken ground on 1^st Jun 2020. For 2020, the total value of the projects is US$399 Billion, of this value, US$124.5 Bn (31%) is attributable to Southern Africa, US$111 Bn (28%) to North Africa, US$79 Bn (20%) to West Africa, US$77.7 Bn (19%) to East Africa and US$6,4 Bn (2%) to Central Africa.

Of the 385 projects 31,4% are built by China, 28,8% by Private Domestic role players in the respective countries, 15.1% by various types of Consortia and the rest by various role players in society. Of the US$399 Bn, 34.5% is funded by Governments, 18.3% by Private Domestic role players, 14.8% by China and the remainder by other role players in society such as Development Finance Institutions (African and International).

The top five projects by value across the continent are: the new capital city in Egypt at a staggering US58 Bn; the offshore area 1 liquid natural gas (LNG) facility in Mozambique at US$23Bn; the Centenary City in Nigeria at US$18 Bn followed by the Kusile Power Plat in South Africa at US$15 Bn and lastly the Dangote refinery in Nigeria, at US$14 Bn. Water-related projects account for a mere 1,7% of the US$399 Bn total value of projects and Real Estate has the highest share of investment at 35,8% of the US399Bn total value of projects. In SA projects with the highest value in terms of investment (other than Kusile) are: the Medupi Power Plant at US$13,2 Bn followed by the Waterfall City Development at US$6,8 Bn and the Steyn City Development at US$4,7 Bn with the value of water-related infrastructure projects situated much lower down the rank of largest infrastructure projects in SA, yet water is essential to life with its uses are diverse, ranging from drinking and sanitation to irrigation for farming and food production. 

In SA there are approximately 3 million people without access to basic water supply services and only 67% of households have access to reliable water supply services. Furthermore, 14.1 million people do not have access to safe water and sanitation. To be sure, South Africa’s government is not sitting idle watching the situation unfold, indeed there are several water infrastructures projects underway to ensure that South Africa avoids a 17% water supply shortage by 2030. Water storage, in the form of dams therefore becomes critical infrastructure to ensure water security for the country. 

Several water-related projects are planned at a total value of R106 Bn, as part of the Strategic Integrated Projects initiative. Indeed, what is encouraging is the recent formation of the Infrastructure South Africa which will serve as a single point of entry for all of the country’s infrastructure projects. In a bill, the National Infrastructure Plan 2050, which has been gazetted, a proposal is made for the development of a National Water Resources Infrastructure Agency which, if passed into law, could start functioning between 2023 and 2024.

Despite all these developments in SA, it is not clear if the rate of investment in and building of water infrastructure is enough for the country to avoid the predicted water deficit by 2030, this is not withstanding possible periods of droughts in the future.

Our Politicians must show political will to create effective government !!!

Infrastructure Investment to Alleviate Unemployment in SA

 

According to StatsSA, as at Q2 2021, South Africa’s unemployment rate stood at 34,4%, this represents 7.8 mil people without jobs out of a labour force of 22,8 mil. This is 7.8 mil people, excluding their close and extended families, who are not able to have a guaranteed meal because they have no income. How then is the problem of unemployment to be solved, especially for women? Investment in infrastructure is certainly one way to address this problem. Perhaps the most famous economic recovery program was the one introduced by President F.D. Roosevelt to revive the US economy when the country experienced a depression between 1929 and 1933. The program came to be known as the “New Deal” and was characterised by the three Rs, namely:  Relief for the unemployed; Recovery of the economy back to normal levels and Reform of the financial system to prevent a repeat of an economic depression. To relieve unemployment, the New Deal involved a wide-ranging infrastructure delivery program which created thousands of jobs as people got to work to build new roads, bridges, airports, among others.

Deloitte (2021) describes infrastructure as government-owned "physical framework of an economy" and we all know that SA is in desperate need of various types of infrastructure. Think, for instance, of access to drinking water and sanitation, Chapter 2 of South Africa’s Constitution states that “everyone has the right to have access to sufficient food and water.” Delivery of water and sanitisation to citizens will require a large investment in relevant physical framework which should bring with it jobs which will go a long way in alleviating the unemployment menace. 

Of course public infrastructure investement, like private investement, requires capital and some of the options open to the government of President Ramaphosa are: an increase in taxes however, with corporate taxes at 28% and individual tax that can attract as high as 45% in marginal taxes (depending on income levels) many would argue that South Africa already has relatively high tax rates; another funding option is the issuing of bonds and yet another is borrowing from organizations such as the World Bank however, a strong argument can be made that SA is already highly endebted, with our debt to GDP ratio at 77%, as at 2020. 

It is my opinion that President Ramaphosa must act with urgency and launch South Africa's own version of the New Deal, separate from the National Development Plan, which so far has failed to deliver on its promise.

Our Politicians must show political will to create effective government !!!