Programme Director, Mr Victor Kgomoeswana;
Minister in the Presidency responsible for Planning, Monitoring and Evaluation, Minister Jeff Radebe;
Members of the Executive Council;
Executive Mayors of municipalities in the Gauteng City Region; Ambassadors, High Commissioners and other members of the Diplomatic Community;
Chairpersons and CEOs of Corporations and Business Organisations; Heads of Government Departments and City Managers;
CEOs of state-owned companies and municipal entities;
Chief Executive Officer of the Johannesburg Stock Exchange, Ms Nicky Newton-King;
Managing Director of the Banking Association of South Africa, Mr Cas Coovadia;
Our special international guests from Katanga Province in the DRC, Singapore, Trinidad and Tobago, Tunisia, Nigeria and Chongqing in China;
Members of the media;
Ladies and gentlemen:
Let me take this opportunity to welcome you all to this Inaugural Gauteng Infrastructure Investment Conference. The fact that this conference is attended mainly by more than one thousand private sector leaders, investors and entrepreneurs bodes well for our province.
We are particularly happy to see so many high ranking leaders of business and public sector organisations attending what is essentially the first sub-national government conference focusing solely on investment in infrastructure.
During the course of this conference, you will receive many presentations and inputs that will give you a full picture of the national and provincial infrastructure challenges and opportunities thereof.
You will also come to understand the inspiring vision and programme we have adopted as a country and province to build a society of our dreams. We have a great dream for our country and our province.
In his classic work on Servant Leadership, Robert K. Greenleaf had the following to say about dreams:
“Not much happens without a dream. And for something great to happen, there must be a great dream. Behind every great achievement is a dreamer of great dreams. Much more than a dreamer is required to bring it to reality; but the dream must be there first”.
The sixty year old seminal document, The Freedom Charter, represents South Africa collective dream to overcome a racially divisive and shameful past. The National Development Plan, Vision 2030, represents our national roadmap towards achieving an inclusive, growing economy and a prosperous nation that has overcome the challenges of poverty, inequality and unemployment.
In Gauteng, we have adopted a ten-pillar programme of radical Transformation, Modernisation and Re-industrialisation (hereinafter referred to as the TMR) as our provincial plan to realise the National Development Plan:
- Radical economic transformation
- Decisive spatial transformation Accelerated social transformation
- Transformation of the state and governance Modernisation of the economy
- Modernisation of public transport and other infrastructure Modernisation of human settlements and urban management Modernisation of the public services
- Re-industrialisation of Gauteng
- Taking a lead in Africa’s industrialisation
Through the ten-pillar programme, we seek to turn Gauteng into a globally competitive, seamlessly integrated, economically inclusive and socially cohesive City Region; a leading industrial hub in the continent with smart, innovation-driven, knowledge-based, ecologically sustainable and future-oriented industries; an activist, responsive, accountable and clean government and an active citizenry.
Our province already has a major competitive and comparative advantage over many regional, national and sub-national jurisdictions.
Gauteng is South Africa’s economic powerhouse and the industrial hub of the Southern African Development Community (SADC) region. Our province contributes 36% to our country’s Gross Domestic Product (GDP), 40% to total industrial output, 60% of exports and almost 10% to the GDP of the entire African continent.
We have built the state-of-the-art infrastructure and we host Africa’s most resilient financial institutions. According to the 2014 Ernst & Young Survey, our province has been the most popular destination of foreign direct investment projects in Africa. We are a Gateway to Africa.
The challenge, going forward, is to continue to enhance our competitiveness by addressing two critical issues: 1) improving the ease
of doing business; 2) maintain and expanding modern, financially and ecologically sustainable infrastructure.
With regard to the Ease of Doing Business in Gauteng, we have established a one-stop service, the Gauteng Investment Centre, which facilitates investments in various sectors of our provincial economy.
The Gauteng Investment Centre has proved to be of great assistance in helping us to cut bureaucratic red tape because it brings various government departments and agencies under one roof to facilitate registration of businesses, tax compliance and overseas travel requirements. The feedback from businesspeople has been very positive.
The Gauteng Infrastructure Investment Conference is a partnership in action between government and the private sector and a programmatic commitment to work together to make Gauteng a globally competitive City Region and a preferred destination for investment and tourism.
We have identified investment in infrastructure - the maintenance of existing infrastructure and building of new one – as the lifeblood of our social and economic transformation agenda.
All over the world, governments, businesses and citizens are placing more emphasis on infrastructure development in order to address the wellbeing of rural populations and meet the growing demands of rapidly expanding urban populations in the context of diminishing natural resources and sluggish economic growth.
How are different jurisdictions responding to the infrastructure challenges?
Some of the global responses aimed at accelerating infrastructure provision and investment include:
An increase in the World Bank’s infrastructure funding, which now represents 43% of its total assistance offered to low- and middle-income countries and the private sector;
The establishment of the New Development Bank by the BRICS (Brazil, Russia, India, China and South Africa) countries to specifically address their infrastructure funding requirements;
The adoption of forward-looking national infrastructure plans with examples including the United Kingdom (2010), South Africa (2012) and Australia (2013) as well as major continental infrastructure initiatives in Europe, Asia and Africa;
An increase in partnerships between governments and the private sector in the construction, maintenance and operation of infrastructure in order to reduce funding gaps and alleviate skills shortages;
In its report titled “Africa’s Infrastructure - A Time for Transformation”, the World Bank’s Africa Infrastructure Country Diagnostic states that: “Africa’s pronounced ‘infrastructure deficit’ is holding back per capita economic growth by 2 percentage points each year, reducing the productivity of firms by as much as 40 percent.”
It estimates that to address this “infrastructure deficit” will cost more than US$ 80 billion per year, which is about twice what is currently being spent.
The South African Reserve Bank estimates that with our current economic infrastructure, our national economy’s potential for growth is
probably capped at around 3.5%. This is insufficient, if we are to adequately address unemployment, inequality and widespread poverty.
The National Development Plan 2030 states that if our economy is to grow faster and in a more inclusive way, gross fixed capital formation needs to reach about 30% of GDP by 2030, with public sector investment reaching 10%.
In order to address the country’s infrastructure challenges, National Cabinet has adopted a comprehensive National Infrastructure Plan composed eighteen Strategic Integrated Infrastructure Projects (SIPS) worth more than R1,4 trillion. The Presidential Infrastructure Coordinating Commission (PICC) has been established to drive the implementation of the Plan.
The vigorous focus on infrastructure development at a national level has seen the public sector contribution steadily grow to 7% of GDP. This has also contributed to improving South Africa’s competitiveness ranking in infrastructure from 25 in 2012 to 22 in 2014, according to the latest Infrastructure Competitiveness Index.
However, given the massive historical backlogs and poor maintenance of existing infrastructure in the face of growing needs, we need to mobilise more resources across the private and public sector in order to enhance social wellbeing and expand economic opportunities to all.
In Gauteng, we are finalising a 30-year Infrastructure Master Plan for the entire Gauteng City Region which outlines our infrastructure needs regarding transport, energy, human settlements, broadband and ICT, water and sanitation, education and health.
From the work we have done on the Infrastructure Master Plan:
- Gauteng requires R105 billion per annum in infrastructure investment from both the public and private sectors
- Energy, transport and water make up 74% of the investment required; Asset renewal represents 56% of capital needed
- Infrastructure backlogs will require 6% of total funding; Resource constraints will require new technology
- Demand management, loss reduction and waste management is urgently required to ensure sustained economic growth
- Skills shortages and institutional misalignment should be urgently addressed
We have already adopted and are implementing a 25 year Integrated Transport Master Plan. We are already inspired by success public infrastructure stories such as the Gautrain, the first speed train on the continent. According to the recent KPMG report released last week, investment in the Gautrain continues to have a major positive impact on Gauteng’s economy.
Just in six years, the R26 billion investment in the Gautrain has already contributed R20 billion to the provincial economy, creating 6000 sustainable jobs, reduced traffic congestion by 21 000 cars, reducing carbon foot print by 52% per trip and triggered additional investment in retail centres worth R10 billion and a further R28 billion investment in property along the Gautrain routes is underway. This is a great and encouraging story that will spur us to undertake bolder infrastructure initiatives that change the economic, spatial and social landscape of our province.
Over the next four years, together with national government, Gauteng provincial government and municipalities will spend more than R100 billion on infrastructure projects in the five development corridors of the Gauteng City region focusing:
- Rollout of public transport infrastructure;
- rollout of broadband connectivity; broadening the energy mix;
- building mega human settlements and new cities;
- fast-tracking the development of the aerotropolis and new logistics nodes;
- revitalising old townships, mining towns and inner-cities;
- expanding social infrastructure (education, health and sporting facilities) and water and sanitation.
The state-owned enterprises such as Passenger Rail Agency of South Africa (PRASA), Transnet and Airports Company South Africa (ACSA) will spend more than R200 billion in energy, water, transport and logistics infrastructure in the Gauteng City region over a twenty-year period.
The Gauteng Provincial Government has set aside R300 million for Information and Communications Technology (ICT) and Gauteng’s infrastructure investment programme will focus on public transport, broadening the Energy Mix, ICT and Broadband and Water and Sanitation.
Programme Director, as government we are improving the capacity of the state to deliver on infrastructure projects on time and on budget. We are also improving planning and coordination within government.
We have also established the Premier’s Infrastructure Coordination Commission which is composed of Executive Mayors of our cities, SOE’s located in our province and the main infrastructure departments.
All these public sector investments will have a huge impact in addressing poverty, unemployment and inequality. However, the elephant in the room is raising business confidence to unlock private sector skills and resources, without which all our public sector infrastructure initiatives will make a limited impact on our economic and social development goals outlined in the National Development Plan (NDP).
There is package of incentives to facilitate private sector investment and propel industrialisation and reindustralisation:
The Municipal Infrastructure Grant which is accessed by municipalities to fund critical social and economic infrastructure projects in municipalities. Municipalities, especially the Metros, also offer incentives in terms of reduced rates and taxes as well as payment holidays on rates and taxes for a fixed period of time. Municipalities can also lease municipal land particularly to manufacturing companies at reduced rates or non-market related rates. Over an agreed period of time these rates will increase and become market related.
The DTI’s infrastructure related incentives include the Critical Infrastructure Programme which gives back to the investor up to 30% of the cost of the infrastructure investment covering areas such as the building of roads, railways as well as the laying out of pipelines and transmission lines.
This incentive is capped at R 30 million. The DTI also administers the Manufacturing Investment Programme which incentivises especially manufacturing firms when setting up their capital infrastructure projects. There is also the foreign Investment Grant which supports industrialists when bringing capital assets acquired abroad into the country.
The South African Revenue Services also offers incentives for upgrades in urban areas as well as infrastructure developments in industrial precincts. SARS also makes provision for depreciation allowances that give back some of the costs incurred in effecting improvements on land and buildings. There are also building construction allowances and allowances on commercial properties new or unused. Provision is also made for urban development allowances which cover up to 20% of infrastructure development costs in urban areas. We also have Infrastructure development tax deductions which provide for up to 10% rebate on the capital equipment used to lay out infrastructure investment.
The National Treasury also offers incentives under the Neighbourhood Partnership Programme which makes funds available to municipalities for purposes of upgrading underdeveloped areas and areas experiencing urban decay with a view to attracting private sector investment into those areas.
Mobilising private sector resources and aligning private sector initiatives with our provincial development plan, the TMR, is one of the priorities of the government I have the honour to lead. Many of you have heard me speak passionately about the need for us to work with the private sector to move Gauteng City Region forward. Why?
Gauteng will require a total of R1.67 trillion in infrastructure investment over the next 15 years. Building meaningful and transformative partnerships with the private sector is therefore not a luxury.
The private sector remains the mainstay of fixed investment in the Gauteng economy, accounting for 80% of gross fixed capital formation at the moment. Most investable capital is in the hands of the private sector and it is therefore important to work closely with business leaders to unlock this capital and direct it towards improving the infrastructure for the common good.
My interaction with business leaders over the past twelve months (and I have met more business leaders in one year than I have ever done in the entire 20 years), give me the confidence that many businesspeople are tired of complaining about what is wrong in our country.
Many of you want to contribute to getting things right and making our province a leading and winning province on the continental and global stage.
This Conference attests to the good will and resolute determination to make Gauteng work better so that South Africa can work better.
On the one hand, it is clear that there are major infrastructure challenges and huge resources required needed to build a globally competitive Gauteng City Region economy that meets the needs of our democratic and inclusive society.
On the other hand, we see massive economic opportunities that derive from these challenges. We see opportunities to build green infrastructure that reduces our carbon footprint. We see opportunities to revitalise and mainstream the township economy and build black industrialists.
We also see opportunities to train more young black professionals and technicians. We see opportunities to have more women and people with disability included in our economy. We see opportunities to address the scourge of youth unemployment. And lastly, we see opportunities to work together, sharing skills and resources to build a country and province of our dreams.
Public-private partnerships are the only way to survive. Citizenship participation is the only way to build safe and thriving communities.
When you see traffic light that is not working or a pothole in your neighbourhood, let it be an opportunity to work with government to fix things that are not working to our expectation.
I trust that this Conference will offer us an opportunity to fix that part of our infrastructure that is not working and appreciate the one which is world-class such as the Gautrain, BRT systems in our metros, good freeways, OR Tambo International as Africa's busiest airport and high speed Gauteng Broadband Network being rolled out currently.
As government, we are ready to work with the private sector to transform, modernise and re-industrialise our economy so that it can serve the needs of all our people, especially black people, women and youth.
Let the work begin – as we say in Gauteng – it start here! Thank you very much.
God Bless Africa!
