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Infrastructure projects: Less talk, more action

Infrastructure projects: Less talk, more action
Infrastructure is viewed as one of the levers to kick-start investment in the economy and to revive investor, business and consumer confidence, says the writer. (Photo: Unsplash / Andre Iv)

If there is one thing Siya Kolisi and Covid-19 have taught the SA government, it is that we are #strongertogether. When it comes to the rollout of critical infrastructure, the government has forged an alliance with business to #getthejobdone. It has never been more urgent.

A small office in the Presidency, the Infrastructure and Investment Office, overseen by the Ministry of Public Works and Investment, has in the past five months overseen the development and subsequent evaluation of more than 276 infrastructure projects, of which 55 are considered viable and ready for presentation to funders.

From there it could take as little as six months – depending on the government department or SOE concerned – for implementation to begin.

The projects have deliberately not been identified; this will happen when the first shovel hits the ground, said President Cyril Ramaphosa, speaking at the Sustainable Infrastructure Development Symposium SA, which was held on Tuesday 23 June and attended by more than 600 virtual attendees, including government ministers and 200 members of the financial community.

The projects fall within SA’s network industries which are considered economic multipliers – water, energy, ports and rail, roads and internet connectivity. Agriculture and human settlements are also areas of focus.

“Covid-19 has not diminished our determination to drive an ambitious infrastructure programme,” Ramaphosa told delegates. “It has made infrastructure investment more compelling and urgent. Infrastructure is at the centre, at the heart of the stimulus of what our country needs to achieve sustainable recovery.”

There was never a more crucial time for the president to utter those words, given that South Africa’s unemployment rate will jump to well over 40% once Q2 data is released, and on Wednesday 24 June Finance Minister Tito Mboweni will present an amended Budget to Parliament. 

This will outline in graphic detail the enormity of the hole that South Africa is currently in.

Infrastructure is viewed as one of the levers to kick-start investment in the economy and to revive investor, business and consumer confidence. 

However, if you think you have seen this movie before, you have. Since 2003 the government has made several attempts to address its poor infrastructure record, with varying degrees of success, as detailed in this Business Maverick article.

The reasons are well known. The state lacks financial and technical skills, which results in weak project preparation, planning and execution. This leads to delays, overspending and underspending and problems with quality, best exemplified by the multibillion-rand Kusile and Medupi mess, but also evidenced by pit latrines at public schools and the lack of access to clean water in many rural towns.

South Africa’s legislation governing infrastructure management compounds these problems. It is some of the most elaborate and complex in the world (the Public Finance Management Act is just one example) and as a result, critical decisions are delayed – often indefinitely.

However, the establishment of the Investment and Infrastructure Office within the Presidency last November signalled Ramaphosa’s intention to break with the past.

The message from the financial institutions was unequivocal: Bring us good, solid, bankable projects and we will show you the money.

Under the leadership of Kgosientso Ramokgopa, the office wasted no time bringing together infrastructure specialists, technical and financial structuring experts, business associations, as well as line ministries and financial institutions to identify and iron out barriers and bottlenecks to the deployment of critical infrastructure in SA.

The office will also enable the Presidency to oversee coordination between all structures dealing with infrastructure development, including the Infrastructure Fund, which is being incubated at the Development Bank of Southern Africa.

As a result of these efforts, in February at Tuynhuys, Ramaphosa hosted a financial delegation that included the heads of SA’s four big banks, the heads of multilateral development banks like the World Bank and International Finance Corporation, and DFIs like the German Development Bank and the African Development Bank Group.

The message from the financial institutions was unequivocal: Bring us good, solid, bankable projects and we will show you the money.

Cabinet approved revisions to the Infrastructure Bill on 27 May. These revisions will ensure that the bill supports, rather than hinders government’s plans – specifically as they relate to public-private partnerships and the involvement of the private sector.

“There is money out there, but the regulatory and policy environment is a concern,” Renosi Mokate, convener of the Presidential Economic Policy Advisory Council, told the government delegates at the symposium.

This is why the work undertaken by Ramakgopa and his team is so urgent.

It would appear that there is some movement, judging from the presentations at the symposium, which was used as a vehicle to update the public on progress made, as well as to hear inputs from the likes of Enoch Gondongwana, chair of the DBSA board; Sandile Zungu, president of the Black Business Council; and Jaco Maree, investment envoy.

(Just as an aside, the symposium was originally intended as the forum in which projects and funders would be introduced, but the lockdown made that tricky and an online pitching session took place at the end of May).

But back to progress made.

Cabinet approved revisions to the Infrastructure Bill on 27 May. These revisions will ensure that the bill supports, rather than hinders government’s plans – specifically as they relate to public-private partnerships and the involvement of the private sector.

“We have identified 55 projects, some of which have been referred to the private sector, some to the DFIs for blended finance and some to government. These projects will be gazetted,” said Patricia de Lille, Public Works and Infrastructure Minister.

There is a provision in the Infrastructure Development Act (2014) that once a project is gazetted it is classified as urgent. “It is a mechanism in the act to expedite project delivery,” she explains.

In addition, she said, the private sector teams that have been providing technical or financial services to the Ramakgopa team, have made their services available for another year.

Jaco Maree, former CEO of Standard Bank, who has been designated by Ramaphosa as an investment envoy, beat the drum of urgency. 

“As government debt-to-GDP heads to 100%, government will be unable to finance these projects. And while the long-term investment industry is very keen to finance these projects, as SA’s debt rises, they will be buying government debt. This means we need the international development finance institutions and sovereign wealth funds to invest in our projects. 

“But we need to remember we are not the only country using infrastructure investment to stimulate growth. The US has announced a $1-trillion investment programme and the UK a £100-billion programme. They will also be looking for funding. We are in a competitive game and we have to act with speed.”

That said, the president remained optimistic.

“We are going to fly,” Ramaphosa remarked. “We would not have got to this point if we had not set up this facility in the Presidency, and if we had not got the support of the private sector. This is an opportunity to build infrastructure in a different way to the past – more transparent and efficient and with greater accountability.” BM/DM

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