Category General News

1.How will the proposed expansion benefit the economy at a local and regional scale? The question is expressed in terms of job creation and economic growth in the economy.

Planning provides an essential blueprint for future development. The transformation from a blueprint to projects on the ground is a crucial step. The Pietermaritzburg Airport Sub-precinct project has great potential to stimulate economic growth and create jobs in the uMgungundlovu region but there is much that can go amiss with this project.

The initial impact from Phase 1 of the Airport Expansion Project will be derived from a new road system, connecting the Airport to the N3 highway, investment in airside and landside infrastructure, including a new General Aviation zone, at the Airport and basic infrastructure, and bulk services, for the Techno Hub.

Over a period of 10 years it is estimated that this will increase regional gross domestic product by R763 million, income from remuneration by R426 million and create 5092 jobs. These benefits will be spread over 10 years but not continuously. In other words, implementation is likely to be ‘lumpy”. The total impact for the 10 year period would be a growth rate of approximately 1.5 percent.

The major economic impact should arise from investment in buildings and facilities in the Techno and new development zones at the Airport. For the Techno Hub a Concept Plan implies CAPEX of R1.35 billion. At this stage there very little information as to where these business and institutional investors will come or the nature, scale or timing of projects. Thus, it is impossible to make any reliable prediction or estimate of the impact on GDP or employment in the next 10 years.

In the long term sustainable economic growth derives from the operation phase when investment projects become viable. The vision is of a fully operational Techno Hub and a range of economic activities in the Business zones. It is doubtful that much of this vision will be achieved in Phase 1 of the Airport Expansion Project and, therefore, no attempt is made to quantify these benefits,

Capital funding may be the Achilles heel of the Airport project. Not only are hundreds of R millions needed for public investment but even greater amounts from private funding for the Techno Hub and Airport projects. None of the Airport or Techno Hub studies and plans give much attention to this issue.

Successful implementation of this complex project requires a management structure able drive the process forward. Once basic infrastructure and services are installed a major marketing initiative will be required to attract private sector investment. Failure to involve private business raises the spectra of a white elephant.

Thus, in the light of the above qualification, it may be concluded that benefits to the local and regional economy, in terms of job creation and economic growth, could be significant but will be derived from a range of diverse investments and take time to materialize. There are major possible 54 impediments to successful implementation of the project stemming from failure to raise capital funding, a lack of effective co-ordination and management and ineffective marketing of investment opportunities to the public and private sectors.

(2) Pietermaritzburg Airport is owned by the Municipality and is currently subsidized by ratepayers. How will the proposed expansion affect the operational sustainability of the Airport?

Msunduzi Municipal accounts for financial year 2014/15 show an Airport deficit of R5 million. This is subsidized from rates and general revenue. The Airport accounts are an integral part of the municipal accounting system and include an arbitrary allowance for depreciation and other extraneous items.

A true picture of the Airport financial situation will not be obtained until income and expenditure are “ring fenced” and accounted for using sound business principles. This will occur if a municipal entity, or some other form of independent management, is established.

A financial model, projecting future trends in income and expenditure, predicts that the upward trend in aeronautical revenue will eliminate an operational deficit, and the need for a subsidy, within 5 years. This prediction is based on continuous growth in commercial aviation passenger numbers, as estimated for Phase 1 of the Airport Master Plan.

There is a qualification to this conclusion. Additional operational expenses will be incurred as the Airport Project progresses. Management of the operational budget will be challenged by the incorporation of new Business zones and the Techno Hub. This may prolong the need for a subsidy. The Techno Hub economic incentives to investors will be beneficial in the long run but in the short run intensify the necessity for a subsidy. Over a period of ten years, however, as new income streams from leases materialize the need for a subsidy should steadily diminish.

Author: Institute of Natural Resources NPC - G Oldham

Submitted 23 Jun 17 / Views 2135