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Banking, Government

Banks ‘have to fund infrastructure projects’


Deputy Finance Minister Nhlanhla Nene

Deputy Finance Minister Nhlanhla Nene says SA’s banks must identify projects in the state’s multitrillion-rand infrastructure programme that they can fund.

This could help ease the pressure on the government to use debt and tax collections to fund the infrastructure build, especially at a time when revenue is constrained by a weak global economy. The government plans to spend about R3.2-trillion on infrastructure until 2020.

Mr Nene yesterday told a summit hosted by the Banking Association of SA that about R1.9-trillion of the spend would be on electricity generation, transport, education and health. About 75% of the projects required funding.

In his keynote address, Mr Nene said the co-operation of all stakeholders, not only financial institutions, was needed to make the infrastructure plan a success.

He said there was limited capacity for the government to fund everything, thus creating an opportunity for banks to grow their lending potential.

He warned that SA’s banks needed to invest for the long term.

“While private sector investment is vital, we must always ensure the risks and benefits are shared fairly between private and public sector. Infrastructure development should not be seen as an easy way to make money out of government,” he said. “Long-term profitability requires a long-term vision, and banks need to lend long term. Lending for consumption might be profitable in the short term, but is not sustainable.”

Cas Coovadia, MD of the Banking Association of SA, said the government should point out which infrastructure projects were critical.

“It’s not a question of whether the banking sector chooses to invest. Government needs to look at which infrastructure programmes are critical to them.

“What we would then want to do is to sit down … at the level of sitting the boffins together around financing,” he said.

Mr Coovadia said what was needed was to narrow down the number of projects from the 17 that were identified to about four important ones for which the banks could structure financing.

But Mr Nene maintained, talking to Business Day after his address, that the banks and not the government should make the first move.

“The banks must identify which areas most suit their profiles.… The more they release funds the better,” he said.

Source: Business Day BD livewordpress counter

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About Coastal Roy

A consultant experienced in the financial sector in Africa and with a background of central banking, the financial system and information technology. Area of expertise: - Financial market development and regulation. - Payment, clearing and settlement systems modernisation and regulation. - Strategy and policy development for central banks and the financial sector. - Capacity building, advising and mentoring in financial sector development. Educational qualifications: - Master of Business Leadership, degree; UNISA - BSc (Hons) degree in Physics, Manchester University


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