Using the upper bound cost structure, we predict that total value of the **electricity** generating stock is going to increase from US$ 7.26 billion (R 47.17 billion) in 2002 to US$ 9.52 billion (R 61.88 billion at an exchange rate of R6.5/$1) in 2005, and then to US$ 14.64 billion (R 95.18 billion) in 2010. Therefore, **_required average annual investments in electricity over the period 2003-2010 are of the order of $ 0.52 billion (R 3.37 billion) or about 0.2% of GDP_**<sup>**_8_**</sup> (See Table 4 and Figure 6a). Again, note that this covers only generation, excluding transmission and distribution and operations and maintenance expenditures.

Similarly, the value of the stock of total **telephone lines** is going to increase from US$ 16.5 billion (R 107.2 billion) in 2002 to US$ 22.3 billion (R 145 billion) in 2005, and then to US$ 40.3 billion (R 262.2 billion) in 2010 **.** **_Required average annual investments in telecom in the period 2003-2010 are therefore of the order of $ 1.98 billion (R 12.9 billion) or about 0.75% of GDP_** (See Table 4 and Figure 6b). Taken together, investment needs in electricity generation and telephone lines are of the order of US$2.5 billion (about 1% of GDP).

How do these investment requirements compare with local estimates of investment needs? For electricity, ESKOM has estimated average annual investment needs in electricity generation, which are approximately of the order of $US1.0 billion, but this includes the cost of investment and rehabilitation of transmission and distribution and a margin for peak demand (Eskom 2005). Therefore, our estimates related to electricity production only appear broadly in line with the ones prepared by ESKOM. It should also be noted that while our estimates rely on a robust, multi-country estimate of demand for electricity that is used to forecast South Africa’s needs using projected demand variables, ESKOM’s estimates rely on engineering projections based on South Africa’s time series of electricity consumption. For telecom, we were unable to identify similar, “official” local estimates of investment requirements in the telecom sector, but our estimates are broadly in line with similar estimates done for other countries (e.g., in Latin America).

# **An Accelerated Growth Scenario**

The above forecasts are based on the consensus IMF and World Bank predicted growth rate of South African GDP in medium term _before_ the adoption of the accelerated and shared growth policy agenda. The forecasts also include corresponding growth rates in the agricultural, manufacturing and services sectors.

We now consider the infrastructure needs associated with an alternative, accelerated growth scenario with the average annual GDP growth rate of 6% identified by the South African government as a policy target.<sup>9</sup> The purpose is to illustrate how infrastructure

> 8 All projected ratios of GDP use average, annual projected GDP for the forecast period.

> 9 The sectoral growth rates that correspond to a 6% GDP growth rate were calculated by averaging previous sectoral contributions to GDP growth, and then scaling these up to correspond with a GDP growth rate of 6%.  It should be noted that the assumption of the 6% average annual growth in this illustrative exercise

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