EDITORIAL: Oh, so now you need the private sector ...
Has the government woken up too late?
And so, President Cyril Ramaphosa’s "new deal" got its first public launch this week, as he sketched out his argument for why infrastructure investment presents SA’s best chance of escaping a grim economic trajectory.
This was the right place to do it too, at the podium of the inaugural Sustainable Infrastructure Development Symposium of SA, in front of hundreds of (virtual) pension fund trustees and potential investors. If Ramaphosa was selling a dream, this was the place to do it.
Covid-19, he said, "has made infrastructure investment even more compelling, even more important and even more urgent — that is why we have placed infrastructure at the centre of the stimulus our economy needs to achieve a sustainable recovery".
And, if you forget the fact that we’ve heard these sorts of rousing speeches before, Ramaphosa made a compelling case.
He spoke passionately of the infrastructure projects in areas like energy, health care, water, transport and technology — many of which he said are "shovel-ready". Of the 276 projects evaluated, a "credible and robust project pipeline" of 88 investment-ready projects has been identified, and presented to investors around the globe over the past five months. And, apparently, "firm commitment" running into billions of rands has already been obtained.
Just how firm these commitments are is debatable, since none of the investors has yet been named. As Ramaphosa himself pointed out, "lenders and investors are revisiting their decision to invest in infrastructure projects that were deemed bankable prior to the pandemic".
Which is why this week’s event was a critical sales pitch to private sector funders — SA’s asset managers and pension fund trustees foremost. But if the government wants to entice them to finance bridges, water projects and roads, it’ll need to offer carrots too, like tax incentives or, as was suggested, a quid pro quo of raising the offshore investment allowance in exchange for investment into an "infrastructure solidarity bond".
At this delicate point, it can’t afford to use the stick by implementing any prescribed assets regime that compels pension funds to invest in specific instruments. This was the point made by Sygnia CEO Magda Wierzycka, who spoke after Ramaphosa. She pointed out that there’s already a willingness among institutional investors to deploy funding — but it has to be through negotiation, not prescription.
SA has a "very active" pension community, Wierzycka said, and any move towards prescribed assets will spark a myriad court cases.
But, she said, the government should realise the gravity of the moment, and "hurry up".
As Ninety One CEO Hendrik du Toit told the FM last week, the private sector doesn’t need to be forced to invest in infrastructure projects. "The government must make the rules clear about projects in, say, water or power, and the money will come," he said.
If this week’s conference is any indication, the government has got the message. Kgosientso Ramokgopa, the head of infrastructure investment in Ramaphosa’s office, said the projects have been packaged through an investor-friendly lens.
But has the government woken up too late? On Tuesday, SA found out that by the end of March, before the impact of the lockdown was factored in, unemployment had breached 30%. Factor in those people who want to work but have given up looking, and this number soars to 39.7%.
Covid-19 raised the stakes, but the suspicion of business led us to this place. Let’s hope Ramaphosa’s plan marks a real step change.