Thought Leadership

Challenges, opportunities and practical implementation

The president has made an audacious undertaking in placing infrastructure at the centre of the Economic Reconstruction and Recovery Plan. By Gundo Maswime*

The Economic Reconstruction and Recovery Plan will involve a deliberate removal of regulatory barriers that increase costs and create delays and inefficiencies in infrastructure delivery. This intervention should, according to the plan, unlock private sector investment and enable massive infrastructure roll-out with a strong localisation drive. The plan was announced with impressive detail and follows on the back of an unprecedented infrastructure investment summit and a launch of an infrastructure development fund based at the Development Bank of Southern Africa.

Over the last six months, Dr Kgosientso Ramokgopa, head of the Infrastructure Investment Office in the Presidency, has graced more than 30 virtual interactions with various stakeholders on the sharpened vision the state has for the development of the construction sector. On each platform, the theme is succinct, and the message consistent: • The government will make it easy for the public sector to raise money from the private sector and is thus calling all private sector players to the table. • The government is calling on all municipalities to be more coordinated and deliberate in their infrastructure plans within their regions to optimise the impact of the projects.

• The government will do this using local material and will ensure transformation even on the supplier’s side of the value chain. • The government will ensure that wateruse licenses and environmental impact assessments are not causing delays in project commencement.

Removing barriers

There is no doubt that infrastructure can anchor sustained economic growth and provide employment opportunities, more so noting the direct reference to labourintensive construction and localisation targets for construction materials.

However, the drive to transform the country into a construction site has brought into sharp focus the main issues that limit the optimisation of the construction industry. It was therefore a relief to the sector that the president had something to say about the main impediments to the optimisation of the sector’s contribution to the industry. To this end, the diagnostic abilities and the policymaking acumen of the state are commendable.

But there is a certain type of anxiety that the sector can be excused for having. Listening to the president outline the Economic Recovery Plan, it is unsettling to realise that there is no issue raised in the speech as a challenge in the industry that was not already covered by the 1997 green paper entitled Creating an Enabling Environment for Reconstruction, Growth and Development in the Construction Industry.

In the 2020 Economic Recovery Plan, the president refers to removing regulatory barriers and approving a waiver on stringent and unnecessary licence approvals. The 1997 green paper already noted that the regulatory framework inhibits innovation, initiative and impedes industry development. In fact, on 30 April 2015, the Office of the Presidency issued a statement saying that “regulatory delays were being improved through efficient issuing of water-use licences and more focused environmental impact assessment”.

The president refers to adapting an infrastructure procurement framework to enable private funding and public-private partnerships. The 1997 green paper had already noted the “ambiguity in the legal framework governing procurement as a reason for lack of innovation and inability of the sector to attract external funding”. In practice, it remains impossible to raise funding from the public sector for infrastructure development without exposing the municipality to an audit finding or internal strife being found to have overlooked one of the many requirements that seem to be intended to ensure external funding doesn’t happen.

In government, any ‘avantgarde’ transaction such as private funding for infrastructure will be scandalised by the media. Smart meters will be an immediate example that Dr Ramokgopa (as mayor of Tshwane) can relate to and bus rapid transit is one that Minister Patricia de Lille (as mayor of Cape Town) can attest to. For this reason, all self-preserving officials would rather do nothing and be accused of a lack of service delivery rather than unauthorised expenditure, which is called corruption in the media.

Major challenges

Perhaps one of the biggest mistakes that we have made as a country on the infrastructure front was to fail to differentiate infrastructure procurement from general procurement. Infrastructure projects worth billions of rand sit with supply chain departments across the country, waiting in the queue with furniture, stationery and fleet tenders to be evaluated and adjudicated. It is the same supply chain personnel that do both.

The constant stoppages of projects by subcontractors are the other albatross on the neck of the construction sector. This problem was also clearly anticipated by the 1997 green paper and the state allowed a decentralised contractor development process to unfold. The KwaZulu-Natal Provincial Government led the pack with its well-organised Vuk’uphile Contractor Development programme.

But just when thousands of emerging contractors were starting to develop and assert themselves as future construction industry champions, National Treasury promulgated a regulation prohibiting set-asides. All contractor development programmes were frozen in mid-air and the contractors that had tasted real money decided to recruit thugs to take the fight to various construction sites. That was the birth of the so-called construction mafia.

Today, these have managed to cost the industry billions of rand in stoppages and contract cancellations. I suspect that this risk has a significant sway in the delay of the expansion of the Gautrain rail network because the investors are not sure how they will resolve the problem of violent stoppages that have become the norm in Gauteng, KwaZulu-Natal, the Eastern Cape and many other regions. Even the police do not seem to know what to do about the issue.

The industry’s self-regulation includes professional associations that, in their proliferation, are characteristic of the industry’s damaging fragmentation. There are many role players laying claim to self-regulation. All past attempts at standardisation have yielded very limited success. Now, this whole scenario is also straight out of the 1997 green paper but is probably just as true today.

Moving forward

There are three important pointers that inspire confidence that, this time around, there is hope for success. The first one is that the government has shown an appetite to confront the ghosts that have spooked the industry for a while. The second one is the appointment of a head of infrastructure investment in the presidency that is evangelising the industry and becoming a pivotal point for the industry to anchor itself. Dr Ramokgopa and Minister De Lille have become a new axis for all things infrastructure.

This is an open policy window that the sector must take advantage of to make lasting changes to the industry. State officials can take the message literally by finding ways to pay contractors on time. Onerous requirements and elaborate documents and approvals must be put into perspective. Alternative dispute resolution mechanisms must be adopted to eliminate delays in project completion.

*Gundo Maswime is a lecturer at the University of Cape Town and a researcher in public infrastructure.