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It is a great honour for me to be able to welcome you to this second day of the RDP Infrastructure Investment Conference.

The subject under discussion is a matter of crucial importance for the future of our country.

The success of the New South Africa will be judged by three factors:

by the degree to which we succeed in maintaining a peaceful, stable and law-abiding society;
by the degree to which we succeed in achieving high and sustained levels of economic growth; and
by the degree to which RDP succeeds in bringing about a better life for millions of our citizens.

These objectives are clearly inter-dependent:

We will not succeed in maintaining stability and social cohesion in the long run if we do not deliver tangible benefits to millions of deprived South Africans.

We will not be able to finance social projects if we do not generate sufficient surplus wealth from a rapidly growing economy.

Our economy will not grow rapidly if we do not have peace and stability in our country.

As the South Africa Foundation recently recommended in its Growth For All proposals, we must develop a comprehensive approach to the full range of challenges facing our country. It is no good if we succeed brilliantly with one or two of these objectives and fail with the third.

We must also bear this reality in mind when considering the allocation of scarce national resources. We must, in particular, ensure that we achieve a reasonable balance between the capital requirements of the private sector, on the one hand, and the RDP, on the other.

As the World Bank reported last year in a discussion paper on the South African economy, the productivity of capital is higher in the private sector than in parastatals. The Bank also pointed out that the redirection of capital stock away from the private sector towards parastatals had had a marked impact on GDP growth.

"When more investment resources are allocated to sectors with lower productivity, there is a depression in the level and rate of growth in the GDP. This effect was particularly strong in the second half of the 1970s and in the early 1980s."

We must accordingly be careful that, in seeking to achieve our developmental objectives through the allocation of capital to RDP infrastructure projects, we do not at the same time undermine our equally important goal of achieving high sustained rates of economic growth. What we require is a sensible balance between these objectives.

At the same time, it is true that, for a number of years, the capital programmes of the general government have been neglected. The real investment of the general government as a percentage of the gross domestic product has, since 1991, declined to a low of approximately 2,0% compared with 4% during the first half of the 1970s.

This was partly the result of the fact that when departments were asked to make proportional budget cuts, they found it easier to cut their capital programmes than their current expenditure.

It was, however, also the result of the poor growth performance of the South African economy in the late 1980s and the early 1990s. It is impossible to maintain and develop physical and human infrastructure services in a stagnating economy with declining per capita income.

As a result, serious bottlenecks and backlogs developed in respect of a number of economic and socio-economic infrastructure services. Now that the economy has improved, these backlogs should be urgently addressed. By so doing the Government will help to improve productivity, economic growth and job creation.

In this process, the Government should, wherever possible, make full use of the capabilities of the private sector. We should look at some of the creative ways in which private sector finance, resources and expertise can be used to develop and maintain public sector infrastructure. The United Kingdom, in particular, has achieved considerable success with such ventures. The government's responsibility should be confined primarily to:

creating a climate that is conducive to private sector involvement in such projects;
ensuring that a proper balance is maintained between infrastructural investment and more direct investment in the production sectors of the economy; and
keeping a watchful eye on capital programmes with unaffordable current expenditure implications.

There is very little difference of opinion regarding the infrastructural needs of our society. We need investment:

to build the houses, schools and clinics that people require for a better life;
bring water, electricity, telephones and sanitation to millions of people in our cities,
towns and rural areas who have never enjoyed such services; and
to finance the maintenance and improvement of our economic infrastructure, to build and maintain the power stations, dams, roads, telecommunications and transportation systems that we require if we want to be a successful competitor in global markets.

The challenge will be to allocate our capital resources in a manner that is both balanced and effective and that will help us to achieve our three interlinked national objectives of peace and stability; rapid and sustained economic growth; and a tangible improvement in the daily lives of millions of our people.

It is my hope that your deliberations today will contribute to reaching consensus on how to achieve these objectives and in particular, on how we should finance the RDP's infrastructural requirements in a balanced and effective manner.

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