Promises of new infrastructure are music to business ears

2012-02-13 00:00

OUR nation’s physical infrastructure is underdeveloped and much of it is failing. The impact is felt throughout the economy, but most keenly in our failure to create jobs.

Studies show a clear correlation between infrastructure investment, economic growth, and job creation, so President Jacob Zuma’s commitment to capital expenditure is good news.

We hope though that the commitment to infrastructure development is motivated by the economic multiplier effect, and not merely oiling the wheels of globalisation and import trade.

Much as we want to see local companies benefit from the government’s infrastructure spend, we also want to see a concomitant investment in skills, capacity, and competitive performance for our manufacturing and export sector to reap the rewards of improved transport.

Of critical importance to our region is the investment in rail infrastructure and the proposed development of the Durban-Free State-Gauteng logistics and industrial corridor, which will hopefully result in economic integration and facilitate the movement of goods through our harbours and airports.

This project is intended to connect the major economic centres of Gauteng and Durban, and the resultant improvement in export capacity and capability will have obvious benefits for Pietermaritzburg with its strategic location.

It is equally pleasing to hear that port charges will be reduced and efficiencies improved that will help reduce the cost of doing business. If carried through, these measures will help reverse the erosion of South Africa’s competitiveness.

The commitment to airport development bodes particularly well for the city and vindicates the support of the Pietermaritzburg Airport by the provincial government that understands its strategic importance. Not only does it stimulate economic development, it also facilitates market access, makes doing business easier and attracts investment.

The president also gave notice of government’s intention to improve water, sanitation, electricity and roads. These themes resonate loudly in Greater Pietermaritzburg.

Local industry is at the coalface of job creation, and for too long it has been burdened with significant additional costs that are directly attributable to electricity outages that are due mainly to failing infrastructure.

The cost of this failure goes way beyond the inconvenience of not having power — it also means a loss of production, an escalating reject rate of products, the loss of future orders due to non-delivery and damage to technology and equipment.

Add the loss of wages to workers, as short-time invariably is authorised at these times, and an uncomfortable picture of an uncompetitive environment begins to emerge.

Not only do we have challenges in the area of security and quality of supply, but business has long complained about the high cost of electricity. The president has asked Eskom to seek options of how price increases might be contained over the next few years, in support of economic growth and job creation.

For sustainability reasons, business tends to invest in capital and labour concurrently. It stands to reason that business invests only when conditions are favourable, and a very real consequence of an unfriendly environment is disinvestment.

The very nature of disinvestment is catastrophic as it tends to ignite its own multiplier effect, but in reverse — loss of confidence, closure of factories, job losses, and a reluctance to invest in research and development.

Top of the wish list is investment in fast, reliable broadband connectivity. Not only can cyber-connectivity potentially boost operational efficiencies in all spheres, but global connectivity is a simple must in the new economic order.

The eastern aspect of KZN has a competitive advantage with a natural affinity with the Asian tiger of India, as well as China, and a host of technologically savvy smaller South-East Asian nations. In this technological age a remote small business in a rural outback may prove as competitive as any of its rivals elsewhere. Technology can indeed bridge the digital divide.

In short, spending on infrastructure unleashes a host of economic activities, with benefits. The ultimate goal, and most certainly in this developing economy of ours, is job creation. Progress on this front has been excruciatingly slow, and despite the macro-economic travails, there surely must be room for innovative thinking, and more importantly, effective action.

Matters of employment, unfortunately, labour under a heavy political cloud that stifles innovative thinking. But it doesn’t mean the thinking should stop.

Alas, a great plan is only as good as its implementation, and the plethora of institutional and governance challenges must be adequately addressed. But at least the government can take comfort in knowing that business is an ally and fighting the same war in the same trenches.

Melanie Veness is CEO of the Pietermarizburg Chamber of Business.

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