Monhla Hlahla, CEO of the Airports Company of South Africa, launched the Rhodes University Department of Political and International Studies Annual Teach-in on Monday 14 September 2009. On the topic of the Teach-in, ‘The Global Economic Crisis; Lessons for South Africa’, Hlahla said South Africa had been fortunate to be somewhat cushioned from the worst effects of the crisis due in part to its infrastructure investment in the lead-up to the 2010 Soccer World Cup.
“Infrastructure investment creates jobs and provides the basic infrastructure such as roads which enables the movement of goods and services to connect our markets to others. The 2010 World Cup has meant greater investment in infrastructure which has acted as a cushion in the current economic crisis. But the period has also seen a slowing of investment in other areas of economic infrastructure such as Eskom and Transnet. Many infrastructure investments have been placed on hold because of the crisis” Hlahla said.
Arguing that successful economic performance depends on how well a nation avoids large fluctuations in the demand for goods and services, Hlahla pointed out that rather than a bold infrastructure investment strategy emanating from conscious policy choices in response to the global economic crisis, the aggressive infrastructure spending that has marked the approach of the government in the current period was not a direct response to the crisis. It had begun before the global crisis hit and was only a function of 2010 preparations. “Prior to that for many years bold investment in infrastructure was lacking” she said.
“The 2010 World Cup has been a saviour by providing an opportunity to reduce infrastructure investment backlogs in metropolitan areas and municipalities. These investments target a range of projects, from improvements in sport facilities to roads and public transport networks, and serve as a catalyst for tourism promotions. However this was really by accident in that the World Cup investment plans were in place prior to the crisis. It was not based on a sound understanding of the economic worth of investing massively and boldly in infrastructure in times of economic crisis in order to lay the basis for growth in the future”.
Hlahla argued that aggressive investment in other areas of the economy remained lacking. For instance, South Africa consumes fuel produced in other parts of the world but an unwillingness to pay for additional pipeline needed by Transnet and a lack of understanding regarding the cost implications of postponing investment has meant that by the World Cup there will be competing demands on the single existing pipeline and shortages will result in some sectors. “Timely investment in world class infrastructure would enable us to interact efficiently with various economies”.
Responding to Hlahla, David Fryer, lecturer in Economics at Rhodes University said that the critical question was “whether or not this was a financial crisis or a political crisis dressed up as a financial crisis” Fryer pointed out that to call it a ‘financial crisis’ is to suggest that there is nothing wrong with the underlying fundamentals in the way in which the economy is structured. But some commentators suggest it is a much deeper crisis with much deeper historical roots – that there is something fundamentally wrong with the economy and that this is the result of a failure of policy in the post war years.
This will be the key question that will frame the ongoing debate throughout the week. Other speakers in the line-up include Professor Johan Fedderke, of the University of Cape Town’s Economics Department, Greg Farrell of the Reserve Bank, Deputy Minister Jeremy Cronin and Professor Francis Wilson.