Monday, January 24

Construction Industry Welcomes Publication of SA’s Long-Term Infrastructure Plan


Construction industry bodies have welcomed the government’s release of a 2050 National Infrastructure Plan for public comment, but raised concerns about the continued lack of implementation of government plans and projects.

The Department of Public Works and Infrastructure released the draft National Infrastructure Plan 2050 (NIP 2050) for public comment last week.

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Written submissions on NIP 2050 should reach the department on or before September 17.

The NIP 2050 states that the plan will ensure that the foundations are built to achieve the National Development Plan (NDP) vision for inclusive growth.

Read: Ramaphosa Accelerates Infrastructure Financing

The cost of delivering infrastructure to meet the NDP’s development goals is estimated to exceed R6 trillion between 2016 and 2040, with energy and transportation accounting for more than 72% of the total cost.

One of the goals of NIP 2050 is to rebuild “a vibrant and empowered civil construction and supplier sector.”

Commenting on the state of the construction sector in 2021, the NIP 2050 said that the industry plays an indispensable role in providing physical infrastructure, is an important employer, especially for low and medium-skilled workers, and has important linkage effects. in related goods and services.

He highlighted that the government’s relationship with the construction industry was damaged by proven anti-competitive and collusive behavior and the industry paid R1.46 billion in fines and contributed R1.5 billion to the Voluntary Reconstruction Program.

With the aim of unlocking obstacles

The plan said the construction sector is highly regulated by numerous laws, many of which require pre-construction permits in terms of time-consuming and cumbersome processes.

He said that the 2014 Infrastructure Development Law recognizes the considerable statutory planning and implementation obstacles faced by the delivery of infrastructure, adding that this law provides a legal instrument by which obstacles to the rapid implementation of the national infrastructure plan can unlocked through facilitated and expedited approvals and authorizations. , licenses, permits or exemptions that may be required in terms of legislation.

However, he emphasized that the World Bank’s 2020 ‘Ease of Doing Business Ranking’ placed South Africa 98th out of 190 countries for regulations related to building permits and 108th for property registration.

The plan said regulators have been slow to address issues, some of which are long-standing and well-understood, that negatively impact the industry, create inefficiencies or stunt growth.

He said the government accounts for more than two-thirds of civil works revenue and about 40% of non-residential construction revenue.

Weakened sector

“The drop and uncertainty in public spending on construction after 2014, therefore, has had a major effect on the health of the South African construction sector, and especially the sector involved in civil works.

“The weakening of project flow and public sector spending has led many large civil construction companies to turn their attention to foreign contracts and / or survive in South Africa by moving their business away from construction.

“There is evidence of an unprecedented number of large contractors requesting the bailout or liquidation of companies, largely attributed to a combination of a lack of large government infrastructure contracts, late payments and the acceptance of problematic contracts. and at a loss, “he said. .

Read: Is SA heading towards a life without a construction sector?

The plan said that the value of publicly traded construction companies fell between 60% and 70% between 2008 and 2018, but suggested that this may have been caused in part by the sale of companies to black power entities that they are not publicly traded.

He acknowledged that there have also been some business failures and a significant emigration of skills abroad, with construction employment falling by roughly 35% between 2014 and 2019.

Foreign companies may ‘need to help’

The plan highlighted that the state infrastructure investment campaign “will draw on a severely depleted delivery sector that may result in further introduction of foreign companies to assist in the delivery of major projects.”

“The government’s infrastructure investment push will act as an economic stimulus if it is carried out by South African construction companies and domestic supplier industries.

“The rate at which this can happen depends substantially on the state’s ability to build confidence in the sector,” he said.

“This, in turn, will require a transparent and credible project portfolio and reformed procurement processes.”

Five conditions

The plan lists five conditions that must be met to ensure that the civil construction sector can meet South Africa’s vision for 2050:

  • The state must operate its Infrastructure Provision and Delivery Management processes in a way that generates certainty and trust.

  • The work flow must be consistent and the project portfolio must allow civil construction companies to plan and structure their work and make decisions around capital investments and human resources.

  • Regulations and the permitting process should be simplified.

  • Professional capacity must be available and trained, with experienced and competent people managing very expensive resources and providing the most cost-effective innovative solutions, as small mistakes can lead to big losses.

  • There must be an explicit commitment to build supplier and civil construction companies ‘SA Inc’.

The Department of Public Works and Infrastructure said that NIP 2050 was prepared by Infrastructure South Africa (ISA) over a six-month period working closely with industry specialists and other stakeholders.

‘Actionable steps’

“NIP 2050 offers a vision and strategic plan that links the main objectives of the NDP with actionable steps and intermediate results.

“The goal is to promote dynamism in infrastructure delivery and address institutional bottlenecks and weaknesses that hamper long-term success. Furthermore, NIP 2050 will guide the way towards building stronger institutions that can fulfill the NDP’s infrastructure-related aspirations, ”he said.

The department added that this first iteration of NIP 2050 will focus on the critical network infrastructure sectors of energy, freight transportation, water and digital communications, with a second-round NIP 2050 extended to distributed infrastructure and related municipal services.

“The NIP 2050 is not a database of all projects nor a consolidation of master plans nor a spatial mapping of projects or a mechanism for centralized decision making,” he said.

“NIP 2050 seeks to identify the most critical actions necessary for a sustained improvement in the delivery of public infrastructure that will have an impact in the short term but with long-term results in view.”

Sounds good, but will it work?

Webster Mfebe, executive director of the SA Civil Engineering Contractors Forum (Safcec), said it is important that a plan such as NIP 2050 exists, but highlighted the importance of achieving the plan’s goals.

“We have had a plethora of plans outlining a vision in terms of what we want to achieve, but it has been very poor in implementation.

“The plan is to be applauded, but I will always be skeptical about its implementation and the lack of adequate and ongoing consultation,” Mfebe said.

He added that the issues raised by Safcec had been included in the NIP 2050, but highlighted the importance of early engagement in projects with contractors through the various associations, such as Safcec and Master Builders South Africa (MBSA), to ensure that projects are acceptable and risk-free. avoid variations and cost escalations.

John Matthews, president of the Construction Alliance South Africa (Casa), a representative body of some 34 construction industry associations, said he could not comment on the NIP 2050 because Casa is still studying the plan, but that it is important to have a plan. long-term. vision for the industry.

However, Matthews stressed the importance of also having short and medium term plans to deal with crises in the industry, such as unemployment, particularly youth unemployment, by unlocking projects.

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