Is infrastructure investment still the saving grace for SA's economy?

Infrastructure spending in SA is intrinsically linked to economic growth. The civil and construction industries have helped drive the economy by building roads, bridges and airports while creating jobs and delivering schools, hospitals, clinics and transport systems.

To restore these initiatives, the government established the National Infrastructure Plan (NIP) and phase two has just been gazetted.

A recent Business Day Dialogue, in partnership with construction materials supplier AfriSam, discussed the potential of investing in national infrastructure to rebuild SA’s economy.

Public infrastructure is critical to achieve the National Development Plan objectives, such as integrated housing, public transport, energy, water and sanitation to supply and stimulate the economy and supplier industries, said Miriam Altman, director at Altman Advisory.

After years of state capture, the government needs to rebuild capacity and recreate partnerships. The responsibility of the state is to pay, plan alongside and procure from the private sector and create an environment where 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 getting value for that money,” says Altman. For example, the bulk of transport funding goes to the Passenger Rail Agency of SA, with zero service, and minibus taxis — which move the most passengers — get nothing. 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.

Watch the full discussion below: 

Denene Erasmus, an energy writer at Business Day, agreed with Altman, adding that the government is good at making plans but not at implementing 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 at AfriSam, said several construction companies did not survive the post-2010 construction drought, which has resulted in Sanral projects being awarded to Chinese companies and young engineers leaving the country to find employment. 

In addition to dealing with an irregular energy supply, companies are contending with the construction mafia, with local workers demanding employment and strikes putting projects on hold. Global issues such as the high demand for SA coal in Europe, resulting in a lack of capacity in the country, have worsened the situation.  

Tomes said cement provides full benefaction, 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 & Concrete SA. He called for anti-dumping and import tariffs to be implemented based on the unfair trading conditions between local producers and importers. In addition, the 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 of economic activity, is the need to publish cement statistics, like most other countries around the world. Companies should be mandated to provide statistics in line with the rules of the Competition Commission  to help the industry prepare and ensure there is sufficient capacity to cope with local demand.

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

Diack warned that the costs of transport and the energy crisis cannot be absorbed and will affect the future cost of infrastructure. In mitigation, AfriSam is planning to build a solar plant near Lichtenburg, in the North West province. “The private sector must play a big role in putting infrastructure processes in place,” he said.

This article was paid for by AfriSam.