Opening remarks by Finance MEC Ms Barbara Creecy at the Conference on Innovative Infrastructure Financing Resources and Pooled Mechanisms for SA Municipalities, Sandton Convention Centre
Councillor Parks Tau: Executive Mayor of the City of Johannesburg and all other Executive Mayors present
Councillor Jeff Makhubo MMC Finance in the City of Johannesburg and all other MMCs present
Councillors, municipal managers and other senior officials of the cities
Ladies and gentlemen
It gives me great pleasure this morning on behalf of Premier David Makhura to welcome you all to the Gauteng Global City region: the smallest province in our country; but one which has the twenty four percent of the population; contributes over a third to the GDP of the country; ten percent to the GDP of the continent; and even in these tough economic times has an economy growing above the national average.
I think I speak for all of us in the City Region when I say we are excited to be attending this conference this morning which addresses matters of great importance in these tight fiscal times for governments across our country and the continent.
As we all know, Ladies and Gentlemen our country’s thinking on our development trajectory in general, and on the role of infrastructure investment in particular, is guided by the National Development Plan which says and I quote:
“Infrastructure is not just essential for faster economic growth and higher employment, it also promotes inclusive growth providing citizens with the means to improve their own lives and boost their incomes. Infrastructure is essential for development”.
To achieve this, the NDP notes that the country as a whole will need to promote higher levels of capital spending over the next 15 years with public sector investment reaching 10% of GDP by 2030.
Both the public and the private sectors can play an important role in financing infrastructure investment and the NDP emphasizes government’s willingness to take the lead in prioritising infrastructure investment is with the aim of crowding in private sector investment over time.
The context within which we are trying to do this is far from ideal. South Africa is part of an interconnected world and this makes us vulnerable to world economic trends. Global economic performance remains mixed, reflecting uneven recovery.
As a result, the International Monetary Fund has revised global growth for 2014 down by 0.4 percentage points to 3.3 percent. Our own domestic growth rate has also been revised downwards to 1.4 percent. The reasons for this are well documented and well known.
The implications for our broader economic environment place additional constraints on government’s approach to public spending in general and infrastructure investment in particular.
On the one hand, slow economic growth requires government to maintain fiscal stimuli to the economy and prioritise service delivery. On the other hand, rising public debt, reduced fiscal collection and current account challenges highlight the need to strengthen fiscal consolidation. For those of us tasked with maintaining the public purse we must constantly strive to maintain a proper balance between these two realities.
Finance Minister, the Honourable Nhlanhla Nene, highlighted these complexities during the tabling of his MTBPS in November last year, where he emphasised the importance of ensuring that the fiscus remains sustainable and rooted on the principles of both counter-cyclical intervention and long-term debt sustainability.
In this environment, redirecting scarce government resources towards infrastructure investment is more urgent than ever because such investment will contribute to economic growth by lowering transaction costs, creating of jobs, concentrating economic activity, improving productive capacities of firms and households as well as creating economic linkages.
In his State of the Province address in June 2014 Gauteng Premier David Makhura laid out a bold fifteen year vision of radical transformation, modernization and reindustrialization of our City Region which will allow us to meet the goals of the 2030 National Development Plan.
By investing in social and economic infrastructure including quality public transport, re-engineering the province’s spatial framework in new human settlements, mainstreaming township economies and providing quality health care and education, we intend to put our global city region on a new trajectory of integrated development and social and economic inclusion.
To finance this ambitious programme we have three basic approaches: firstly to achieve better synergy between provincial and city planning, budgeting and implementation in particular of major infrastructure programmes; to re-orientate exiting budgets to core services and an emphasis on infrastructure; thirdly to contain costs and pay attention to eliminating waste and corruption in our own procurement processes; and finally to look for ways to increase our own revenue and alternate funding mechanisms.
I have already indicated that one of the ways we would stretch our rand would be through better planning and co-ordination between different spheres of government on infrastructure priorities and spending.
I am pleased to share with you today that Premier Makhura has established the Provincial Infrastructure Coordinating Committee (PICC) to give expression to this commitment. The committee is chaired by the Premier and it includes all the mayors in the city region.
This forum has already identified a common list of priority infrastructure projects which the province and the cities all agree must be funded over the next fifteen years. The Premier will be giving more details of this programme in his State of the Province Address in February. We see this as an important step in giving investor certainty in relation to priority areas for investment.
What I can also tell you today, is that over the next three years the province and cities of this global region will be spending more than R94 billion on both social and economic infrastructure projects.
Significant as this sum is, it will not be sufficient to meet all of our existing and future infrastructure needs. I know I speak not only for the Gauteng City Region, but for all the cities present here today when I say that it is because the need for infrastructure finance far outstrips government budgets that your discussions over the next three days are so important.
I would like to take this opportunity to share with all of you some of the experiences we have already had in seeking alternative funding at Gauteng Provincial Government. We, unlike the cities present here today cannot raise bonds to finance our infrastructure needs and we have therefore had to look at other creative mechanisms including public private partnerships, Build Operate and Transfers (BOT), leasing and leaseback options to name a few. We have come to understand that these options are better suited to economic rather than social infrastructure investment.
Our key vehicle for sourcing alternative funding for strategic investment from the private sector is the Gauteng Infrastructure Financing Agency (GIFA).
GIFA is currently assisting GCR governments to develop bankable proposals and markets them to the private sector. The agency is active in the following sectors: energy, the green economy, waste to energy, transport and logistics, ICT, manufacturing and property development.
Going forward, we envisage GIFA becoming a major facilitator of alternative financing for the priority infrastructure projects of the PICC across the city region. We see it playing a role in the pooled funding that the Executive Mayor of Johannesburg referred to.
Ladies and Gentlemen by way of conclusion I would want to urge all of us in considering ways in which we will raise alternative funding for infrastructure projects not to forget the many lessons we have all learned in government over the past twenty years in tightening up on implementation and contract management processes. We know that wasteful expenditure often happens as a result of cost escalation, project scope changes, lack of planning and weak project management.
These issues are as important in managing off-budget expenditure as they are in managing government funded projects. I say this because we all know that mismanagement of these programmes deprives communities of important amenities including water, sanitation, housing, roads, healthcare and other social services. It also impacts negatively on job-creation efforts by government and the private sector.
It is for this reason that we want GIFA to develop project monitoring and evaluation capacity because we think the Provincial Infrastructure Co-ordinating Committee must not only decide on common projects and facilitate their funding, but it must also monitor their implementation.
I end by thanking you for inviting me to make these few opening remarks today and to take this opportunity to wish you every success in your deliberations going forward.
SOURCE: South African Official News