But expresses concern over continued lack of implementation of government projects.
Construction industry bodies have welcomed the publication by the government of a National Infrastructure Plan 2050 for public comment but expressed concern about the continuous lack of implementation of government plans and projects.
The Department of Public Works and Infrastructure gazetted the draft National Infrastructure Plan 2050 (NIP 2050) for public comment last week.
Written submissions about NIP 2050 must reach the department on or before September 17.
The NIP 2050 states that the plan will ensure that the foundations are built for achieving the National Development Plan (NDP) vision for inclusive growth.
It is estimated that the cost of delivering infrastructure to meet the development objectives of the NDP will be in excess of R6 trillion between 2016 and 2040, with energy and transport accounting for more than 72% of the total cost.
One of the aims of the 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 the industry plays an indispensable role by providing physical infrastructure, is an important employer, especially for low and medium skill workers, and has important linkage effects into related goods and services.
It highlighted that the government’s relationship with the construction industry was damaged by proven anti-competitive and collusive behaviour and the industry paid R1.46 billion in fines and contributed R1.5 billion to the Voluntary Rebuilding Programme.
Aiming to unblock obstacles
The plan said the construction sector is highly regulated by numerous acts, many of which require permits in advance of construction in terms of slow and cumbersome processes.
It said the Infrastructure Development Act of 2014 recognises the considerable statutory planning and implementation obstacles facing infrastructure delivery, adding that this act provides a statutory instrument by which obstacles to the expeditious implementation of the national infrastructure plan can be unblocked via facilitated and expedited approvals, authorisations, licences, permissions or exemptions which may be required in terms of legislation.
However, it stressed that the World Bank’s 2020 ‘Ease of Doing Business Ranking’ placed South Africa 98th out of 190 countries on regulations relating to construction permits and 108 regarding the registering of property.
The plan said regulators have been slow to address issues, some of which are long standing and well understood, which have a negative impact on industry, create inefficiencies or retard growth.
It said the government accounts for over two-thirds of civil works revenue and about 40% of non-residential construction revenue.
“The fall and uncertainty in government construction spending after 2014 has therefore had a material effect on the health of the South Africa construction sector, and especially the sector involved in civil works.
“Weakening project flow and spending by the public sector has led many large civil construction companies to turn their attention to foreign contracts and/or to survive in South Africa by shifting their commercial activity away from construction.
“There is evidence of an unprecedented number of large contractors having filed for business rescue or liquidation, largely attributed to a combination of a lack of large government infrastructure contracts, late payment and the taking on of problematic and loss-making contracts,” it said.
The plan said the value of public listed construction companies fell by 60% to 70% between 2008 and 2018 but suggested this may partly have been caused by the sale of companies to black empowered entities that are not listed.
It acknowledged that there has also been some business failure and significant skills emigration overseas, with construction employment falling by about 35% between 2014 and 2019.
Foreign firms ‘may need to assist’
The plan highlighted that the state infrastructure investment drive will “be calling on a severely depleted delivery sector which may result in increased introduction of foreign businesses to assist in the delivery of major projects”.
“Government’s infrastructure investment drive will act as an economic stimulus if delivered by South African construction companies and domestic supplier industries.
“The pace at which this can happen depends substantially on the ability of the state to create confidence in the sector,” it said.
“This in turn will require a transparent and credible pipeline of projects and reformed procurement processes.”
The plan lists five conditions that must be met to ensure the civil construction sector can deliver South Africa’s 2050 vision:
The state must operate its Infrastructure Delivery and Procurement Management processes in a way that creates certainty and confidence.
Work flow must be consistent and a project pipeline must enable civil construction companies to plan and structure their work and make decisions around capital and human resource investments.
Regulations and the process of issuing permits must be streamlined.
Professional capacity must be available and skilled, with experienced and competent people managing very expensive resources and providing the most cost effective innovative solutions as small errors can result in large losses.
There must be an explicit commitment to building ‘SA Inc’ civil construction and supplier firms.
The Department of Public Works and Infrastructure said the NIP 2050 was prepared by Infrastructure South Africa (ISA) over a period of six months working closely with sector specialists and other stakeholders.
“The NIP 2050 offers a strategic vision and plan that links top NDP objectives to actionable steps and intermediate outcomes.
“The aim is to promote dynamism in infrastructure delivery and address institutional blockages and weaknesses that hinder success over the longer term. Additionally, the NIP 2050 will guide the way to building stronger institutions that can deliver on infrastructure related aspirations of the NDP,” it said.
The department added that this first iteration of the NIP 2050 will focus on the critical network infrastructure sectors of energy, freight transport, 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 centralised decision-making,” it said.
“The NIP 2050 seeks to identify the most critical actions needed for sustained improvement in public infrastructure delivery that will have impact in the short term but with the longer-term outcomes in view.”
Sounds good, but will it deliver?
SA Forum of Civil Engineering Contractors (Safcec) CEO Webster Mfebe said it is important there is a plan such as NIP 2050 but stressed the importance of achieving the objectives of the plan.
“We have had a plethora of plans where a vision is outlined in terms of what we want to attain but it has been very thin on implementation.
“The plan has to be applauded but I will always be sceptical about its implementation and lack of proper and continuous consultation,” said Mfebe.
He added that issues raised by Safcec had been included in NIP 2050 but highlighted the importance of early engagement about projects with contractors through the various associations, such as Safcec and Master Builders South Africa (MBSA), to ensure projects are palatable and are derisked to avoid cost variations and escalations.
John Matthews, chair of Construction Alliance South Africa (Casa), a representative body of about 34 construction sector associations, said he was unable to comment on the NIP 2050 because Casa is still studying the plan but that it is important to have a 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.