My recent opinion piece, carried by one of the daily publications, asserted that Premier David Makhura’s Achilles heel remains the infrastructure development backlog. Despite efforts to remedy this situation by the national, provincial, and local governments – the infrastructure gap in Gauteng appears to be insurmountable.
Sometime in July 2017, Premier David Makhura and myself were dinner guests to the then outgoing Vice-Chancellor of the University of Johannesburg, Prof. Ihron Rensburg. By then I was Member of Mayoral Committee for Finance at the City of Johannesburg. I was sitting next to Makhura and he passionately shared his vision of the Gauteng City Region with me. These included rapid advancement of township entrepreneurship, establishment of economic zones, development of integrated infrastructure, and creation of socially and economically inclusive City Region. I interjected – “but Mr Premier – what do you mean by integrated infrastructure?”. Makhura responded – “Vhamusanda (traditional chief), if you look at our roads throughout the Gauteng City Region they are integrated. Although our municipalities operate within their jurisdiction and boundaries – you would drive through various municipalities seamlessly without even thinking that your single trip is navigating through various municipalities roads, provincial and national roads”.
Makhura sipped his rooibos tea dashed with honey and posed a question: “Vhamusanda, if our roads are integrated and seamless – why can’t we have our electricity and water infrastructure integrated?”.
I nodded my head in agreement. At that point – Makhura looked and pointed to security camera attached to the wall and continued: “You see Vhamusanda, I want a situation wherein private and public sectors security cameras within our City Region are integrated, seamless, and can ‘talk’ to each other”.
He reminded me of the discussions I have had with his MEC of Finance, Barbara Creesy, regarding the cooperation between the provincial and Joburg metro broadband infrastructure networks. Since then, I have been monitoring how the Premier was delivering on his priorities.
Makhura has made some impressive strides during the last four and half years. Some progress has been made to change the spatial landscape. By working with the previous City of Johannesburg administration and the private sector – new cities were established on what the then Johannesburg Executive Mayor, Parks Tau, named “Central Corridor” as follows: Masingita, Reifontein, Waterfall, Modderfontein, and Steyn City. The pace of creating an integrated spatial landscape slowed down when mayor Tau lost the mayoral chain.
The National Treasury has conducted an infrastructure assessment which focused on the eight metros by taking into account the variability factor in the metros relative to expenditure, revenue base, and future projected expenditure needs. The results of the study found that the three Gauteng metros have a combined infrastructure funding gap of around R400-billion over a 10-year period. Considering that this study did not include local and district municipalities – it could be estimated is that the capital funding gap in all Gauteng municipalities is just over R500-billion.
Noteworthy, the aforementioned figure does not include the SANRAL expenditure and funding gap in jurisdictions that are under the provincial and national government in Gauteng Province. The total infrastructure backlog in Gauteng should therefore be hovering towards R1-trillion. I should hasten to indicate that the provincial and local governments inherited much bigger infrastructure backlog from the apartheid state and they have done much to reduce it.
While the premier has worked very well with the private sector to revolutionise real estate investments in Gauteng, he should rally the private capital to invest in social and infrastructure projects. This would enable the provincial government, metros and municipalities to embark on off-balance sheet projects without negatively affecting their leverage ratios. Private investors should somehow be enticed to contribute towards the construction of roads, water, electricity, and security infrastructure. More investments should be directed to environmental impact projects and those that will yield socially responsible and green outcomes. These should include smart-meters and smart-security related infrastructure.
For investors to contribute to the provincial and local government projects, the Premier should prod the Minister of Finance to amend Regulation 28 of the Pension Funds Act to allow pension funds to investment more than the currently allowed 15% in unlisted projects such as power plants and dams. Moreover, Makhura should convince the Minister of Finance to give favourable tax rebates to investors who put money on assets in critical shortage such as municipality infrastructure, housing, university residences, clinics, public hospitals, and public transport. It should be borne in mind that most of the aforementioned assets produce permanent jobs. All companies pay 28% income tax and then 20% dividend tax. The REITs (Real Estate Investment Trusts) are allowed to earn income and pay this out to their shareholders without any tax deduction. Thus their tax rate is ZERO. This is an anomaly, and if my memory serves me well – they got this favourable dispensation from the then Finance Minister, Trevor Manuel. This advantage is the simple explanation for why there is a national oversupply of office blocks and shopping malls. It also substantially explains why listed property has been the fastest growing sector on the JSE.
I have got no doubt that during his second term, Premier Makhura will, with the assistance of other stakeholder, make huge strides to reduce the infrastructure backlog.
Dr. Dagada is a founder of GrandPoint Capital, and heads-up The Financeburg Group. He is on Twitter: @Rabelani_Dagada