Economic recovery, infrastructure and energy project overview

South African Government plans to roll out the Economic Reconstruction and Recovery Plan. President Cyril Ramaphosa, in his State of the Nation Address in February, stated that the plan focusses on infrastructure, industrialisation and local production, employment stimulus and energy security. The following key matters are a point of focus: Allocating R340 billion to infrastructure investment in network industries such as energy, water, transport and telecommunications; allocating R19 billion to road projects; focusing efforts on additional housing and water infrastructure; and previous initiatives will be continued through the Infrastructure Fund, namely, allocating R100 billion to the Student Housing Infrastructure Programme and SA connect, a programme to roll out broadband to schools, hospitals, police stations and other government facilities.

Government declared renewed commitment to business and organised labour to buy local so as to stimulate increase in local production. In this regard, all social partners to the Economic Reconstruction and Recovery Plan have agreed to reduce imports by 20% over the next five years.

According to a Construction Projects Overview, the most significant transactions over the last year relating to energy are:  Ethanol plant projects; private sector power generation through thermal power (gas, coal, biomass), onshore wind farms, solar photovoltaic (solar PV) plants and small hydro plants. In this regard, the fifth round of the Energy Independent Power Producer Procurement Programme must include 1600 MW from onshore wind energy and 1000 MW from solar PV power plants. Most of the projects under the previous Round 4 of the programme have been completed with energy already being generated.

The overview also speaks to the allocation of infrastructure investment in rail infrastructure and road projects. Funds will be used to upgrade rail and government has committed to the rehabilitation of three major highways. There has also been significant investment in port infrastructure in order to replace equipment and improve port operations. Further funds have been allocated to water infrastructure in light of the water crisis, specifically the Mokolo and Crocodile Rivers and the uMkhomazi Water Projects.

On the construction front, government confirmed that public-private partnerships are the mechanism of choice for developing infrastructure and has been widely used in government administration buildings projects, hospitals, toll roads, correctional services buildings, and educational facilities. 

In this regard, Finance Minister Enoch Godongwana stated in the Mid-Term Budget Policy Statement that private sector partnerships are required to fill a R441 billion gap in infrastructure financing for 55 projects recently announced by government. The statement emphasised the fact that infrastructure development is critical for economic recovery and growth. The Infrastructure Fund, Treasury and Infrastructure SA are all involved in initiatives to improve the scale, efficiency and speed of infrastructure spending. This includes a projects appraisal, attracting private-sector financing and creating a pipeline for projects. The Infrastructure Development Act of 2014 should be utilised in this regard as it aims for the fast tracking and coordination of infrastructure development and improves the management of such development during all life cycles -planning, approval, implementation and operation phases.

In May of this year, National Treasury completed a review of public-private partnerships and recommended policy changes to be announced in the 2022 Budget. The Finance Minister stated that more work is being done to unlock more infrastructure projects for execution. There is strong collaboration with government departments and other institutions such as Infrastructure South Africa and the well-placed Development Bank of Southern Africa to prepare four projects with an investment value of R84.5 billion in the telecommunications, water and sanitation as well as the transport sectors.

This means that if interest rates are maintained, a surge in construction activity is expected in 2022.