[Letter] Anti-graft guarantees

The SA National Roads Agency (Sanral) is the latest state entity to recognise its inability to discharge its responsibilities. CEO Reginald Demana said recently his organisation was going to need higher levels of private sector investment to prevent the further disintegration of the country’s crumbling road infrastructure (“Sanral’s irregular expenditure surges 1,741%", November 3).

For over a decade investment in fixed capital has been lagging. Gross fixed capital formation, a measure of investments in infrastructure and other fixed assets as a share of GDP, has been hovering at an average of 15%. That is far below the required level of 23%-25%, and miles below the government’s own 2012 National Development Plan target of 30%.

Although there is an urgent need for investment in infrastructure, critics have questioned whether it is appropriate for the private sector to bail out failing state entities. Doing so deprives them of the incentive to improve their performance and allows them to continue failing.

Sanral has been accused of various corruption scandals and tender fraud. In the most recent tender scandal a Chinese company, Mecsa JV, which received the tender for the construction of the EB Cloete Interchange and the widening of the N2 and N3 national roads, allegedly failed to meet tender eligibility requirements.

Greater private sector involvement in infrastructure is inevitable and necessary, but companies are well advised to be aware of the risks of co-operating with state institutions. They should make such co-operation conditional upon improved financial management and clear action against crime and corruption on the part of their public sector partners.