Following Finance Minister Tito Mboweni’s Medium-Term Budget Policy Statement on 28 October 2020, the South African Institution of Civil Engineering (SAICE) hosted an insightful panel discussion on the economics of infrastructure on 29 October, with the aim of establishing how government and business can work together to achieve the goals set out in South Africa’s Economic Reconstruction and Recovery Plan.
This virtual event was chaired by Nthabeleng Lentsoane, SAICE Marketing and Communications Strategist, and featured several high-profile speakers, namely:
- Vishaal Lutchman Pr Eng, SAICE CEO.
- Prof. Adrian Saville, Founder and CEO of Cannon Asset Managers and GIBS Professor. Prof. Saville is an award-winning professor in economics, finance and strategy at the Gordon Institute of Business Science (GIBS) and has lectured at business schools around the world.
- Commissioner Miriam Altman, Commissioner at the National Planning Commission (NPC) and Director at Altman Advisory. Commissioner Altman was actively involved in creating South Africa’s National Development Plan – Vision 2030.
Lutchman opened by saying: “The Economic Reconstruction and Recovery Plan means we have the opportunity to build a better structured economy. While the term ‘reconstruction’ means something is broken, fixing it will be a path for growth, development, and job creation.” Quoting the NDP 2030, he said that what we do, and how we do it, is just as important as what we want to achieve. “Civil engineers play a crucial role in this recovery. We want to be a part of it; we want to rebuild our infrastructure, our society, and our nation but we are finding it hard to connect skilled individuals with the work at hand.” Addressing his fellow panellists, he asked for input about Minister Mboweni’s public statement that “by putting all our efforts into implementing the Economic Reconstruction and Recovery Plan, we can accelerate growth to 3% or more. This will secure fiscal sustainability and build this economy better than before.”
Prof. Saville, informed webinar attendees that from a macro-economic perspective, government policy has – since the 1990s – aimed for 5% growth. “However, in 20 years our delivery has been lower, with deep social and economic impacts. Covid-19 has certainly played a part in this, but we cannot actually attribute our current state to the pandemic alone. We were already in trouble.” He said that the moderated 3% growth could be achievable through Growth Domestic Fixed Investment (GDFI). However, with the country’s savings rate having fallen from 15% to 10% since the pandemic, Prof. Saville said this presents a serious near-term obstacle to GDFI.
Commenting on the Economic Reconstruction and Recovery Plan, Commissioner Altman said that there is no doubt that the plan’s infrastructure focus is the right one. “We all agree on it, and we want to do it, so what is going wrong? We can’t just talk about the list of projects we want implemented. The capacity to deliver is the number one thing we need to be talking about. A 3% increase is somewhat ambitious, but if we focus on capacity, we can create the conditions for growth. We have the power to change our GDP ratio.”
In response, Lutchman commented that often, development plans feel like “teasers” with false hope of development. He asked panellists what needs to happen to bring plans to reality. There was agreement amongst panellists that perhaps a more modest goal would set South Africa up to succeed and would have positive knock-on effects to get the plan into action. “Three percent isn’t a great number – government may be overestimating. But it is still within our power to achieve it by focussing on a few top priority projects,” commented Commissioner Altman. She said that we need to make sure that the barriers to project implementation are attended to. “We need distributed capability, down to the ground, to be able to implement. We need to strengthen municipal capabilities and key SOEs that deliver infrastructure. That is the only way we are going to do this. It is within our power.”
Prof. Saville added that the recovery plan will rely on a foundation of capacity to turn ideas into delivery. “The policy is good, the framework robust, and the thinking is sound. The deficit lies between the exceptional policy and the eventual outcome. Perhaps we need to be more modest, to set up to succeed. Then we can get quick, easy wins followed by positive spill-overs and multipliers. This can put South Africa on the road to transformative economic growth.”