The MTBPS this week will reveal how government is going to deal with a shortfall in tax collection against its targets. The problem is our economy has performed worse than expected when targets were set.

The imperative is to maintain fiscal discipline. I can’t overemphasize how important this is. There is no way to spend your way out of a deficit. If business perceives that government is being reckless with its finances, then confidence falls as we factor in the risks of sovereign financial distress. When that happens, companies stop investing which in turn constrains growth. While government spending money does support growth, this can be more than counteracted by the reduction in investment by businesses out of fear that government spending is unsustainable.

Given the revenue shortfall, National Treasury must either cut expenditure or raise funding. Traditionally there are only two sources of funding: higher taxes or debt. Taxes might be hiked at the margins, but are unlikely to increase significantly, given that South Africa already has higher tax rates than most competing markets and tax hikes are unpopular. But debt is also difficult – interest rates are high and an increase in issuance will inevitably increase the cost of borrowing from a market that is wary of the sustainability of government’s debt load. So, what should Treasury do?

There is a third way – better partnerships with the private sector. These can play an especially important role in driving infrastructure investment, which is critical to enabling and delivering wider economic growth. Infrastructure is what allows the country to function, including electricity generation, railways, ports, bulk water works and roads. It is key to increasing the capacity of our economy to produce goods and services and ensure they reach diverse markets.

Historically, government, through the state-owned enterprises, has been the main investor in establishing and building network infrastructure, but the challenges facing Transnet and Eskom have left them unable to invest what is needed. These have absorbed R234bn in cash from the Treasury over the past five years but still they are unable to meet the needs of business and there have been recent calls for significant, additional funding.

That is where partnership with business has proven to make a difference. The electricity sector is emerging as an excellent example. Through the National Electricity Crisis Committee (Necom), established by President Cyril Ramaphosa under the auspices of Operation Vulindlela and the joint venture between the Presidency and National Treasury, a clear plan was drawn up. Significant progress has been made on implementation, with legislative changes enabling the private sector to start investing huge amounts of money into building new electricity plants. In the past 18 months, electricity regulator Nersa has registered close to 6 gigawatts of new electricity projects, all being built by the private sector. The Renewable Energy Independent Power Producers’ Procurement Programme is a longer-running example, where hundreds of billions have been invested by the private sector in creating new electricity generating infrastructure.

We are on course with a similar approach to our logistics sector, which has deteriorated dramatically and now constrains our ability to move goods around the country and from our ports. The National Logistics Crisis Committee (NLCC) has drafted a comprehensive roadmap that details how performance can be improved, drawing on the strengths of both government and the private sector. Progress is on the horizon – Transnet has a preferred bidder for a concession at the Durban Container Port and concessions are being developed for rail. This has the potential to galvanize the investment needed, but instead of drawing on the government purse it can be financed by the private sector. Improvements in rail capacity can make a huge difference – every train running between Durban and Johannesburg takes hundreds of trucks off the road, relieving the choked N3.

Partnerships are also going to be key in bulk water infrastructure, developing the electrical grid, building out digital infrastructure, improving capacity of our important road corridors, and even in some of the social infrastructure needed like hospitals and government buildings.

National Treasury has been working on improving the regulatory framework that governs public-private partnerships. Appropriate regulation is key. Business needs projects to be well defined, with the risks allocated to those best able to manage them. In the February budget, Treasury provided an update on progress with reforming the regulatory environment for PPPs to make them easier to implement and better managed. It would be good to hear of further progress on this front in the MTBPS.

Such PPPs are good mechanisms to create partnerships, but not the only ones. As BLSA we are actively supporting Necom by helping to fund critical skills to support various interventions in the electricity sector. This is producing results – The Kusile Power Station, for example, has been able to bring two units back into production a month early because of support from the private sector. We are willing to work with the public sector on such initiatives because they support improvements to the business environment, which enables businesses to invest and grow. If we are able to do that, tax revenues will recover, and government finances will be restored.

I do not envy the finance minister’s job this week. The competing demands are immense. But I can say that he has an asset and collaborative partner in business to use to make his job easier. Create an enabling environment for business to partner government, which will unleash billions in investment spending, and many more will come. Hold the line on fiscal discipline and investor confidence will grow. This is the path to sustainable outcomes.