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Worrying disconnect

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Worrying disconnect

Economic Development Minister Ebrahim Patel on government's approach to the construction of public infrastructure. Camera Work & Editing: Nicholas Boyd. Recorded: 20.7.2015.
Photo by Duane Daws
Economic Development Minister Ebrahim Patel

31st July 2015

By: Terence Creamer
Creamer Media Editor

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A genuine disconnect has arisen between government’s rhetoric on public infrastructure and the perceptions of the infrastructure practitioners, particularly those in the construction sector.

Outside government, there is palpable disappointment with the country’s infrastructure performance, as well as the performance of the Presidential Infrastructure Coordinating Commission (PICC), which is meant to be overseeing government’s R4-trillion National Infrastructure Plan. Inside government, there is a strong belief that the programme is gaining traction and that any cause for disappointment is due to the failure of the private sector to live up to its investment bargain.

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The truth, it seems, lies somewhere in the middle.

There is little question that much is indeed being done, as has been highlighted in recent weeks by both Minister in The Presidency Jeff Radebe and Economic Development Minister Ebrahim Patel.

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Speaking at the Gauteng Infrastructure Investment Conference earlier this month, Radebe noted that, since 2009, government had been allocating more than R800-billion to infrastructure in the rolling three-year Medium-Term Expenditure Frameworks and that, by the end of 2014, R1-trillion had been invested. For his part, Patel reiterated the priority being given to public infrastructure at the release of a KPMG publication containing a series of articles on the programme. About R250-billion was being invested yearly across economic and social infrastructure projects and Patel stressed that infrastructure was perceived by government as being the trigger ‘i’ in the ‘six i’s’ of public policy – the others being industriali- sation, investment, innovation, inclusion and integration.

The problem is that South Africa’s infrastructure companies, especially the larger ones, are in the doldrums, as reflected by anaemic order books, deteriorating confidence levels and falling share prices.

But why the disconnect? Part of the answer may lie in explanations offered by Patel himself. Firstly, he suggests that the current negative narrative is partially a consequence of a far more competitive environment – itself the outcome of the high-profile collusion investigation into the construction sector by the competition authorities. His second observation is that most of the current megaprojects, such as Medupi and Kusile, are located outside the main centres, unlike the pre-World Cup projects that were highly visible.

That, however, is surely not the whole story, with the South African Federation of Civil Engineering Contractors second quarter State of the South African Civil Industry report striking a far more pessimistic tone. Sixty-five per cent of those surveyed indicated that order-book values were at low levels and by far the majority also expressed high levels of dissatisfaction regarding tender flows and contract awards.

Another aspect to this disconnect arguably relates to the composition of infrastructure investment. The pre-2010 focus was on construction- intensive projects such as roads, airports and stadiums. During the current phase, much of the expenditure relates to infrastructure equipment, such a locomotives and train sets, wagons, buses and signalling systems, as well as wind turbines and solar panels.

Given the disconnect, it would be helpful for the PICC to be less dismissive of the industry’s plight and, instead, adopt a more proactive stance in outlining the country’s larger infrastructure vision. Improved visibility of the prospects could go a long way to alleviating the immediate sense of despair brought about by low order levels, slow tender flows and weak contract awards.

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