Building the future – driven by Covid-19

BUILDING THE FUTURE –

DRIVEN BY COVID-19

By Monica Bennett, director of Thought Leadership, GI HUB

The GI Hub recently launched its newest resource, Transformative Outcomes Through Infrastructure. Its purpose is to uncover the G20 priorities that underlie the US$3,2 trillion (ZAR48,66 trillion) of infrastructure investments announced postCovid-19 and to help direct future spending into areas that could yield the greatest possible benefits for people and the planet. With this resource, we are making available data that we collected collaboratively with G20 governments and sharing insights on how those governments are using infrastructure to achieve transformative outcomes after the pandemic. This information will help governments, investors, multilateral development banks and project directors across the public and private sectors to develop future infrastructure packages with transformative outcomes in mind.

The initiative has revealed itself to be even more timely and relevant than expected, especially in the context of the various national pledges to net zero and the ever-growing attention on digitalisation, connectivity, circularity and affordability in infrastructure.

An unprecedented scale of opportunity

Why did we need this resource?Because the scale of opportunity after Covid-19 is almost unprecedented – and so is the need.

The infrastructure landscape changed rapidly after the virus first struck and governments needed an immediate reference point to enable better decision-making. An unprecedented level of fiscal stimulus was deployed after Covid-19 started: indeed, in April 2021, the International Fund’s Fiscal Monitor reported a total of US$17 trillion of key fiscal measures for the G20 (including member and guest economies) since January 2020. This represents approximately 20% of the G20 GDP and has resulted in a reduced fiscal space which has forced governments to divert their budgets into urgent areas such as healthcare and social protection. As a result, infrastructure as a stimulus was slow to emerge in the early days of the pandemic. However, an analysis of the G20’s stimulus packages over the past 18 months has demonstrated substantial commitment by G20 governments to infrastructure investments for Covid-19 recovery.

Global stimulus

Between February 2020 and August 2021, G20 governments announced US$3,2 trillion in infrastructure as a stimulus, the equivalent of 3,2% of GDP across G20 member and guest economies. This is substantial compared with the total stimulus deployed during the global financial crisis of 2007/8, which was US$2 trillion (roughly 1,4% of GDP). If this infrastructure as a stimulus is spent in the next two years, it would be a 45% increase in yearly infrastructure investment compared with 2019 levels.

The boost to infrastructure investment is sorely needed. The pandemic increased inequalities among vulnerable people and

“Between February 2020 and August 2021, G20 governments announced US$3,2 trillion in infrastructure as a stimulus, the equivalent of 3,2% of GDP across G20 member and guest economies.”

highlighted gaps in access to financing and services in every country. Simultaneously, the climate crisisis still at “code red”. It remains urgent for the sector to confront its contributions to climate change and embrace the positive impact by adopting more green and circular infrastructure.

However, investment alone is an incomplete solution. Governments cannot afford to continually increase spending. In April 2021, public debt levels across G20 economies were 50-100% higher than they were following the global financial crisis. In thinking about transformative outcomes through infrastructure, governments can leverage the private sector demand for environmental, social and governance outcomes to mobilise private investment in infrastructure. In this context, innovative financing and delivery models start to play a role in achieving transformation.

From every vantage point, it is clear that we need to get as much as possible out of the unprecedented level of infrastructure as a stimulus.

Getting the most from infrastructure

The infrastructure sector needs to make a fundamental shift from built solutions that address singular problems to those that address multiple transformative outcomes. Transformative outcomes are those that have the greatest impacts on our most pressing global challenges, including the climate crisis, social inequality, adaptability and resilience.

All infrastructure as a stimulus can create jobs and economic growth. A 2020 GI Hub study found that the economic multiplier for public investment (including infrastructure) was 1,5 times greater than the initial investment in two to five years – much higher than other forms of public spending.

Targeting of transformative outcomes should, in addition to creating better social and environmental outcomes, result in an even greater economic multiplier and help close the infrastructure gap. For example, recent GI Hub analysis found that technological innovation could fill 60% of the infrastructure investment gap, if rolled out at scale.

Transformative outcomes are achievable

Achieving transformative outcomes is possible. Our Transformative Outcomes Through Infrastructure resource contains examples of infrastructure as stimulus packages in G20 countries that are targeting transformative outcomes, which can be used as templates to create stimulus packages or structure projects for transformative outcomes. We have also curated a library of reference documents that are full of ideas and guidance for targeted transformative outcomes through national and local infrastructure. All of these are underpinned by the InfraTracker, which shows data on how stimulus is being applied by country, sector, sub-sector and targeted outcomes.

We encourage readers to explore the resource and contact us with questions or feedback, or to contribute or collaborate. We are also inviting collaboration with public- and privatesector organisations and individuals to extend our work and advance transformative outcomes through infrastructure. We welcome your ideas.