Africa faces challenges on spending plans: government

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South Africa may struggle to overcome global funding constraints as it bids to find the cash to boost infrastructure spending over the next few years, Trade and Industry Minister Mandisi Mpahlwa said on Tuesday.
South Africa plans to spend about R787 billion over the next three years to upgrade its transport infrastructure, such as rail and airports, and to increase electricity generating capacity.
Much of the spending will be made by state-owned companies, funded through their own balance sheets or loans, Reuters reports.
“We have to fight hard as SA Incorporated to maintain the government infrastructure programme,” Mpahlwa told reporters.
“There are new challenges, financing it is going to be a lot harder but we have to do what we can to maintain our public infrastructure programme.”
State-owned power utility Eskom plans to spend over R343 billion while logistics group Transnet aims to spend R80 billion.
Both companies want to tap into international credit markets for a portion of the funds they require. The Treasury has loaned Eskom 60 billion rand and has offered a further 176 billion rand in loan guarantees.
Mpahlwa said the infrastructure spending would help put South Africa in a strong position to grow faster once the world economy started recovering.
Global credit markets have tightened sharply making financing more difficult while Eskom’s credit ratings have been downgraded and the sovereign ratings have come under threat.
Rating agencies Standard & Poor’s and Fitch cut the outlook for South Africa’s investment-grade rating to negative from stable late last year, effectively making it more expensive for it to issue debt.
“In the uncertain circumstances in which we are making this commitment it may well be that there might be a slight drop in the number (R787 billion) …. (but) I am making no prognosis,” Mpahlwa said.
The minister added that plans to help struggling industries would be released towards the end of the month, stressing that the government wanted to protect the automotive industry, which last month asked for a government loan to help it cope with tougher economic conditions.
“We are of the view that the automotive industry continues to be a very important sector for the South African economy … we are not going to give up on the automotive sector.”
South Africa’s automotive industry — key for jobs and exports — has been particularly hard hit by a recession in its major trading partners and by lower domestic sales, partly due to higher interest rates.
The government has said it was prepared to rescue struggling sectors and companies, with money possibly directed through state-owned development finance agencies.