Is infrastructure spend still SA’s saving grace?

Infrastructure spend in SA has traditionally been intrinsically linked to economic growth with civil and construction industries helping to drive a prosperous SA economy, building roads, bridges and airports while creating jobs as well as delivering schools, hospitals, clinics and transport systems. To restore these initiatives, the government recently produced the National Infrastructure Plan (NIP). Phase 2 of NIP has just been gazetted.

A recent Business Day Dialogues in partnership with AfriSam discussed the potential of investment into national infrastructure to rebuild the economy of SA.

Public infrastructure is critical to achieve the National Development Plan (NDP) objectives such as integrated housing, public transport, energy, water and sanitation, as well as a whole host of other projects, in order to supply and stimulate the economy and supplier industries, said Miriam Altman, a director at Altman Advisory. After years of state capture, the state needs to rebuild capacity and recreate partnerships. The responsibility of the state is to pay, plan and procure from private sector as well as create an environment in which the private sector can execute these projects timeously and cost effectively. Procurement needs to be recognised as a specialised skill requiring technological competence. It is also vital to have a project pipeline communicating the procurement process, so that companies can prepare.

“The primary problem is not money, it’s to get value for that money,” continued Altman. The bulk of transport funding, for example, goes to PRASA, with zero service; minibus taxis, which move the most passengers, get nothing. It has been agreed that for the sake of improving the economy, both passengers and goods need to be moved off road and onto rail – but no action has been taken to improve the country’s crumbling rail infrastructure.

Denene Erasmus, an energy writer at Business Day agreed with Altman, adding that the government is good at making plans but cannot implement them. Companies need a secure and reliable source of energy and the switch from fossil fuels to renewable energy must happen “quickly and aggressively”. Rules for the procurement of local energy need to be relaxed to move forward.

Richard Tomes, sales and marketing executive AfriSam pointed out that several construction companies did not survive collusion accusations, meaning that SANRAL projects are now being awarded to Chinese companies and young engineers are leaving the country to find employment.

In addition to dealing with an irregular energy supply, companies are contending with the construction mafia, with locals demanding employment and strikes pausing projects. Exacerbating the situation are global issues such as the high demand for SA coal in Europe which is resulting in a lack of capacity in the country.

Cement, he said, provides full beneficiation, from the raw extraction to the finished product, and adds significant value to the SA economy.

Cheaper cement is being imported, said Bryan Perrie, CEO of Cement and Concrete SA. He called for anti-dumping and import tariffs to be implemented based on the current unfair trading conditions between local producers and the importers. In addition, the NRCS (National Regulator for Compulsory Specifications) should be compelled to give feedback on cement sampling and testing, as per the compulsory standards act. Another important matter to assist with planning, and something that is deemed a key lead indicator when it comes to economic activity, is the need to publish cement statistics, like most other countries around the world do. Companies should be mandated provide statistics in line with the “rules” set out by the competition’s commission, in order to help the industry prepare and ensure that there is sufficient capacity to cope with local demand.

According to Eric Diack, executive chairman and CEO of AfriSam, road transport is the biggest cost to the industry… “This is Transnet’s moment to shine.”

Diack warned that transport costs, along with the costs of the energy crisis, cannot be absorbed and will impact the cost of infrastructure going forward. In mitigation, AfriSam is building a solar plant near Lichtenburg. “The private sector must play a big role in putting processes in place,” he said.

To watch the full discussion, click here.