Can investment in public sector infrastructure result in job creation?

Unemployment continues to be one of the major socio-economic challenges faced by South Africa, with severe consequences for its citizens including poor living standards.

In 2011, the National Treasury launched a R9 billion initiative, the Jobs Fund, to address the issue of unemployment through partnerships and by providing grant funding to public, private and civil society organisations. The fund operates under four distinct funding windows including enterprise development, institutional capacity building, support for work seekers and infrastructure investment. The infrastructure investment funding window co-financed light infrastructure projects with potential to lead to job creation in an economic sector or geographical area.

Genesis was appointed by the Jobs Fund within the Government Technical Advisory Centre (GTAC) – a repeat client – to conduct an impact evaluation on selected infrastructure investment projects.

The assignment included a comprehensive review of the overall infrastructure investment portfolio consisting of nine projects in total. The Genesis and the Jobs Fund teams selected four projects to be evaluated based on several characteristics including location, status (closed or in progress), sector, cost, performance, type of funding as well as the extent to which the project offered key learning areas for the Jobs Fund.

The evaluation adopted a Social Accounting Matrix (SAM) model to determine the impact of the infrastructure investment on GDP and employment. Findings showed that 4,380 direct jobs were created with 99% of these workers classified as previously disadvantaged individuals.

Overall, the infrastructure investment portfolio had a GDP multiplier of 1.1 with a total of 19,500 jobs (direct, indirect and induced) jobs. Approximately 57% of the workers were youth while 36% earned above the minimum wage of R3,500.

The project was a learning opportunity for the Jobs Fund because it had never done an evaluation on infrastructure investment projects. Findings and recommendations from the evaluation provided guidance on whether infrastructure is something that the Jobs Fund should invest in to create jobs.

The findings support the notion that light infrastructure alone does not lead to job creation. A large percentage of job creation impacts resulted from supporting activities including support for work seekers and enterprise development. The evaluation provided recommendations on how similar projects can be replicated in future and how impact can be measured in a holistic manner across all stages of project cycle – origination, appraisal and implementation.