04 Mar SONA2018 v SONA2019: a commitment to infrastructure development, but what’s missing?
President Ramaphosa’s message to the infrastructure sector in 2018 was hopeful: infrastructure investment was critical for economic growth, job creation, service delivery and small business empowerment. We saw a commitment to investing in new roads, power stations, and schools. The President recognised poor project implementation as a challenge to achieving the country’s infrastructure development goals. Steps would be taken to remedy this challenge by assembling a team to speed up implementation of new projects, particularly for water projects, health facilities and road maintenance.
Ancillary to poor project implementation, but just as important were cost overruns and project delays. Although valuable lessons were learnt in building new infrastructure, the President would focus improving budget spend, and monitoring systems to improve project integration, and build a broad compact on infrastructure between the private sector and organized labour. This earmarked a clear opportunity for clients doing business in the infrastructure sector, and boosted investor confidence.
A year later, are those commitments still a priority?
During his 2019 SONA, President Ramaphosa reflected on the past five years and the progress made with more than R1.3 trillion invested in infrastructure. Calling infrastructure development, the “flywheel” of South Africa’s economy, the President remained confident that efforts towards infrastructure investment would yield tremendous benefit for the country. Focusing on the past, however, was insufficient, and the President called on all spheres: government, investors, the private sector and the public, to do more.
The President identified a number of reasons that slowed down the provision of infrastructure. Infrastructure initiatives were fragmented and not fully integrated. This was most notable within different government spheres where there was a lack of cohesion. In a bid to address these problems, Cabinet announced the adopting of a new infrastructure implementation model, which will be underpinned by the new Infrastructure Fund (announced during the economic stimulus and recovery plan, last September). Government have also committed to contributing R100 billion to the fund over a 10-year period. This will be used to leverage financing from the private sector and development finance institutions.
Expansion and collaboration were two common themes addressed in the infrastructure space. Existing projects (specifically student accommodation) would be expanded, this in particular to meet the growing demand. The President undertook to approach infrastructure development differently, with a deeper partnership with communities towards planning, building and maintaining infrastructure. Reflecting on the manner in which the government approached the Vaal River sewage crisis, he committed to relying on all the capabilities of the state and the private sector to address infrastructure challenges.
A major area of concern was the technical capacity in government to ensure project delivery. The President committed to strengthening the technical capacity in government to ensure that projects moved faster. We would see a key focus on the roles of engineers, project managers, spatial planners and quantity surveyors, as “action teams” to fast track project delivery.
The government were also in the process of developing a comprehensive integrated nation plan to address water shortages, ageing infrastructure and poor project implementation. Water shortage and poor infrastructure featured as an immediate concern. The President confirmed the establishing of an inter-governmental rapid response technical team, supported by specialist professionals, to intervene in areas with severe water shortage.
Inadequate sanitation facilities facing schools in the country posed life threatening risks. An internal audit reported nearly 4 000 schools still have inappropriate sanitation facilities. The government have committed to prioritising and eradicating the unsafe and inappropriate sanitation facilities within the next three years.
A potential area of growth was harnessing the potential of the country’s oceans to grow the economy. Since launching Operation Phakisa on the Oceans Economy in 2014, the President confirmed investments of nearly R30 billion which created over 7000 direct jobs. The investments were mainly in infrastructure development, marine manufacturing, aquaculture, and the oil and gas sector. The President expected investment in the Oceans Economy over the next five years at an estimated R3.8 billion by government and R65 billion by the private sector.
Finally, and what is being called a “game-changer for our country”, following Total’s announcement of a new “world-class” oil and gas discovery off the coast of South Africa, the President was extremely encouraged that this new find would have significant consequences for the country’s energy security and the development of the oil and gas industry. Government committed to its continued development of legislation for the sector so that it was properly regulated and in the interest of all concerned.
All in all, infrastructure development appears to remain a government priority for 2019. The challenges impacting poor infrastructure implementation and integration will be met with the adopting of new implementation models supported by investment and state funding. A lack of technical capabilities within government, will be remedied with the support of advisory teams to get projects “off the ground”. Collaboration by all role players within the sector was called for.
Although this sounds hopeful, it raises questions about whether the government is prioritising infrastructure development within existing legal structures and frameworks? Every year we hear commitments to prioritising infrastructure development. Promises of “new models” are made, and foreign investment is seen as the great white hope for infrastructure needs. What is patently missing is reliance on the existing legal framework (such as the Infrastructure Development Act) which does exactly what the government seeks to do each year when it comes to infrastructure development: to facilitate and co-ordinate public infrastructure development. The Act, which has been in existence for almost five years, empowers the government to prioritise planning, approval and implementation of large scale infrastructure projects. This is, without a doubt, the special vehicle required to meet government’s infrastructure objectives. The Act will see the setting up of a special council (similar to the “action team” called for in SONA 2019) to co-ordinate the development, maintenance, implementation and monitoring of the national infrastructure plan.
So, although SONA 2019 presented the tip of what is needed to invigorate the sector, the true test will be the pace at which these promises are actioned, and whether existing legal structures will play its envisaged role in achieving government’s objectives.
Nikita Lalla, Chief Executive, Head of Department, Construction, Infrastructure and PPP, LNP Attorneys Inc
Ricardo Pillay, Director and Team Leader Construction, Infrastructure and PPP Department LNP Attorneys Inc
This article was also published by Business Day: Business Day publication 4 March 2019