Comments on budget aspects of infrastructure, agriculture

Infrastructure needs skills development

The company believes that as part of BRICS, South Africa has the opportunity to utilise relationships, built with other emerging economies, to spread growth into the rest of sub-Saharan Africa. It is therefore critical that South Africa has the necessary capacity and infrastructure to achieve this goal. A key point to remember is that infrastructure development should go hand-in-hand with skills development. In order for South Africa to maintain its role as 'developer' of the sub-Saharan region, it must become an expert in this arena and set the benchmark for this type of development.

"BRICS interest in Africa is substantial," states Frost & Sullivan's economics research analyst Craig Parker "Therefore there are great opportunities for public-private-partnerships in the region for infrastructure development and service delivery.

In tying skills to infrastructure investment, one must be cautious not to put the cart before the horse. In the current global climate, investors are highly risk averse and will not invest into programmes they feel are too risky, or may not show decent return. This means that if you are seeking private funding for an infrastructure project, and the necessary skills are not in place, the risks may be too high for many investors. The Budget places an emphasis on private funding that may not be that easy to obtain. This must be seen in the context of FDI inflows that declined dramatically in 2010, and the fact that South Africa's growth rate is far lower than that of other developing countries, even within Africa. South Africa has seen far less financial investment and financial inflows, since 2009, than countries like Brazil and Turkey.

"Investment in infrastructure is needed to enhance our position in BRICS. However, this needs to be tied to a strong skills development drive. It may not be the ideal time to engage in large infrastructure projects and running up debt, but these projects are needed and will surely create jobs. This is extremely positive."

Investment needed in agriculture

Another important issue announced by Gordhan is the additional R1.9 billion given to the agricultural sector through the Department of Agriculture, Forestry and Fisheries to improve support services in this sector. R150 million will also be made available for provincial and municipal agricultural colleges.

Frost & Sullivan believes that more emphasis should be placed on supporting the agricultural sector of the economy. Firstly, it is a major employer of unskilled labour and secondly, there is a major global food crisis, which requires local capacity to combat high food prices. Food security is a major concern to the World Bank, as global food shortages, caused by adverse climate conditions, have led to a major hike in prices globally.

Commercial farmers producing the bulk of local food supply will benefit little from the R1.9 billion allocated, as this will primarily go to emergent farmers. The increase in the fuel levy by 28c/l will also have a significant negative effect on farmers running their equipment. The tolling of roads will also mean additional costs and pressure on farmers.

"Taking all these factors into account, food supply in South Africa is under pressure and considering this in a global context, where most experts admit there is a crisis, it does not bode well for South Africa as a country," concludes Parker.