Ahead of the Medium-Term Budget Policy Statement (MTBPS) delivered by Finance Minister Enoch Godongwana on October 21, the National Treasury has solemnly reflected on multinational organisation the International Monetary Fund's (IMF’s) assessment of South Africa’s public investment management with its Public Investment Management Assessment (PIMA) and Climate-PIMA tools (C-PIMA), which found that South Africa has relatively strong public investment management institutions and frameworks, particularly for planning and resource allocation.

However, weaknesses in implementation constrain the extent to which these frameworks translate into effective infrastructure outcomes.

The assessments have identified the need for a coherent public investment strategy to be coordinated across government and for the systematic evaluation of completed projects.

Treasury highlights that this assessment shows that South Africa operates below the efficiency frontier, which reflects the infrastructure outcomes achieved by the best-performing countries at different levels of public capital stock, and this suggests that South Africa could achieve better infrastructure outcomes with its existing public capital.

South Africa’s efficiency gap is at 40%, compared with an average of 36% from emerging market economies and the IMF analysis suggests that stronger public investment management could close up to two-thirds of this gap.

MAINSTREAMING CLIMATE RESILIENCE
South Africa remains highly exposed to climate disasters, including droughts, wildfires and floods and its capacity to respond to climate change events is relatively low, National Treasury remarks.

C-PIMA estimates that natural disasters caused losses of about $10.1-billion to the South African economy between 2000 and 2024, equal to 2% of the country’s GDP. Therefore, building climate resilience is viewed as essential to protect infrastructure investment, sustain service delivery and reduce future fiscal costs.

The C-PIMA has also identified opportunities to integrate climate risk into public investment decisions and recommends stronger climate risk analysis in the appraisal and selection of critical infrastructure projects.

This assessment also concluded that climate risks should also inform fiscal risk analysis and reporting, asset registers and asset management plans.

Owing to these considerations, Treasury will update the Infrastructure Planning and Appraisal Guideline, applicable to all spheres of government, as part of implementing these recommendations.

The revised guideline will systematically integrate climate risk, adaptation and resilience into project appraisal, and exposure and resilience to climate risks will become increasingly important criteria in assessing infrastructure projects going forward.

Notably, the IMF has also made recommendations that government strengthen the appraisal and selection of infrastructure projects, improve conditional grant performance and project delivery, and ensure more effective maintenance and management of the country’s existing infrastructure assets.

The National Treasury says it will submit the final reports from this assessment to Cabinet for consideration, after which government will integrate the IMF’s recommendations into its infrastructure reform agenda.