The main highlight of President Zuma’s State of the Nation Address was his announcement of several new infrastructure projects. This seemed to go down well with the popular media, who called it an “ambitious” speech, and the general impression seems to be that infrastructure spending is difficult to fault given the crumbling condition of many rural roads, the frequent warnings of electricity shortages and the high costs, and slow speed, of internet access.
But what is often missing in the public discourse is that infrastructure spending decisions are implicitly decisions about industrial policy, which implicitly influences a country’s comparative advantage. Because infrastructure are expensive, it is simply impossible to simultaneously provide all infrastructure service requirements at once: fix all roads, reduce all port charges, provide low cost internet coverage across the country. Choosing one project means not choosing another. This means favouring certain industries against others: a new railway linking a iron-ore mining town to a port, for example, would entail few benefits for those sectors outside mining.
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