How will continued investment and infrastructure unlock the South African economy?
International research shows that the provision of infrastructure provides a big benefit for economies. As a public good, the infrastructure stock makes the economy more efficient, with good roads, port facilities and sufficient power supply being major enablers of economic activity.
Secondly, the actual construction of infrastructure has stimulatory impact on the economy, with widespread civil construction activity increasing employment and demand for input goods and services in the economy, thereby boosting GDP growth.
What is the role of the private sector in partnering with the state in funding these projects?
As money is fungible, capital allocated from the private sector and the state both have the impact of stimulating the economy. As the national fiscus is currently under significant strain, it makes sense for private funds to be utilised in the development of infrastructure to maintain the stimulatory impact of new construction in the economy. Furthermore, there is also a belief that private sector led infrastructure projects lead to better efficiency in construction and implementation, as a result of the way in which risks are allocated in private sector owned infrastructure projects.
What are the potential investment opportunities created by the announcement that government will be accelerating investment into infrastructure investment and proposed changes to Regulation 28?
The government’s stated intention of allowing greater private sector investment through the amendment of Regulation 28 is welcomed. The impact of more pension money being allocated to productive infrastructure in the economy will have a positive impact on economic growth in the short to medium term, while also creating a greater stock of infrastructure in the long term alongside credible investment returns of the pension fund contributors. We do have some thoughts on how the current draft changes to Regulation 28 can be improved and these comments have been filtered through to the National Treasury through the industry associations we are a member of.
How do ESG considerations add value?
ESG considerations drive sustainability. Sustainability is key for infrastructure projects, which tend to have a significant footprint in the societies in which they are based. It is important that projects add value to the communities they serve and are managed in a manner that supports long-term sustainability for the infrastructure concerned. We, for instance, have a dedicated team of three people, ensuring the sustainability of all our investments. We have also seen the evolution of ESG from being primarily a risk management tool, to an orientation where actual impact is targeted and monitored over the long term. Sustainability is key for infrastructure projects, which tend to have a significant footprint in the societies in which they are based.