The private sector’s role in creating jobs in South Africa took centre stage in President Cyril Ramaphosa’s State of the Nation Address (Sona) this year. It was also clear that President Ramaphosa has increased his focus on the important role that infrastructure development plays in our country.
Ramaphosa highlighted how “infrastructure is central to our economic reconstruction and recovery”. He then went on to mention the word “infrastructure” over 20 times in this year’s speech, more than the 13 mentions that the phrase “private sector” received.
A key component of government’s plan in this regard is its R100-billion Infrastructure Fund, which the president highlighted is “now working with state entities to prepare a pipeline of projects with an investment value of approximately R96-billion in student accommodation, social housing, telecommunications, water and sanitation and transport”.
The private and public sectors have reacted positively to the advent of the Infrastructure Fund ever since it was established in 2018 by the Development Bank of South Africa. However, on the ground, government has faced criticism for being slow with the implementation of projects within the Infrastructure Fund and for even decreasing gross fixed capital formation levels.
The implementation of infrastructure relies heavily on the government procurement processes, the overarching custodian of which is the National Treasury. The implementation of infrastructure projects is a slow process. There is, on average, a six- to 12-month turnaround time for tender evaluations. For larger projects, the private sector also encounters governmental supply chain departments that are understaffed or under-skilled.
Added to this, there is the risk that these departments may engage in irregular expenditure, while budgets may not be managed effectively. This results in infrastructure implementation being directly affected and delayed — if implemented at all.
Master planning and improved centralisation
It’s clear that there needs to be a greater focus on how to improve and fast-track government’s infrastructure programme and spending.
When it comes to improving its infrastructure rollout, government should have a cohesive and centralised master plan in place — whether that takes the form of the current National Development Plan (NDP) or even a newly updated initiative. Such a plan should be activated to connect all sectors of the economy and society. The cohesion between physical infrastructure (such as transportation, power, telecommunications, schools, health facilities) and social infrastructure (including water supply, sanitation, sewage disposal) is crucially important in this regard.
The current challenge is that multiple plans are developed by different departments — among these being transport, health, and water — and at times, these plans don’t talk to one another.
Here’s a practical example. If a new stretch of road is being developed in a town or village, that road should be planned in such a way that it ties into other critical needs of the town or village’s residents. For example, the road would need to connect to a new planned hospital, thereby providing greater health access. Another example is that if a smart city is being built, there needs to be a master plan that encompasses the development of high-speed broadband services for that city.
Secondly, when it comes to fast-tracking government’s infrastructure builds, there could be benefits if National Treasury applied a greater level of centralisation to procurement processes.
By doing this, National Treasury could ensure that the right experts are taking care of these processes while also providing checks and balances for funding to be well spent. Importantly, this could further speed up infrastructure implementation by reducing the levels of bureaucracy and shortening construction times.
In addition, National Treasury already has a longstanding Infrastructure Delivery Management System (IDMS) that sets out the necessary processes for delivering and maintaining infrastructure in the public sector. Industry experts have highlighted how the IDMS can be one part of the solution when it comes to improved planning, budgeting, and prioritisation of key infrastructure projects.
What is promising is the presidency’s appointment of highly respected Sipho Nkosi, whose task will be to cut red tape across government to “improve the business environment for companies of all sizes”.
This is already a major step in the right direction that should help to realise President Ramaphosa’s vision for a better business environment in South Africa. We look forward to how the presidency and National Treasury will work together to ensure that this is tangible for businesses on the ground.
If the same approach is applied to infrastructure implementation, the benefits could extend beyond many generations, help our economy recover faster from the effects of the Covid-19 pandemic, and enable us to meet our full economic potential as a nation. DM