Infrastructure projects are the way out of and beyond Covid-19
While the coronavirus demands immediate attention, long-term infrastructure will put SA in good stead for years
Markets are testing their emergency trading breaks and the global economy looks like a shrinking violet. Central bank balance sheets are already stretched to their limits. Large-scale infrastructure projects are one of the few levers left to mobilise public resources and stimulate the economy.
How fast we can get infrastructure rolling may determine how quickly we recover from what seems to be an inevitable coronavirus recession.
We need projects on a large enough scale to give the economy a vital boost in the short term and the set-up for long-term growth. The good news is there is a lot already in the pipeline; plenty of groundwork has been done already. We need to make sure the momentum is kept and the right projects happen.
In his state of the nation address President Cyril Ramaphosa set out the path to expand infrastructure around the country. He laid out the activities that will fill the sky with yellow cranes again. And it is impressive work.
The Infrastructure Fund with the Development Bank of Southern Africa, the Public Investment Corporation (PIC), government departments and state-owned entities (SOEs) have been pushing the pace of project design and rollout. The list of shovel-ready projects that will create jobs and drive growth upwards is promising.
However, we need to focus our efforts on the infrastructure that will have the greatest effect. Not all projects are going to mobilise fast, create a large number of jobs, reposition the economy — and keep doing so for decades after.
There are plenty of roads and bridges to nowhere built around the world with little action after construction. There are small-scale upgrades to existing roads and pipelines and public works that are vital and must happen, but do not move the needle much on growth and jobs. They are critical, but do not transform anything.
Whether expanding the Gautrain, building new lines between cities or putting in urban rail, there is no shortage of opportunities to drive growth through transport
Strategic infrastructure sets up the economy for a wave of development, enabling new economic activity and productivity. The ports, pipes, bridges, cables and runways that enable the rest of our society to rise and thrive.
We have a moment of crisis with the coronavirus. A serious threat to life and livelihoods that acts directly and indirectly through a slowed down economy. It is a moment of crisis concentrating national attention and resources that we should make the absolute most of.
We need to work out the small set of very large infrastructure opportunities that are going to give us the greatest return in six months, 18 months and 18 years from now. Where should we prioritise financial support? Where can we place the best managers? Where can we spend valuable political capital in driving these projects through process.
Truly strategic infrastructure brings people together. These are investments that enable human interaction and enhance livelihoods. These are the projects that make the experience of city life a good one; the projects that expand trade flows to link our rural regions to cities and cities to other countries; the projects that open doors for innovative research, new business forms, new public service delivery models. These are projects that look forward.
Large-scale transport networks are the best place we could start. They combine large capital cost, local materials and thousands of workers, they take several years to build and once completed they create new demand and bring together new areas of economic and social activity.
In the UK, the Crossrail project to join the east and west of London was the single largest project-driver of the country’s growth in the past 10 years. Japan, China and Germany have all used high-speed rail networks to drive their growth over decades.
We can do it here. Whether expanding the Gautrain, building new lines between cities or putting in urban rail, there is no shortage of opportunities to drive growth through transport.
Growth through hubs
Networks have to join something up so we should be thinking in clusters. We have a mining cluster along the Rand; an automotive cluster in Port Elizabeth; a media cluster on a hill in Randburg; a banking cluster split across Sandton and downtown Johannesburg;and energy and IT clusters in Cape Town.
They have expiry dates though. Unless each of these industry clusters has investment to enable its next wave of growth, they will be stuck. Banking, insurance and media are on a roll in part because of upgrades in telecoms networks. “Behavioural banking” and platform models only work with a great internet connection.
We need our strategic infrastructure to drive our clusters.
The car industry is converting away from petrol worldwide. That leaves the SA car industry exposed, just as countries such as Ghana are building up to deliver urban, electric cars to the entire continent.
Rather than wring our hands we should recognise the value of our semi-dense cities. Gauteng embracing electric cars will open up the automotive cluster for its next wave of growth. The infrastructure investment needed is a charging network with the density of loading points to make it obvious to drive electric.
With the size and form of Gauteng we have a chance to get ahead and not look back in ten years, while racing to convert our cities to electric and closing our car factories for lack of international demand thinking, ‘oh – missed that one.’
Then there are the nodes, the switching points, the connections between the flows of goods and products and people. The fastest growing businesses in South Africa are online. Which is great, but many need an entire infrastructure adapted to delivering their products.
They need capacity at the ports, large warehouses outside cities combined with smaller faster depots in towns and suburbs close to customers. Investing here has a tripling effect. Bottlenecks in trade are removed; new companies are enabled to drive growth; consumption rises as large numbers of new employees spend their income.
We have been delivered a crisis that demands immediate focus and action at massive scale. Let’s use it to create economic stimulus that will roll out fast and have an impact that lasts.
Backing a core of four or five, fully strategic infrastructure investments will give action at the scale we will need to recover. From then on they will enable the next wave of economic development. They will deliver the growth we need and the kind of country we want to have. Let’s look forward, focus our efforts to grow out of the crisis and deliver.
• Sprott is MD of Scaled Impact.