South Africa needs R1.27 trillion to fix its growing infrastructure crisis

South Africa faces an enormous funding challenge, with an estimated R1.27 trillion needed to address critical infrastructure needs and support the country’s long term economic growth.

The figure highlights the scale of the investment required to tackle deteriorating roads, struggling water systems, electricity constraints and ageing public infrastructure.

Infrastructure remains one of the biggest obstacles to South Africa’s economic recovery, with years of underinvestment and poor maintenance leaving essential services under pressure.

The warning comes from Jacko Maree, former chief executive of Standard Bank, who believes South Africa needs an additional $75 billion (R1.27 trillion) in annual investment to achieve its economic growth ambitions.

Speaking at a conference in Johannesburg, Maree argued that fixed investment is the only sustainable way to put the economy on a stronger growth path.

Maree led Standard Bank between 1999 and 2013 and also served as one of President Cyril Ramaphosa’s special investment envoys for five years from 2018.

He believes South Africa must make attracting investment its biggest economic priority.

One of South Africa’s biggest problems is the significant decline in fixed investment as a proportion of the economy.

The National Development Plan adopted in 2012, set a target of increasing fixed investment to 30% of gross domestic product (GDP) by 2030.

However, according to Maree the figure currently stands below 15%.

This represents a major shortfall and reflects the difficulties South Africa has experienced in attracting sufficient investment into productive industries.

South Africa’s economic output has also expanded by an average of just 0.4% since 2018, when Ramaphosa became president.

Maree believes South Africa should build on the success of its renewable energy investment programme.

He argues that the country needs to develop investment ready projects with clear regulatory frameworks, particularly in ports, rail, tourism and other industries.

This could help unlock billions of rands held by pension funds, major businesses and other institutional investors.

Former finance minister Nhlanhla Nene also stressed the importance of stronger cooperation between government and the private sector.

Nene argued that South Africa needs economic growth of at least 3% to make a meaningful difference to unemployment and living standards.

National Treasury meanwhile, has projected that the economy could grow by 2% towards the end of the decade.

The warning is significant for South Africa where slow economic growth, high unemployment and infrastructure constraints continue to weigh on the economy.

Ultimately, the message from the country’s former banking chief is that South Africa cannot achieve its economic ambitions without a dramatic increase in investment.

Sources: South Africa needs R1.27 trillion – Daily Investor

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