Despite the challenging global economic environment, the South African government did not see a reason to review the pace of infrastructure investment at this point, said Presidency deputy head of policy coordination and advisory services Alan Hirsch on Thursday.

Speaking at the support programme for accelerated infrastructure development (Spaid) conference in Midrand, he emphasised that the government was reluctant to cut back sharply, or even significantly at the moment.

The State had plans to spend some R600-billion on infrastructure capacity building, in various sectors, from housing and electricity through Eskom, to transport through Transnet and the South African National Roads Agency, as well as the Airports Company South Africa (Acsa).

“We know that we need to be ready when growth resumes,” he explained.

“The growth may resume at a high rate in 2010, or 2011, or perhaps, worst-case scenario, even later. But what we don’t want, is to be in a situation… where [we] were unable to effectively exploit opportunities because of various bottlenecks”.

“Now is the time to invest so that we are more able to respond to opportunities in the future,” Hirsch reiterated.

The government forecasted that there would be a long run growth trajectory driven by the developing markets, particularly Asia and Latin America.

However, he stated that there could be some inevitable “recalculations and rescheduling” of investment.

Hirsch said he had heard news that Acsa was considering rescheduling some of its post-2010 investments “But that is inevitable and sensible and based on expectations of demand, and, of course, I think we all know that Acsa has been ahead of the game in terms of investment compared to many of the other infrastructure investors.”

Acsa spokesperson Solomon Makgale could not confirm that Acsa had made any firm decision to delay post-2010 investments, but did state that plans were being reviewed.

PRIVATE SECTOR PARTICIPATION
It was noted that the government was compensating for a decline in private sector investment, and this investment was important, so as to keep economic activity at a reasonable level.

A number of delegates at the Spaid conference, however, suggested that the government had shown a resistance, and a reluctance to work alongside the private sector in infrastructure delivery. It was particularly highlighted that Eskom had yet to sign any agreements with independent power producers, despite the electricity crisis, which the government had been warned about beforehand.

Hirsch conceded that perhaps the government initially had a “misconceived restructuring programme in the electricity industry”.

“We had several years in which we were trying to enlist private sector participation in the electricity industry. Nobody realised, nobody pointed out, that the price of electricity was too low, and that was why we weren’t getting significant participation. So government panicked and said we have to use the vehicle that is available, which is Eskom, and put a lot of resources in trying to make Eskom work,” Hirsch said.

He further stated that once the country’s reinvestment in many of the infrastructure sectors reached a sufficient level, and it was confident about its position, that it would be able to identify the areas in which private competition was possible, and those areas in which it was much more difficult.

He referred to an earlier presentation by World Bank development research group lead economist Dr Ioannis Kessides, who gave a number of successful examples of infrastructure delivery in the developing world, with focus on the roles of the private and public sectors.

For example, he said that electricity generation and supply to final customers was an activity that could be competitive, while electricity transmission and distribution were activities that retained monopoly characteristics. With air services he noted that airport facilities were not usually competitive activities, while aircraft operations, maintenance facilities and commercial activities were more competitive activities where the private sector should be involved.

Kessides also highlighted cost-reflective tariffs as being at the centre of the reform agenda, adding that very low pricing has been one of the major problems, which has led to deterioration in the performance of utilities.

Market-friendly institutional policy frameworks, and an effective system of regulation were also emphasised as prerequisites for effective private sector participation in infrastructure delivery.

“I think that we have some strong regulatory institutions,” said Hirsch, indicating that South Africa was on the right track.

He noted the role of the National Energy Regulator of South Africa, which had shown that it was a “fierce” organisation, the Competition Commission and its role in cartel exposition, as well as the Independent Broadcasting Authority of South Africa, which took decisions and the initiative to move forward.

“So, I think the signs are positive, and our regulatory institutions are maturing and becoming stronger, and I think that bodes well for the future. We are laying the basis for faster growth,” affirmed Hirsch.