There is a danger that the R400bn infrastructure fund could be used without the necessary capacity, resulting in poorly designed systems, according to prof. Imran Valodia, dean of the Faculty of Commerce, Law and Management at Wits University.
Valodia told Fin24 that the announcement by President Cyril Ramaphosa of the R400bn injection into infrastructure over the next three years, could signal some potential changes in the economy as reducing backlogs is a stimulus for growth.
“There is a lot of finance in the global economy, looking for places to invest…,” Valorie said.
However, he expressed concern about the state’s ability to implement large scale projects “given the problems in Eskom and Transnet”.
Ramaphosa on Friday announced a wide-ranging economic stimulus package including a plan to ramp up the declining spend on infrastructure and a dedicated execution team to be established within the presidency to monitor implementation.
More details about the Infrastructure Fund will be announced in the mini budget speech in October and Valodia described government’s decision not to expand the expenditure ceiling, but instead re-prioritise almost R50bn in this financial year, as “quite a sensible approach”.
Don’t necessarily need money
Outgoing member of the Monetary Policy Committee (MPC) Brian Kahn took a frank approach to the stimulus package at a media lunch in Johannesburg with the SA Reserve Bank (SARB) on Friday.
Kahn said that many things can be done to boost economic growth that do not require any money.
“There doesn’t seem to be any policy coherence… at a whim policy changes,” Kahn said.
He added that, if businesses are uncertain about the regulatory environment, they will not invest in a country.
Kahn referred to the mining sector which he said had “seen no investment” for years, due to uncertainty around the Mining Charter and the Mineral and Petroleum Resources Development Act (MPRDA).
In his Friday speech, Ramaphosa said Parliament had withdrawn the MPRDA and Cabinet has adopted the Revised Mining Charter, which will be made public this week.
Kahn expressed concern that, even if the reworked legislation is positive, “there may already be a lot of damage done".
Deputy SARB governor Kuben Naidoo said he is most worried about low levels of trust between business and government, which has led to declining rates of investment in the country.
The SARB on Thursday cut its 2018 growth outlook to 0.7% from its 1.2% outlook in July, citing the weak economic environment.
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