Sona: Ramaphosa urged to focus on unlocking pipeline of R900bn infrastructure investment projects

President Cyril Ramaphosa has been urged by the consulting engineering sector to focus in his State of the Nation Address (SONA) later this week on the government’s efforts to unblock the much-publicized project pipeline of nearly 900 billion rand “in shovel-ready projects”.

“We believe that the state can achieve this by harnessing as much technical capacity and built environment in the private sector as is needed to fill the gaps that exist in the public sector as a matter of urgency,” said Consulting Engineers South Africa (Cesa’s ) newly appointed President Olu Soluade on Thursday, February 3.

Soluade’s plea follows reported delays in the implementation of the government’s massive infrastructure investment program which aimed to revive the economy after the Covid-19 pandemic lockdowns.

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He said the construction industry was again the worst performing sector of the economy in 2021.

Soluade added that with infrastructure development having been hailed as one of the key elements of South Africa’s economic recovery, public sector trends are most interesting.

“While tender activity has improved, there is still little evidence that these tenders are being awarded at a reasonable rate.

“It also raises questions about the claim that any of the released strategic infrastructure projects from 2020 were indeed ‘shovel ready’ or accelerated on any sort of broad base.

“There has been progress though, with some high profile projects being rewarded,” he said.

Projects

This is a reference to the 50 Strategic Integrated Projects (SIPs) and 12 Special Projects involving an investment of R340 billion which were unveiled by the government in July 2020 as the first tranche of the project pipeline of the Symposium on Sustainable Infrastructure Development in South Africa (Sidssa).

These projects were supposed to be ‘shovel ready’ and were to begin within three months as part of Ramaphosa’s infrastructure investment drive to boost the economy.

The Head of Infrastructure and Investments at the Presidency, Dr Kgosientsho Ramokgopa, said when these projects were unveiled that debt capital market financing accounted for R340 billion of the total investment in these projects and that they wouldn’t make any money from the fiscus.

In October 2021, the government unveiled the second tranche of the Sidssa project pipeline comprising 55 new catalytic infrastructure projects from various sectors valued at around R595 billion, which are expected to create around 538,500 employment opportunities.

Read: Government unveils R595 billion pipeline of new infrastructure projects

However, Minister of Public Works and Infrastructure Patricia de Lille admitted during the unveiling of the second tranche of Sidssa projects that there was a funding gap of around R441 billion for the 55 new projects presented to the Marlet.

Various organizations – including the SA Forum of Civil Engineering Contractors (Safcec), Master Builders South Africa (MBSA) and the construction market information company Industry Insight – have already raised doubts about the ability to implement the current projects.

MBSA Chairman Vic Naidoo addressed the issue again this month, emphasizing that industry recovery is MBSA’s key objective for the coming year and the importance for entrepreneurs to be on construction sites to restart the wheels of the economy.

“People, shovels and helmets are waiting, eager and ready to be called into action,” he said in a message that appeared in the February 2022 issue of SA Builder, the official publication of MBSA.

However, Naidoo pointed out that the recovery of the construction sector is directly linked and dependent on the deployment of the promised public infrastructure projects.

“There is no doubt that major plans have been written and announcements have been made regarding the government’s intention to catalyze economic growth through public infrastructure spending.

“What’s missing is following up on announced projects to get them tendered and awarded,” he said.

Naidoo said a concerted effort is therefore needed to bridge the existing gap between public and private sector collaboration on the pipeline of projects announced in South Africa’s economic reconstruction and recovery plan.

“This divide must be replaced by a collaborative partnership. It’s the only way to unclog the project pipeline and unlock much-needed work opportunities,” he said.

Missed targets

Industry Insight CEO Elsie Snyman said late last year that government targets linked to the National Development Plan (NDP) are “still lacking miserably, gross fixed capital formation (investment) by to GDP is 14% against a target of 30%.

Snyman added that according to Sidssa, 54% of potential projects are either in the pre-feasibility or feasibility phase, with less than 10% under construction.

Soluade de Cesa also echoed this theme in his presidential address, pointing out that the association’s semi-annual Economy and Capability Survey (BECS) report showed a decline in public sector clients, particularly corporates. (SOE), with 50% of projects now coming from private sector clients.

Soluade said that figure is higher than 2020 and 2019, adding that the public sector is generally seen as the industry’s largest customer.

“The role of the public sector remains essential for the engineering profession,” he said.

Soluade said the BECS report also revealed an alarming number of project cancellations, low ability of companies to break even, and declining fee income year on year. Competition between bidders has thus increased to a fierce level, he said.

Soluade said on a more positive note that companies have indicated an increased need for engineers and technologists, which represent great opportunities for Cesa graduates.

“Companies also expect an increase in profitability, even if margins remain low.

“Overall, the confidence index for consulting engineers has improved significantly, following the fallout from the Covid-19 pandemic and subsequent lockdowns.

“While we face many challenges, it is encouraging to know that our industry remains positive and resilient,” he said.

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