The apartheid years saw infrastructure development limited to geographical areas of the old South Africa, neglect in townships and informal settlements, and a concentration on the needs of industry and white areas to the almost total exclusion of others. During the emergency period of the State Security Council in the 1980s, some infrastructure projects were initiated as political grease in an attempt to overcome political resistance and struggle. These projects were therefore conducted piecemeal, were not integrated with an overall development strategy, nor were they seen as legitimate by the communities themselves.
Since 1994, the ANC has led the way to provide an integrated, holistic approach to major social and economic questions, including the provision of infrastructure. One of our major tasks when we took government was to conduct a massive survey of infrastructure needs in the face of the obvious backlogs that we faced. That survey covered social and physical infrastructure, its state of maintenance, and an assessment of future needs and addressed questions of implementation agencies and the role of different spheres of action. We found that there was an infrastructure backlog of about R170 billion in our country, across all areas of activity!
Even today we have no accurate measure of infrastructure expenditure, but we can estimate that since 1994 the public sector has accounted for about 30% of gross fixed capital formation in South Africa. Of this, about 45% came from extra-budgetary institutions and non-financial public enterprises. The remainder, or about 15% of total fixed capital formation, came from allocations made by government through the Budget.
From 1994 government has concentrated on infrastructure development in a range of areas that has picked up speed as programme management and other elements have improved and developed. Thus, since 1194, 2,8 million phones have been installed, most of which are in previously neglected areas; over 1,4 million housing subsidies have been allocated and over 1,3 million houses built; over 3 million homes have been electrified; since 1997/8 we have spent over R18 billion on roads, with 78% of this spent on provincial and 22% on national roads; rural roads have been built consistently through the CBPWP; since 1997/8 we have also spent over R1, 6 billion on rail infrastructure. The Consolidated Municipal Infrastructure Programme has allocated about R3, 4 billion for sanitation, water, roads, and storm water projects. The infrastructure budgets for education and health facilities have increased dramatically since 1998/99 as well.
However, although we have marked up some major successes, we have also recognized a number of problems in our efforts so far. One issue that has emerged is the question of the fiscal responsibility for the ongoing maintenance of new infrastructure, and the measures that need to be in place to ensure that work skills developed during construction are carried over into the maintenance period. Another issue has become the manner in which particular facilities, such as schools and clinics in rural areas are linked to broader development initiatives such as electrification, water and sanitation, rural access roads, telecommunications and so on.
A critical element of the provision of infrastructure is to ensure that these projects and programmes translate into social transformation. It appears that we have proceeded quite far in our efforts to address the backlogs, but it is clear that more still needs to be done. Since 1998/9 we have begun to reap the benefits of earlier economic decisions and a greater resource base for further infrastructure expenditure is now possible. We believe that we are now in a position to accelerate the provision of infrastructure across South Africa in an integrated and development manner. Our focus should be on improving the implementation of our programmes, and improving the performance of all entities and facilities that are thus provided.
There are two economies in South Africa. The developed economy suffers from a lack of cost competitiveness in relation to the global economy whilst the underdeveloped part of the economy, which represents the experiences of a high proportion of South Africans, is an area where economic potential is not being enabled and harnessed due to backlogs and under-investment in social and productive capital.
The challenges facing us have grown from the outlines of the Freedom Charter through the RDP. These cover issues of democracy and governance, meeting social needs, securing economic transformation, safety and security. Infrastructure as broadly defined seeks to ensure that we meet basic needs through social infrastructure and economic transformation through economic infrastructure. The programme of national democratic transformation challenges us to focus infrastructure development towards achieving the integration of our communities through spatial development and deracialising our country. This includes bridging the technology; production and infrastructure divide between rural and urban areas. It also requires greater coordination and planning for infrastructure to support the growth and development strategy implemented through all spheres of government.
The adoption of the RDP in 1994 laid the foundation for all our policies in the period of government. Infrastructure policy was included either implicitly or explicitly in a range of areas that covered electricity provision, housing, health, water and sanitation, telecommunication and information networks, transport, municipal services and public works programmes. We identified South Africa as a development state where we envisaged an active and participatory role for the state, state institutions and enterprises as well as initiating public-private partnerships as a means to mobilizing private sector support and resources in a targeted and development role.
A number of resolutions adopted at the Mafikeng Conference identified specific areas of activity in some detail, including rural development, energy, water, housing and so on. In essence Mafikeng highlighted the need to expand our programmes and to develop better methods of coordination and planning to secure greater community involvement and better use of limited resources. In addition we agreed to establish more effective ANC structures to coordinate our own resources and to secure improved involvement of ANC structures and branches. A central element of all the resolutions in dealing with infrastructure emphasized job creation and skills development.
We have already indicated some of the successes and some of the problems that have emerged as we embarked on delivering better infrastructure. Mafikeng also envisaged an expanded and more wide ranging application of the principles of the National Public Works Programme. We urged that all our programmes should be "visible" in their impact on eradicating poverty in South Africa. It appears that the basic are sound, but that the mechanisms of delivery and the visible impact on poverty are not as clear cut as they could be. Thus we need to consider seriously what measures can be identified that are practical, workable and within our ability, and which are financially sound. We could consider more strategic interventions that aim at better coordination and the integration of programmes that exist at present, creating linkages and improving on operational efficiencies between sectors. As unemployment remains the critical challenge facing us at present, we should consider how best to integrate measures to combat unemployment in all areas of our work, including the development of a major Public Works Programme as an employment creation strategy.
In order to advance this vision for the transformation of the South African economy, government should continue to focus on microeconomic reform strategies as the majority of the remedies to the factors limiting accelerated growth lie within the micro economy. The challenge is to focus on ensuring that infrastructure supports economic growth sectors, input sectors in the economy and provides for basic needs in marginalized areas. Infrastructure should be focused in growth areas, development corridors, and Spatial Development Initiatives, Integrated Sustainable Rural Development Programme and Urban Renewal Programme Nodal areas. A labour intensive roll out programme in identified priority areas of the country for the maintenance of infrastructure where lack of further maintenance would mean the loss of that asset.
There also appears to be a problem of the dysfunctional funding for infrastructure at different levels of government. Thus, the different sectoral programs are not matched at national level in terms of budgets nor are they integrated at the programme level. Provincial problems include structural imbalances that exist in the availability of funds for the different line functionary sectors and give rise to highly fragmented responses towards development projects . At local level, the financial and capacity difficulties of many local authorities create severe impediments to the delivery of a wide range of services .
Another noticeable problem is that, despite valuable efforts by the Department of Provincial and Local Government (DPLG), the private sector has yet to enter the infrastructure "market". Very few municipalities have fully explored the responsibilities of joint ventures or outsourcing of service. This is beginning to improve and a number of local governments are launching initiatives in this regard. Nevertheless, the policies developed by DPLG in relation to partnerships assists in the investment opportunities.
Current implementation of infrastructure development programmes is dogged with a myriad of problems such as weak financial and institutional capacity of Local Government as implementers of basic infrastructure services, the reluctance by the private sector to provide finance in areas of greatest need for basic infrastructure investment due to perceived risk and difficult and volatile financial markets, accompanied by high interest rates.
This is further compounded by low level of foreign investment in Africa and South Africa against a background of increasing private capital flows and skills shortages in the areas of project planning and management, financial management, information technology and corporate governance and the major threat of HIV/AIDS to existing and future human capital in these areas.
This has occurred in the context of sound economic, monetary and fiscal policies by government, increased budgetary allocation to provinces and local authorities and increase policy co-ordination at national level and sound regulatory frameworks such as Public Finance Management Act, political stability, decreasing government borrowing and debt level and transformation of local government and promoting of public private partnerships.
Institutional arrangements for implementation require rationalization and more efficient management to achieve our objectives. The role of SOEs remains a critical challenge particular in relation to inadequate mandating mechanisms such as shareholder compacts which would guide their priorities and programmes. However, success in this area must be noted particularly with Eskom, Transnet, Denel and the Independent Development Trust. Specific attention still is needed to ensure maximum utilization of resources available to us as a country, for example deployment of SAND technical capacity to infrastructure development programmes, and minimization of duplication of roles such as Eskom and Local Governments in the provision of electricity.
Because of a lack of uniformity across functional areas, the coordination of strategic planning and the execution of programmes are difficult to achieve. There are few effective mechanisms in place to ensure consistency in the determination and application of national strategic priorities. Because different criteria are used to determine the allocation of funds to provinces, the amounts allocated to related functions do not ensure consistency of outcomes. Moreover, the lack of integrated development plans leads to mismatches of funds at provincial level.
National and provincial development priorities are not necessarily determined jointly, with the result that each line department may channel funds in different directions. Local government strategic planning and prioritization processes may either prove weak due to capacity constraints or may be ignored by other tiers of government and the market. Deficiencies in the current system of infrastructure provision pose the inherent danger of both the under-provision of services or the "duplication" of services and may result in wastage of the country's limited resources.
Current government initiatives that promote greater infrastructure provisioning integration include the following:
Policy and programme: The Municipal Infrastructure Investment Framework - Department of Provincial and Local Government; Municipal Service Options: A guideline for Local Authorities - Department of Provincial and Local Government; Guidelines for the Provision of Engineering Services Amenities in Residential Townships - The Red Book - developed by the Department of Housing in conjunction with the CSIR, provides guidelines for planning and infrastructure provision in human settlements; White Paper on a National Water Policy for South Africa .The White Paper on Local Government, 1998. The Department of Housing has developed policy for housing development through the "Minimum Norms and Standards in respect of Permanent Residential Structures" which also forms part of the National Housing Code.
Programmes and strategies: Consolidated Municipal Infrastructure Programme (CMIP) - DPLG. Community Water and Sanitation Programme - DWAF.
The provision of economic infrastructure is aimed at lowering the costs of doing business in South Africa. High levels of infrastructure investment particularly in transport, roads, telecommunication, energy, rail, create a competitive edge for the South African economy, and make it more efficient, lowering the cost of production and therefore improving the environment for investment and job creation.
Information and Communications Technology (ICT) has revolutionized approaches to cross-border commercial transactions and is a greater part of the global agenda. This includes services that will create a flourishing information society such as the Internet, tele-medicine, tele-agriculture, e-commerce, e-business, e-government, and other convenient measures that will improve the quality of life of our people while contributing to economic growth.
The growth of e-commerce has redefined traditional business methods. In 1991, there were less than 5 million Internet users. Currently there are over 300 million users. With this growth, there are numerous opportunities as e-commerce creates a fiction less economy in which transaction costs and barriers to entry are minimal. The growth of e-commerce presents an opportunity for us to compete directly in high value-added industries.
However the lack of suitably skilled ICT workforce in South Africa is indicative of the education system not meeting the rigorous demands of today's knowledge-based economy. The demand for technically trained talent in the workplace far exceeds the current supply. If South Africa wants to establish a world-class high technology industry, we must address the establishment of a first rate education system to gain global competitive edge.
From the above it is clear that a broad, integrated policy framework on co-ordination of infrastructure development in South Africa does not exist. The absence of such a framework undermines effective cross-functional co-ordination between and within various spheres of government. In order to promote an integrated and accelerated approach to social and economic development, in both urban and rural areas, Government has made available R6 billion over the next three years (over and above the infrastructure budgets in the various line departments). Spending will focus on increased inter sectoral integration as well as stimulating economic growth in areas with high economic development potential. A phased development approach makes the following assumptions:
The conditions under which municipal, social and economic services are to be provided will depend on the nature of the project. In general, consideration must be given on whether projects are greenfields, upgrading or combination projects.
In the absence of integrated planning and budgeting via IDPs, special funding arrangements must be made. In key funding for strategic projects should be top-sliced and provided as a single budget. This obviates the need for complex and time-consuming funding negotiations between multiple parties. This funding should be made available according to a projected project cash flow but must provide flexibility in complex project.
Implementation agencies should be encouraged to gear other sources of funding through innovative financing models developed at project level. The optimised funding mix could result in Municipal Service Partnerships (MSPs), which involve a contractual arrangement with a service provider other than the municipality itself5.
Large and complex infrastructure projects may best be implemented in a turnkey manner. This approach substantially reduces the overall project management burden on the state, but requires considerable intergovernmental co-operation. Provincial governments should therefore become the key co-ordination authorities, facilitating project planning, rollout and capacitating as far as possible at the local level. Where appropriate, systems should be optimized to avoid multi-level procurement and multiple agency involvement within a single location.
A key element of the integration of infrastructure delivery processes involves the alignment of principles and priorities underpinning the various programmes that contribute to the development of integrated economic developments. The concept of functional arrangements along programmatic developmental lines requires fundamental structural change in the delivery of infrastructural services affecting all three spheres of government. The process of restructuring would need to harness the momentum of existing initiatives, such as the proposed system of spatial planning and development (as set out in the Green Paper on Development and Planning) and the Municipal Systems Act, 2000. A carefully planned multi-year programme would be needed to obviate possible disruption. Further research will also be required in order to assess the financial, personnel and other implications of this proposal. While there could be a need for a local government capacity audit, linkages should also be sought with the DPLG's national capacity building programme. A concerted, systematic transition to the programmatic integration of the delivery of infrastructure is proposed which takes account of the following dimensions.
To ensure consistency of outcomes at the national sphere of government, integrated infrastructural development should occur within the framework of a single uniform system of integrated planning that serves the needs of the country as a whole. The spatial planning and development system and the adoption of legislation advocated in the Green Paper on Planning and Development would appear to answer this need to a significant degree and the adoption of legislation, as recommended in the Green Paper, will form the foundation for future spatial planning. Cognizance should also be taken of numerous crosscutting-planning processes occurring at provincial level . While horizontal co-ordination across sectors is important, it is equally important to consider vertical co-ordination across spheres of government.
Finally, but perhaps most importantly, local level Integrated Development Plans which constitute the principal strategic planning instrument to guide and inform planning and development at local level should be afforded priority consideration. The IDP process is key to promoting integrated planning, especially between local and provincial authorities.
Local authorities are primarily responsible for the provision of, especially, but not only, municipal services. They are also responsible for operating and maintaining such services. The ability of municipalities to sustain the capital and operating costs of providing services is accordingly of concern. In some areas it would appear that municipalities set service standards for infrastructure provision at high levels, as higher levels of services (e.g. roads or storm water drainage) usually imply lower maintenance costs that are more affordable to municipalities7. High levels of services, however, lead to high operating costs (such as water-borne sewerage) that may not be affordable to many communities.
A draft report to DPLG, the Revised Municipal Infrastructure Investment Framework estimates the bulk and internal capital cost of delivering municipal services to a basic level per household in urban areas is R10 104, and in rural areas R7 823. The current average monthly operating costs for a basic level of service in urban areas is R113 per household, and R57 per household in rural areas. The cost of providing the five municipal services averages 64% of municipal expenditure in urban areas, but is markedly higher in rural areas.
Funding co-ordination will be greatly assisted through the IDP process. The problem of private sector investment remains complex. Despite the valuable efforts by the Department of Provincial and Local Government, the private sector has not yet entered the infrastructure "market". Very few municipalities have dully explored the responsibilities of joint ventures or privatization of service. Similarly the is a need to review the single year budgeting to medium term budgeting already operational at National and Provincial level and to focus funding for infrastructure in rural areas. These aspects need to be addressed in order to enhance the funding which is available for infrastructure investment in an environment of relative scarcity.
As we advance towards integrated infrastructure delivery, we need to re evaluate our policy framework through policy analysis, and work toward establishing a policy and planning framework for integrated infrastructure.
Thorough assessment of impact of infrastructure programme needs to be done against the social transformational objectives as discussed in our Strategy and Tactics document including Black Economic Empowerment, Small, Medium and Micro Enterprises, Women's' Co-operatives and Youth Brigades.
Recognising that the key challenges of infrastructure development remain the co-ordination of investment between public sector, public entities and private sector investment. We need to establish an infrastructure Investment Framework in order to more effectively co-ordinate investment to ensure targeted and planned infrastructure programme implementation.
In order to enhance visibility of our delivery programme we need to establish highly visible, targeted delivery programmes in the short term, across all spheres of Government to o be aimed at completion by the beginning of 2004.