The Business Day Dialogue on the economic impact of urban infrastructure developments in partnership with the Gautrain Management Agency took place in Sandton on 14 October.
A panel consisting of Jack van Der Merwe, CEO Gautrain Management Agency; Laverne Dimitrov, Transport Specialist, DBSA; Lebo Leshabane, CEO, IX Engineering and Mark Allix, Industrial writer for Business Day Live, debated the economic benefits of investment into urban infrastructure. Editor of Business Day, Tim Cohen, in his welcoming speech referenced a point made by Harvard University’s Ed Glaeser, in his book, “Triumph of the City”, that perhaps the most important force in any city is serendipity – the chance meetings that people have with one another which lead to communication, the sharing of knowledge and ideas, and the iteration of the economic process.
Much of the panel discussion went on to support this theory. Lashabane pointed out that initially it’s often difficult to justify the costs inherent in infrastructure projects, which in some cases can take up to 11 years to quantify. The spin off benefits, however, are more rapidly observed and one need only look at the communities around the projects to see the benefit of infrastructural investment. She says studies have shown once people have a mode of transport available, property and land prices increase by 25 and 100 percent respectively while personal loans increase by up to 40 percent, because consumers now have access to financial markets and make more FMCG purchases.
Allix argued that
Transport is an enabler and is necessary to sustain life, said Allix. Infrastructure, he added, is what enables communities to engage with one another. However, infrastructure should not be complex or hugely expensive and the cost benefit should enable people to live decent lives. He argued that we need to think creatively about infrastructure including tunnels, bridges between buildings and cable cars – small changes that don’t need to cost R100 billion.
Based on a report done by KPMG on the five years that the Gautrain has been operating Van der Merwe revealed that of the R27 billion provided to build the Gautrain, Gauteng has received R47 billion back already in benefits, while 135 000 jobs have been provided.
Dimitrov discussed the importance of Public Private Partnerships (PPPs) in infrastructure development and finding partnerships that will forward the goals of public policy. However, she warned that there is always a fiscal cost involved. Global debate around this fiscal cost argues that it should be calculated over the lifetime of the asset – up to 100 years.
Van der Merwe pointed out that PPPs should not take place for the sake of funding, but rather to access knowledge, global best practice and capital markets when embarking on projects that have not been done before. He warned, however, that international partners would always look at the risk of the project in the greater context of the risk of the country and that one cannot float PPPs when there are questions around country risk.
Gunnion concluded that there should be more PPPs in infrastructure projects and that ultimately, investment into infrastructure makes for healthier cities.