LETTER: Infrastructure gaps
Investment of at least 6%-8% of GDP in infrastructure is needed to support sustained rapid economic growth
The World Bank has suggested a rule of thumb that physical infrastructure investment must be at least 6%-8% of GDP to support sustained rapid economic growth.
SA’s national development plan (NDP) sets targets for infrastructure spend that are consistent with the recent state of the nation address, which highlighted high-speed trains and smart cities.
Infrastructure spend presents an opportunity as it potentially fosters aggregate economic output given its contribution, on its own, to GDP, not only as an enabler for trade but also to boost other sectors of the economy.
For SA to play a significant role in the newly established African continental free trade agreement (AfCFTA) and fully achieve goal nine of the UN sustainable development goals and aspiration one of agenda 2063 of the AU, infrastructure gaps must be addressed. Goal nine is to build resilient infrastructure, promote inclusive and sustainable industrialisation and foster innovation. Aspiration one is for a prosperous Africa based on inclusive growth and sustainable development.
The literature suggests that the government will need to accelerate and intensify efforts to mobilise domestic and external financing resources for infrastructure development. Prudency in attracting foreign direct investment to finance the required growth is key, particularly in SA. Fuelling economic growth by excessive capital accumulation, policymakers risk suffocating the possibility of steadier and more resilient future economic growth that comes from greater efficiency and productivity in using scarce factors of production.
However, the lack of entrepreneurship and engineering prowess in the new economic advisory council is concerning if SA is to become a construction site, as suggested by the president. Hard questions need to be asked: what infrastructure investment to GDP ratio is required to achieve rapid growth, as suggested by the NDP? What impedes us in achieving this target? What are the costs of inefficiency and a lack of agility to the overall economy?
These are practical questions that need to be answered if rapid growth is to be achieved, but the council seems to be abstract in its orientation and composition. We need fewer convoluted theories and models and more focused engineering targets driven by ruthless patriots who understand SA’s realities.
Infrastructure development and engagement unit, Nelson Mandela University
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