South Africa's Capital Investment to Increase GDP

By Eddyson Lugangwa Posted 15 June 2006 @ 04:08 pm EET     Print     Reprint     E-Mail     Comments

Johannesburg (IBTimes.com) - The state's ambitious R162bn capital investment programme to be undertaken by parastatals Transnet and Eskom over the next five years would contribute about 1,5% annually to gross domestic product (GDP), Public Enterprises Minister Alec Erwin told Parliament yesterday.

The capital expenditure would stimulate the local supplier industry and act as a catalyst for the creation of new economic activity, Erwin said in a speech on his budget vote in the National Council of Provinces.

"Spending in key areas of manufacturing will be significant. Based on modelling, which we did together with the Industrial Development Corporation, it is estimated that R27bn will be going to construction, particularly civil engineering," the minister said.

He also estimated that R11bn would be spent on metal products, excluding machinery, R9bn on electrical machinery, R8bn on nonelectrical machinery, and R11bn on transport equipment.

Erwin said that Eskom's annual demand for steel and cement over the next few years was estimated to be 60000 tons and 1-million tons respectively, while construction of Petronet's pipeline from KwaZulu-Natal to Gauteng would require between 75000 and 90000 tons of steel.

Construction of the pipeline is expected to begin at the end of next year. "The positive impact that the investment will have on the economy cannot be understated," he said

Erwin said the past two to three years had shown the economy was capable of a higher growth rate and that it was robust and competitive.

"It is now time for both the public and private sector to internalise this reality, and adjust their decision-making accordingly," he said, calling for private-sector business leaders to demonstrate "confidence and foresight" by investing now.

Erwin said a study by the Human Sciences Research Council had shown that improving telecommunications and logistics inefficiency alone added as much as 4% to GDP.

However, Erwin said growth would be impeded if there were delays in revamping port and freight systems, which was a key goal of the capital expenditure programme.

He said that Transnet had therefore accelerated the building of new ports, expanding capacity in overcrowded ports and modernising freight facilities.

The new port of Ngqura, part of the Coega Industrial Development Zone, was being developed, and there would also be expansion in Saldanha Bay.

"A prefeasibility study for a container terminal at the Port of Ngqura has been completed and a full feasibility study and costing exercise for the terminal is being conducted.

"In respect of addressing overcrowding in Durban harbour and Cape Town; the Pier 1 terminal in the Port of Durban is being expanded and redesigned to provide an additional container terminal with 600000 TEUs (20ft equivalent units) capacity by 2007," the minister said.