Infrastructure 2022 by SundayTimesZA

INFRASTRUCTURE 2022

www.businessmediamags.co.za

UNLOCKING GROWTH IN AFRICA

GOING GREEN Sustainable modular construction

SMART CITIES

A strategic direction

THE STATE OF SA RAIL

PROJECT FUNDING Africa rising

hatfield

pretoria centurion

midrand rHODESFIELD

www.gautrain.co.za

Gautrain

The Gautrain

marlboro sandton rosebank PARK The Gautrain

or tambo

FROM THE EDITOR

INFRASTRUCTURE www.businessmediamags.co.za

UNLOCKING GROWTH IN AFRICA

PUBLISHED BY Arena Holdings PO Box 1741, Saxonworld, 2132 011 280 3000

EDITORIAL EDITOR Rodney Weidemann 062 447 7803 rodneyw@samining.co.za ART DIRECTOR Shailendra Bhagwandin bhagwandinsh@arena.africa SUB-EDITOR Anthony Sharpe

SALES ADVERTISING CONSULTANTS Ilonka Moolman 011 280 3120 moolmani@arena.africa Tshepo Monyamane 011 280 3110 tshepom@samining.co.za Noël van Breda 011 280 3456 noelvb@arena.africa

PRODUCTION Neesha Klaaste 011 280 5063 neeshak@sahomeowner.co.za

PRINTING

THE IMPORTANCE OF

INFRASTRUCTURE IN TODAY’S ECONOMIC CLIMATE

outh Africa has challenges around unemployment, and infrastructure development is one of the keys to helping create jobs at the scale necessary to make an impact. City of Johannesburg executive mayor Mpho Phalatse recognises this fact. Current projects include stabilising City Power’s network and stronger focus on its Green Buildings Policy, focusing on low to net-zero carbon footprints. Today’s digitally transforming world is such that the conversation around developing smart cities in Africa has become a vital one. In SA there are efforts in places like Tshwane and Johannesburg, as well as the proposed Lanseria Smart City development. When it comes to building the required infrastructure, safety must always come first. Infrastructure projects demand strong safety measures, from initial planning right through to postoccupancy. Safety begins with the various consulting engineers’ – structural, civil, geotechnical and mechanical – risk assessments, through specific safety

Rodney Weidemann

CONTENTS 12

CTP Printers, Cape Town

MANAGEMENT BUSINESS MANAGER Claire Morgan morganc@arena.africa

measures during construction, and on to other critical post-occupancy measures like fire safety and smart security. We also look into what is required to obtain infrastructure funding on the continent, as many African governments have maintained spending on infrastructure, despite wars and pandemics raging. Of course, in a world where environmentally friendly construction is crucial, sustainable construction methods are more important than ever. We look at some of the new methods of construction that are both modular and sustainable. Lastly, we look into the parlous state of South Africa’s rail infrastructure, and how improvements in security and allowing private operators to run on Transnet’s rail networks will create greater efficiencies and reduce the opportunities for thieves to steal vital infrastructure. There can be little doubt of the challenges facing South Africa today, but equally, there can be little doubt that infrastructure development offers the country a golden opportunity to make headway against these problems. n

GENERAL MANAGER MAGAZINES Jocelyne Bayer

unsolicited material. Infrastructure is published by Arena

SA RAIL: CAN IT BE FIXED?

SAFETY: PROJECT SAFETY END-TO-END

23 COVER IMAGE © ISTOCK

SMART CITIES: DREAM OR REALITY?

Holdings. The opinions expressed are not necessarily those of Arena Holdings. All advertisements, advertorials and promotions have been paid for and therefore do not carry any endorsement by the publishers.

www.businessmediamags.co.za/infrastructure

COVER STORY

INFRASTRUCTURE FUNDING: WEST AFRICA LEADS THE WAY

SUSTAINABLE CONSTRUCTION: SIMPLE AND GREEN

I N F R A ST R U CT U R E

T R A N S P O RT – C O R P O R AT E P R O F I L E

SMART TRANSPORT

INFRASTRUCTURE IMPROVES CITY SUSTAINABILITY

Gautrain OR Tambo Station

The development of the Gautrain has not only provided a reliable transport option in Gauteng, but it has also boosted the province’s sustainability and reduced citizens’ carbon footprints.

obility is essential for a city that seeks to operate in a sustainable and efficient manner. Apart from creating jobs, uplifting communities and reducing congestion between the Gauteng City Region – namely Tshwane, Johannesburg and Ekurhuleni – the Gautrain project strives to support the local provincial government, accelerating economic growth development and infrastructure delivery. Gautrain continues to make a significant contribution to creating a larger and more economically powerful Gauteng region, connecting the scattered urban centres of the three metropolises into a highly accessible network. THE BACKBONE OF GAUTENG The project has been designed in such a way that it restructures urban areas, improves city 2

I N F R A ST R U C T U R E

Gautrain Sandton Station.

"PROPERTY VALUES NEAR GAUTRAIN STATIONS HAVE GROWN SUBSTANTIALLY, AT A RATE OF 3 PER CENT RELATIVE TO SURROUNDING AREAS. " sustainability, and reduces travel distances and road congestion. Gautrain is the backbone of an integrated public transport system, and is a project that complements and supplements other public transport modes in the province, providing citizens with a safe, efficient and reliable mobility solution. It brings economic benefits in that efficient public transport and lower road traffic congestion increase productivity and the economic viability of

the province, and it decreases the out-of-pocket cost of transport to the community. Gautrain has also reactivated property development in many areas around its stations, thereby contributing to better land use and redressing apartheid spatial development planning. It contributes to the goals of transit-oriented development and has led to many high-end corporations competing for space in new office

buildings close to stations. Property values near these stations have grown substantially, at a rate of 3 per cent relative to surrounding areas. In some areas such as Rosebank, rental rates have experienced a 100 per cent appreciation. Efficient land use, to which public transport contributes, produces results far beyond the immediate benefit of increased use of said transport. It has the potential to significantly change the way we live and travel, reducing our individual carbon footprints while enhancing our mobility. It further encourages people to have a more active, healthy lifestyle, particularly if they are walking or cycling to their stations. Operating at 99.67 per cent service availability, the service continues to be a convenient, fast and reliable means of travel as well as a catalyst for better public transport systems in the province. As a modern transport infrastructure system, Gautrain has changed the image of the province and that of public transport in South Africa. It has made rapid travel between major commercial nodes Gautrain Rosebank Station.

across the province possible. Moreover, Gautrain doesn’t compete with other modes of public transport such as taxies and buses, which all have an important role to play in the total transport system. BEYOND THE TRAIN The Gautrain fits alongside other modes of transport into the province’s holistic transport network. Municipal Bus Rapid Transport services are also integrated with the Gautrain at some of the stations, sparing commuters the frustrations and delays motorists experience with traffic congestion on the road. The service consists of a fleet of modern, low-entrance and low-emission buses with comfortable seating, providing feeder and distribution services to and from Gautrain stations. Gautrain has midibus operations at Marlboro, Sandton, Centurion and Hatfield stations, in a partnership with the taxi industry that facilitates the integration of the industry into the Gautrain system. The midibus operations have proven successful in improving accessibility to public

FOLLOW US ON: Twitter: @TheGautrain Facebook: www.facebook.com/gautrain Website: www.gautrain.co.za Call centre: 0800 4288 7246

transport and integration of the Gautrain system with other public transport services. The rapid rail link between Johannesburg, Ekurhuleni and Tshwane has the following attractions and destinations along the route, to which appropriate linkages have been created to facilitate access: ▪ Historical landmarks ▪ Shopping malls ▪ Sporting venues ▪ Tertiary institutions ▪ Monuments ▪ Zoological parks The project has shown that a well-planned project does not only create value during construction and implementation, but also continues to improve the quality of people’s lives by saving them time and reducing emissions, thus contributing to a greener Gauteng. The Gautrain project is a demonstration of government’s commitment to economic development and moving people forward, helping to achieve long-term socioeconomic sustainability and development. n

I N F R A ST R U C T U R E

C O N T R A C T S – C O R P O R AT E P R O F I L E

NEC 3 AND 4 CONTRACTS

CRITICAL FOR INFRASTRUCTURE DEVELOPMENT New Engineering Contracts (NEC) have gained a lot of traction in the last decade, given their philosophy of collaboration and good project management. Samantha Reyneke, a director at law firm NSDV, explains why NEC contracts are so important

istorically, government infrastructure projects were predominately procured under either General Conditions of Contract for Construction Works (GCC) contracts, Joint Building Construction Contract (JBCC) or on Fédération Internationale Des Ingénieurs-Conseils (FIDIC) contracts. WHY DOES THE SOUTH AFRICAN GOVERNMENT FAVOUR NEC 3 AND 4 OVER OTHER CONTRACTS? Interestingly, the latest iterations of the FIDIC contracts have aligned themselves with the NEC philosophy and have the World Bank’s backing for the next five years. The GCC contract is also looking at publishing amendments, so we are in an interesting space when it comes to government’s procurement options. The NEC 4 contracts have been updated and streamlined following feedback from the industry, and consideration of government priorities and emerging best practice. The NEC contract suite offers procurement options with improved flexibility, clarity and certainty. There has also been an international shift towards the NEC in contracts specifically in Europe, Middle East and Australasia. While we don’t know the exact reason as to why most state-owned enterprises in South Africa have adopted the NEC as the contract of choice, we can’t help but feel that the Medupi and Kusile power projects – which were both procured on FIDIC – have something to do with it. In the NEC, government seems to have now found an alternative procurement option to help it build its projects on time, within budget and with no defects. 4

I N F R A ST R U C T U R E

HOW CAN THE NEC 3 AND 4 BE USED FOR BETTER COLLABORATION AND INFRASTRUCTURE DEVELOPMENT IN SA? The NEC suite of contracts lends itself to industry best practice when it comes to collaboration and dispute avoidance. NEC 4 builds upon the success of the NEC 3 contracts. The proven and unique processes for collaboration, fair dealing and good project management that are inherent in the NEC philosophy remain in this evolved edition. The benefits of using NEC 4 is that the requirement to act in “a spirit of mutual trust and co-operation” encourages the creation of a collaborative partnering environment, including working together in a co-located site office and attending regular partnering workshops. The NEC project management process, with its unique early warning mechanism, enables early identification of issues and agreement of follow-up actions, factors and deadlines, helping to keep projects on time, within budget and to the highest standards. WHY DID NSDV CHOOSE TO UNDERTAKE A TIPS SERIES ON THE NEC 3 AND 4 CONTRACTS? We believe it is important for us to help to educate both clients and the industry through the sharing of knowledge. We have had such a great response to the knowledge share around NEC contracts that we have decided to add two additional series in the works: a “JBCC for Average Joes” tip series and an “FIDIC for First Timers”, which should significantly improve customer knowledge around all the various

Sam Reyneke.

"THE NEC PROJECT MANAGEMENT PROCESS, WITH ITS UNIQUE EARLY WARNING MECHANISM, ENABLES EARLY IDENTIFICATION OF ISSUES AND AGREEMENT OF FOLLOW-UP ACTIONS, FACTORS, AND DEADLINES." possible contracts. With better understanding, operators can make more informed business decisions. n

PERSPECTIVE

FOR JO’BURG, INFRASTRUCTURE DEVELOPMENT EQUALS JOB CREATION

Infrastructure development is key to creating the scale of jobs that will impact South Africa’s high unemployment rate. Rodney Weidemann speaks to the Johannesburg mayor about the city’s plans regarding such development

ohannesburg has been neglected and without leadership for a long period, says Executive Mayor Dr Mpho Phalatse, creating an infrastructure backlog that sits at around R300-billion. This means that almost all aspects of infrastructure need to be attended to, so the budget must prioritise those projects that are urgent. One such project is stabilising City Power’s network. To this end, Phalatse says, the city will need to address matters relating to the ageing infrastructure, and how it can bring on independent power producers and green energy to help offset load shedding and sustain economic activity. “As it stands, City Power has a capital backlog of R26-billion. We have asked them to isolate the funding that is required to stabilise the grid, so that in the short to medium term we are able to begin what is termed wheeling: allowing independent power producers to rent and feed into the network. “In the budget, which comes into effect on 1 July, City Power received the largest capital budget of R1.2-billion, roads infrastructure was allocated R918-million, water supply infrastructure R795million; and sanitation facilities R600-million. This is a clear signal to residents that we are serious about addressing Joburg’s infrastructure needs.” PROMOTING INCLUSIVITY Phalatse points out that another one of the multiparty government’s priorities is to focus on building an inclusive Johannesburg, which means making every corner of the city a place where residents have all the amenities they need to live a quality life

– including access to housing and job opportunities. “This dovetails with Johannesburg’s Climate Action Plan 2021, as the city’s Green Buildings Policy takes us on a path towards achieving low to net-zero carbon footprints for all new buildings by 2030, while achieving a total net-zero performance compliance standard by 2050, across the board. “At the same time that we create new and greener homes, we will be creating jobs in this green space. Investing in this space could, in fact, mean more than 340 000 jobs created by 2030, with over 140 000 of these solely from building more energy-efficient homes, schools and workplaces in Johannesburg alone.” THE 4IR FOUNDATION The mayor says it is an absolute necessity for Johannesburg to retain its status as the economic hub that supports and determines the growth trajectory of South Africa. The Fourth Industrial Revolution (4IR) is the foundation upon which cities are recognised globally for modernising their approach to service delivery and governance. She notes that the city has 10 Smart City Catalytic Programmes that follow on from the Smart City Pillars and form the backbone of the new Smart City Integrated Implementation Programme. “Of course, to succeed in the 4IR, we need to emphasise the importance of science, technology, engineering and maths as subjects that learners simply must study,” adds Phalatse. “If we are to succeed in our endeavour to build a smart and

FAST FACT In June this year, Johannesburg hosted the African Smart Cities Summit, which gathered stakeholders to discuss Africa’s readiness to implement smart city methodologies in current infrastructure. Source: DMG Events

Mayor Dr Mpho Phalatse.

resilient city, our youth will have to have a firm grasp of 4IR principles. “Although education does not fall within our competency as a local government authority, we nonetheless work closely with higher education institutions to fill gaps that may exist in the areas of knowledge and innovation. Further to this, the city runs an annual bursary programme for specific careers aligned to the business of the city, such as engineering and town planning, in order to mould the skills needed to keep the City running for generations to come,” concludes Phalatse. n I N F R A ST R U C T U R E

S M A RT C I T I E S

SOUTH AFRICA AIMS TO GET SMART

A recent smart cities summit outlined the efforts being made in cities like Tshwane and Johannesburg, along with the proposed Lanseria Smart City Initiative, writes Rodney Weidemann

he implementation of smart cities is all about responding to challenges such as congestion, rising crime, growing urban poverty and the need for more efficient service delivery practices. There is also a growing view that Africa is ready to leapfrog the competition through the implementation of smart city technologies. With this in mind, the recent Big 5 Construct Southern Africa expo hosted the African Smart Cities Summit. The goal of this summit was to provide African solutions for Africa’s cities, and to gauge the continent’s readiness to adopt smart methodologies for implementation in current infrastructure, explains Tracy-Lee Behr, portfolio director for built environment at DMG Events. “There is a tendency to want to adopt developed-world policies and solutions in the local environment, but this is not a like-for-like swap,” says Behr. “What this summit did was consider how ready we are at present, and understand the current infrastructure that is in place, and how this can be adapted and integrated further into communities. In essence, it was about learning from what has gone before, but also about adapting it to suit the African landscape. “At the end of the day, we have many grassroots issues that need to be solved. It is imperative to

I N F R A ST R U C T U R E

properly plan, so that any smart city development is done with these challenges in mind.” Behr says the summit brought together key stakeholders and smart city professionals in an open platform of engagement. This enabled the sharing of knowledge, drove inspiration, and helped to find solutions to the current smart city needs and challenges. REVENUE OPTIMISATION One of the most appropriate smart solutions to implement from the outset is a tool to assist in optimising revenue through accurate billing and collection. This is because ensuring better revenue collection will help to provide the funds needed to further invest in smart technologies. Speaking at the summit, Martin Nangoro, CCO at Interfile, outlined how the company has implemented a new platform for the Tshwane Municipality, aimed at providing a smart solution to revenue collection struggles. “Tshwane struggled with poor ratepayer service, including a lack of statements, late statements and long queues. There were also many unreconciled payments, which led to erroneous disconnections. “There was a challenge with call centre capacity, resulting in long wait times on the phone, limited electronic revenue collection channels and no

electronic customer engagement. Furthermore, the business processes were all manual, leading to an estimated 30 per cent error margin.” The solution is known as the e-Tshwane platform. It enables electronic bill presentment and payment, payment for reconnection, notification of delayed/ un-issued accounts and various bespoke solutions for citizen engagement. “Seamless integration into the municipality’s core financial system was obviously crucial, while we also made sure that payment reconciliation is system generated, so there is now no manual input,” said Nangoro. “Payments are traceable and correctly allocated. “Some of the successes experienced so far have included both happy customers and staff, a reduction in call centre load, improved revenue collection at reduced costs, better reconciliation of payments and streamlined business processes. In addition, it significantly improved transparency to the customer and provides a complete history of the customer’s engagement online. This is the way to create happy and engaged citizens.” A SMART CITY IN ACTION Discussing the Lanseria Smart City Initiative at the summit, Gauteng Department of Economic Development deputy director-general Jak Koseff

SOME STATISTICS FOLLOWING THE IMPLEMENTATION OF THE E-TSHWANE PLATFORM: ▪ ▪ ▪ ▪ ▪

Registered users: 370 000 with 617 000 accounts Monies collected per year: 1.078 billion so far this year Meter readings submitted per month on average: 80 000 Queries logged: 3 500 monthly Applications received – 450 land development applications from 700 users, approximately 20 000 clearances memos and certificates

"THERE IS A TENDENCY TO WANT TO ADOPT DEVELOPEDWORLD POLICIES AND SOLUTIONS IN THE LOCAL ENVIRONMENT, BUT THIS IS NOT A LIKE-FOR-LIKE SWAP." – TRACY-LEE BEHR suggested that the Lanseria regional node represents the first genuine, scale, post-apartheid urban node in the republic. Noting a recent history of coordination failures, Koseff suggested that the key challenge for this project is simply Lanseria’s position at the urban edge of four different municipal governments. None of these are in a position to fund the necessary bulk and framework infrastructure within the time frames required, in order to unlock fully the various development applications that collectively represent a new city node housing more than 3.5 million people. Koseff said: “Deploying the now masterplanned Lanseria City node will provoke a range of coordination processes including: Innovative financing that debt-finances the upfront cost of bulk services; An infrastructure and economic master-planning process that will integrate all the potential economic development activities underpinning the sustainability of the new city node; A coordination mechanism that can phase the work required into a coordinating structure for the new city node, analogous to a city improvement district, but at larger scale. “Progress continues, and so far the masterplanning process is complete. This is key to

designing a special purpose vehicle (SPV) for bulk infrastructure, through which a Development Bank of Southern Africa loan will cover the costs of bulk and be recovered through claiming a percentage of the future service charges developers and residents will pay.” Koseff added that in concluding the master plan, consultative webinars were held with property developers; large landowners; experts in waste/ water/electricity infrastructure, roads and transport networks, and human settlements; social infrastructure leads and ICT experts, as well as with various local community clusters. “The City of Johannesburg and Mogale City have passed council resolutions endorsing the master plan and SPV, but can’t approve development applications until the SPV timeline is in place. A feasibility study will be conducted around structuring for the high-tech special economic zone that is being positioned for Lanseria, while clusters of landowners with investor pipelines are negotiating with government to set up a real estate investment trust for this.” STRATEGIC DIRECTION The City of Johannesburg’s new mayor, Mpho Phalatse, has already made her feelings known as to what constitutes a truly successful city. She

says it is one that makes the most of the talent and innovation available, and maximises its use of technology to empower residents and find solutions to pressing challenges. Lawrence Boya, director of the Smart City Programme for the City of Johannesburg, says that in light of this, the city has had “smart” on its radar since the 2010 World Cup. The first Johannesburg Smart City Strategy was adopted by the mayoral committee in July 2014. “The strategy was revised in 2020, and now identifies eight pillars or outcomes that shape our approach and meaning of a smart city in the Johannesburg context,” says Boya. “An implementation programme has been developed, referred to as the Smart City Integrated Implementation Programme. “Johannesburg’s approach seeks to address three interconnected challenges. The first comprises the legacy of apartheid, underdevelopment of townships, and the systemic shortage of opportunities for black people in general, and young people in particular. The second challenge lies in repairing and rebuilding a broken city. The third is all about laying solid foundations for a globally competitive, modern and prosperous city that is smart and inclusive.” > I N F R A ST R U C T U R E

Boya says that a balanced approach is being advanced at a broad strategy level, putting smartness at the centre of everything the city does. “This approach advocates for an overarching smart city goal that must be embedded in every mayoral priority and the business plans of all city departments and entities.” As part of this approach, Boya feels that being smart includes having policies, systems, procedures and tools that prepare the city for any adverse shocks, disasters and business interruptions. These could be due to extreme weather, economic and financial meltdown, or social upheavals. Using smart technology and processes to provide better and more efficient services to residents, businesses, investors and visitors is another key goal, as is investing in developing human capital ready to operate in both the Fourth Industrial Revolution and subsequent ones. “We aim to build a city of convenience by eliminating queues, putting more services online, digitalising all paper-based and manual functions and services, and eliminating the need to drive or

S M A RT C I T I E S

travel long distances to access services,” says Boya. “Ultimately, we want to connect the city digitally wall-to-wall, and ensure that public Wi-Fi is available in all public areas. “We also want to make it possible for every home to be connected to fibre, and for 5G and future

digital connectivity technologies to be available in every corner of the city. As we move forward, we will continue driving innovation across many of our services, with a focus on putting citizens at the centre of the transformation, and ultimately on future-proofing the city,” he concludes. n

16 on Bree

YEA RS OF EN

LENCE EXCEL ING ER NE GI

The Leonardo

Xhora Dam

E R W I C AWA R D S – C O R P O R AT E P R O F I L E

REAL RECOGNITION FOR WOMEN IN CONSTRUCTION

FAST FACT

Now in their third year, the ERWIC Awards are building female representation in construction through recognition. By Rodney Weidemann

here remain certain industries dominated by men for a variety of reasons, including unconscious gender bias, a lack of adequate support and negative perceptions of women working in the industry. Among these, construction might be one of the first that comes to mind. According to Bongani Dladla, CEO of the Construction Industry Development Board (CIDB), there remain many stereotypes to overcome in this sector. Too often, he says, there are myopic views that suggest women don’t like to get dirty or aren’t as physically capable as men. It is the CIDB’s responsibility to dispel these.

"A KEY GOAL IS TO ENSURE THAT YOUNG WOMEN ARE PRESENTED WITH A PICTURE THAT SHOWS THE CONSTRUCTION INDUSTRY IS AN OPTION FOR THEM." – DLADLA

According to the organisation, 48 per cent of construction companies in South Africa registered on the CIDB Register of Contractors in Grades 1 to 4 are owned by women.

“To this end, the Empowerment and Recognition of Women in Construction (ERWIC) Awards are the highlight of our annual calendar,” Dladla. “They offer the industry a chance to recognise and promote the work done by women in the sector, along with those companies that support them. “The awards are about highlighting the exceptional work done by women over a range of 12 categories, encompassing project delivery, rural development, mentorship, skills transfer, innovation and pioneering efforts, among others.” CREATING AN ENABLING ENVIRONMENT Dladla notes that industry representation by women is not yet at the desired level, and this must change urgently, considering that women make up more than 50 per cent of the population. “These CIDB initiatives are about creating an enabling environment and removing barriers that prevent women from taking their rightful roles in this industry. Not only do they reward women who have been successful, but they also help to highlight role models in whom young women entering the sector can see themselves reflected. “A key goal is to ensure that young women are presented with a picture that shows the construction industry is an option for them. We also believe it is necessary to showcase skills like plumbing and other artisanal careers, to ensure that women recognise that these are acceptable careers for both men and women.”

Bongani Dladla.

EVOLVING AWARDS The inaugural ERWIC Awards took place in 2020, says Dladla, pointing out that the 2022 Awards are presently in the nomination stages. The awards ceremony is scheduled for late August. He notes that there has been an evolution in the awards, in that this year a conference and networking elements have been added, to allow for new connections to be formed and learnings to be undertaken. “Diversity in this industry is necessary, considering that government views construction as a vital player in the country’s economic recovery. This industry has a potentially huge multiplier effect with respect to job creation, so building an enabling environment in which women can also contribute will only be good for South Africa in the long run. “Remember too that we run the risk of a lack of ideas and innovation if we don’t have enough diversity in the industry. This is why we so urgently need the unique thoughts and perspectives of women,” Dladla concludes. n I N F R A ST R U C T U R E

I N F R A S T R U C T U R E D E V E LO P M E N T – C O R P O R AT E P R O F I L E

ARE INFRASTRUCTURE PPPS THE ANSWER TO SA’S ECONOMIC DIFFICULTIES?

nfrastructure development is critical for South Africa, as this is a proven means of countering economic downturns, and is catalytic to economic recovery. Such development has a multiplier effect on growth, which is why it is so important to the nation’s recovery from the pandemic and the decimation it created within the economy. The challenge facing SA is that in many sectors, there is a huge backlog in capital expenditure on infrastructure. The country’s rail and water infrastructure is in a terrible state, and other infrastructure is also crumbling as a result of these backlogs. It is imperative that we begin to fast track infrastructure investment. Daniel Zinman, Head of Power in the Infrastructure Sector Solutions team at Rand Merchant Bank (RMB), says that while crumbling infrastructure limits economic growth, the opposite is true of reliable, well maintained and world class infrastructure. “When it comes to such investment, there has traditionally been a lot of shying away from private sector involvement. However, the pandemic has exacerbated an already floundering economy, and government today simply doesn’t have the balance sheet to do this without the private sector,” he says. Siyanda Mflathelwa, Head of PPPs and Concessions in the Infrastructure Sector 10

I N F R A ST R U C T U R E

Solutions team at RMB, notes that public-private partnerships (PPPs), despite being cumbersome and regulatory-heavy, and thus require significant forward planning, are a potential answer to this challenge. “We see three key areas where we believe government should expedite infrastructure through such PPPs. The first is in the area of power, because this is critical to a successful economy, and large spend is required here to improve things. Steps at least have been made, with power plants of up to 100MW no longer requiring a generation licence,” she says. “The second area is in regard to water, which is rapidly becoming as critical as power. We understand there are plans afoot for a similar approach to what has been done with respect to programmatic renewable energy procurement,” says Mflathelwa The last area of focus is the rail transport arena. According to Mflathelwa, the launch of a National Rail Policy is a start, but the impact of a lack of effective rail infrastructure is highlighted by the mining industry’s inability to properly capitalise on the commodity boom. This is due to the rail issues constraining how much material can be transported to the ports. “There are many positive knock-ons to improving

Infrastructure development is catalytic to economic recovery. Government should further facilitate public-private partnerships to encourage critical infrastructure builds. the above infrastructure areas, from encouraging local manufacturing and boosting job creation, to reducing the amount of trucks on, and thus damage to, the road system and on to the environmental benefits of fewer emissions from these vehicles.” Zinman suggests that in today’s environmentallyconscious world, sustainability plays a major role in new infrastructure developments, especially those related to power and water. “To this end, RMB has a Sustainable Finance and ESG team, whose focus lies on helping clients to access sustainability-linked loans, green bonds and other forms of sustainable finance. We work closely with them and fund infrastructure projects which are by definition mostly renewable -providing advisory services, senior debt funding, mezzanine finance, acquisition finance or funding to BEE parties.” “We are particularly excited about the possibilities in the power space. Not only the fact that government has eased regulations around the licensing rules for power plants, but also Eskom’s willingness to allow private sector players to wheel electricity across the country and the increasing cost effectiveness of renewables. For us, as funders, there is an abundance of opportunity here, and we look forward to playing our part in improving SA’s infrastructure,” he concludes. n

P R O C U R E M E N T – C O R P O R AT E P R O F I L E

THE LONG-TERM IMPACT

OF IMPROPER PROCUREMENT PROCESSES When costs are cut upfront during the consulting phase of a project, it may well lead to far greater costs during the much longer operational and maintenance phase.

hile Africa is certainly not a single homogeneous entity, some challenges are common across most countries on the continent. One of the most notable is the fact that much of the infrastructure is in a generally poor state, due to a failure by governments to adopt an asset life-cycle management approach. This is largely because democratic governments change quite regularly, but infrastructure is an asset that has a lifespan far in excess of the average electoral cycle. This is not the only challenge, explains Chris Campbell, CEO of Consulting Engineers South Africa (CESA). He notes that often when projects are developed with donor funds, local practitioners are excluded from the project. This is because the donors dictate the terms of inclusion, which means their own countrymen are often brought in to work on things, at the expense of real local job generation and capacity. That means that once the team leaves, there is no one around to monitor the infrastructure and keep it in effective working order. “This is why we place so much emphasis on infrastructure procurement: because it is vital to understand that with an investment of this length – anywhere from 25–50 years – there is nothing short term about it,” says Campbell. “Proper infrastructure procurement is about not only the engineering and construction of the project, but also the ongoing operation thereof. “Moreover, too often those funding the project lose sight of the fact that the initial services performed by the consulting engineer only amount to around 2 per cent of the total cost of ownership (TCO) of the project. There is also often an

"THE CHALLENGE HERE IS THAT TOO OFTEN PROCUREMENT DEPARTMENTS ONLY FOCUS ON THE UPFRONT CAPITAL EXPENSES, WITH LITTLE THOUGHT FOR THE OPERATIONS AND MAINTENANCE." – CAMPBELL impression that by cutting costs in this phase, more money will be available for better solutions and materials further into the project. However, if the consulting engineers’ resources are constrained, they are unable to deliver the most cost-effective solution, creating a knock-on effect.” SIGNIFICANT OPERATIONAL COSTS Campbell points out that it should be understood that the contractor phase is valued at around 15–20 per cent of project TCO, which therefore leaves over three-quarters of the infrastructure costs sitting in operational maintenance. What this means is that if you have cut costs on solutions and materials in the early stages, you are going to find your costs escalate significantly once you own and operate the infrastructure. “The challenge here is that too often procurement departments only focus on the upfront capital expenses, with little thought for the operations and maintenance,” Campbell elaborates. “The answer is to ensure you have a well-rounded, informed team that can look after the integrity of the processes and ensure the necessary procurement process boxes are ticked, but that also makes sure the infrastructure is adequately looked after. This is key, because you will own it for decades, and no nation has the kind of money required to keep

BEWARE THE INADVERTENT COSTS There is potential to reduce cost through the adoption of smart building technologies, such as leveraging natural light instead of electric lighting. However, careful attention must be paid to such techniques, as with more natural light there is also increased heat, which may add to costs in other areas, such as a need for more air-conditioning.

recapitalising its infrastructure.” In Africa, however, Campbell says we still see too many situations where the technical practitioners have become marginalised, as their role has been consumed instead by procurement entities. “The problem here is that this approach is squeezing out those who offer the best advice at the earliest stage. In doing so, governments lack awareness that downstream, the maintenance and operations become much bigger challenges. This is ultimately why CESA believes it is necessary to implement either proper cross-functional teams, or alternatively, procurement departments that are specifically focused on infrastructure spend.” n I N F R A ST R U C T U R E

RAIL

THE STATE OF SOUTH AFRICA’S RAIL INDUSTRY

ust-covered tracks, dangling overhead cables, and vandalised stations left in complete ruin are what currently remains of most of South Africa’s once-thriving public rail system. The decision to cancel all private security contracts in 2019 allowed South Africa’s rail network of over 30 000km to fall prey to vandals and crime syndicates, who have stripped the networks of both tracks and overhead cables to make an income from scrap metal. The decision to scrap private security contracts was made by the Passenger Rail Agency of South Africa (Prasa), which oversees the running of South Africa’s rail network, due to the South African state’s financial watchdog discovering that Prasa was not following the correct process when awarding these private security contracts. While the decision to scrap all private security contracts was deemed necessary, the issue is that no contingency plan was put in place to continue to look after vital infrastructure, resulting in an ‘open season for criminals to loot and rob the railway network’. (Mkhize, 2022) The real conundrum is that logistics and transport networks are crucial to economic growth and success.

I N F R A ST R U C T U R E

SIGNIFICANT CHALLENGES When asked about the most significant challenges South Africa currently faces with its road, rail, and shipping networks, Head of PPPs and Concessions in the Infrastructure Sector Solutions team at Rand Merchant Bank (RMB), Siyanda Mflathelwa, states the following: “Rail and ports are a good place to kill many infrastructure birds with one stone. We find that railways are spending increasing amounts on security and protecting infrastructure from theft – this is because rails are currently not being utilised enough. When there are a lot of trains on a line, there is less of an opportunity for vandalism and theft.” Transnet CEO Portia Derby informed Parliament that Transnet spent R1.5 billion on security in 2022 to try and protect the railway network. The R1.5 billion has significantly increased since 2018, when Transnet spent R1 billion on security. (Payne, 2022) Mflathelwa further states that: “Investing in infrastructure and getting more capacity on the tracks will be a natural deterrent for theft, as well an increase policing and visible policing presence. Current impediments to investment within the rail industry are not just due to theft and vandalism, as these reasons are really a by-product of a declining industry.”

The current state of South Africa’s rail industry leads many to believe it is time to let this public infrastructure finally rest in peace, writes Benjamin van der Veen.

By implementing the correct frameworks, such as allowing private operators on the rail networks where Transnet can’t achieve the efficiencies alone, they can create a system to allow private operators to utilise idle Transnet stock or alternatively a programme where private companies can use their own rolling stock.” She continues by stating that RMB sees rail and ports infrastructure projects as eminently fundable and with private capital from customers on the line, large parties with a vested interest in the rail network being functional, and with the correct framework that allows private sector investment and usage, would be willing to commit capital to invest in the rail network. These large parties include, but are not limited to, the mining sector and heavy machinery industries. THIRD-PARTY ACCESS Third-party access is essential to help SA’s rail infrastructure survive, as outlined in the Business Day Dialogue in association with the African Rail Industry Association (ARIA), held in August last year, which discussed and highlighted why thirdparty access to South Africa’s rail infrastructure is an essential key to helping rebuild South Africa’s economy.

THE COST TO REPAIR SA’S RAIL NETWORK To recover South Africa’s rail infrastructure and resume the rail service, the SA Government and Prasa will have to complete the following: ▪ Replacement of vandalised overhead traction equipment (OHTE) and refurbishment of traction substations and tie stations ▪ Rehabilitation of vandalised signalling system ▪ Rehabilitation of damaged per-way infrastructure ▪ Maintenance of per-way through on-track machines (OTMs) ▪ Walling programme on priority corridors ▪ Footbridges or street-to-street bridges on Mabopane and Central Line corridors ▪ Rectification of station platforms ▪ Installation of backup fibre in identified corridors ▪ Refurbishment of the vandalised station building ▪ Minister of Transport, Fikile Mbalula, has indicated that: The cost to Prasa to repair and rehabilitate the vandalised infrastructure is in the region of R4 994 674 062.88.” (News.gov, 2022)

During this dialogue, ARIA CEO Mesela Nhlapo explained that third-party access is not privatisation. Instead, it allows private freight rail operators to use Transnet’s rail network, strengthening Transnet’s financial position by adding significant volumes to the rail network. It is estimated that 1.7 billion tons of freight are moved annually in South Africa (BusinessDay, 2021), with more than 150 million tons of cargo transported by road between January and March 2021. The rail industry only moved 40 million tons over this period. (SA, 2021) ARIA believes that potentially 58 million tonnes of freight could move to rail, which, if correctly done, would mean that rolling stock investment could meet the volume potential of roughly R45 billion and benefit the agricultural sector, vehicle sector, metals and minerals sector, shipping sector, bulk liquid, and hazardous chemicals sector.

Nhlapo went on to say: “There is nothing stopping the government from granting business third-party access. It requires no legislative changes and no investment from government”. CEO of independent rial operator Traxtion, James Holley, explained that Traxtion is already successfully operating under third-party access provisions in several African countries. He adds that Traxtion has announced investments of between R14 billion and R17 billion into trains over the next five years. All these trains will be manufactured in South Africa. Holley also argues that an improved rail network will benefit regional trade. This follows from the original 2020 announcement by President Cyril Ramaphosa that Transnet would be granting third-party access to the South African rail network. The announcement of third-party access was made due to Transnet being unable to meet customer demands.

"INVESTING IN INFRASTRUCTURE AND GETTING MORE CAPACITY ON THE TRACKS WILL BE A NATURAL DETERRENT FOR THEFT." – MFLATHELWA

Furthermore, the President noted in February of this year that the country would not be privatising the state-owned entity, emphasising instead the importance of Transnet allowing private rail operators to operate on South Africa’s core rail network. (BusinessTech, 2022) n I N F R A ST R U C T U R E

SAFETY

INFRASTRUCTURE SAFETY

FROM START TO FINISH

Infrastructure projects demand strong safety measures, from initial planning right through to post-occupancy. Rodney Weidemann looks at at some of the key safety measures required

ealth and safety considerations begin at the concept stage of any project, and through each phase, the health and safety of construction workers, members of the public and the end-user must be considered, explains Willem Botha, head for greater Africa at Zutari Consulting Engineers. “Subject matter experts (the design engineers) in each appropriate discipline (structural, civil, geotechnical, mechanical and so forth) should partake in risk assessments throughout the project life cycle, through concept to completion and operation.” Danie Rohde, construction lead at Zutari, notes that during the planning phase, a risk assessment is done and a register is compiled, listing all potentially high-risk items with proposed mitigation actions. “This register then becomes a live document that frequently gets updated and reported on during each phase of the project. While the client is ultimately responsible for all health and safety on the site through the appointment of an independent health and safety agent, the consulting engineer plays a crucial role in designing the product with these considerations foremost in mind. “The safety of construction workers and of infrastructure in operation is of utmost importance to all parties involved during all stages of the project. Therefore, all parties must familiarise themselves with their respective responsibilities 14

I N F R A ST R U C T U R E

and accountabilities. While it is governed by legislated processes and procedures, ultimately safety should be the highest priority for all individuals in the industry, as people’s lives are at stake.” CONSTRUCTION PHASE Different projects require different approaches to safety, says Mike Zinn, marketing and sales manager for Skyriders Access Specialists, but all should have some form of safety induction. “In some projects, this induction might be a simple 10-minute video, while for others it may be an eight-hour process involving deep insights and understanding. From my experience, the right approach should always include a proper safety induction and a thorough audit of your safety file, to ensure everyone starts on the right note. “When it comes to construction safety, the Occupational Health and Safety Act governs this at the highest level, determining basic guidelines such as: ‘Any work conducted above two metres requires a safety harness.’ It also determines standards around equipment, training and supervision.” Zinn adds that it is also important when working at height to understand what the job expectations are and to have a detailed scope of the work. For example, welding at height will require different safety processes to repairing concrete There should also be competent and qualified personnel – such as supervisors, first aid representatives and equipment

inspectors – at hand should anything go wrong. “With a detailed risk assessment undertaken and the relevant staff on-site, it is imperative to check the training and competencies of those undertaking the work,” continues Zinn. “They need to be trained to work at height and may even require a medical certification to be allowed to undertake specific tasks, like working in a confined space. “Finally, it is vital to have a rescue plan in place. Should safety be compromised in some way, you need to have a plan in place to undertake a rescue rapidly, so it is crucial for all personnel to know what they are supposed to do in such a scenario.” IN CASE OF FIRE According to ASP Fire CEO Michael van Niekerk, fire safety planning needs to occur at the inception phase of any project, so that important design aspects such as escape paths and the structural stability of the building can be established before critical design elements are locked in. “There are additional aspects such as the intended use of the building, the resultant

"IT IS ONLY BY ENGAGING THE SERVICES OF PROFESSIONAL FIRE ENGINEERS AT THE CONCEPT DEVELOPMENT STAGE OF A PROJECT THAT ONE IS ABLE TO ATTAIN THE BALANCE BETWEEN COST AND BENEFIT." – VAN NIEKERK SMART BENEFITS L2D’s Smart Camera solution offers a lot more than just security when it applies artificial intelligence algorithms to data. Among the other benefits it offers to employees, tenants, customers and other relevant stakeholders, are: ▪ People counting ▪ Capacity planning ▪ Unusual behaviour and movement ▪ Heat mapping ▪ Predictive analysis

fire load and fire risks associated with the intended use that must be included in the design, especially when these fire risks require automatic sprinkler protection. Regulatory fire safety requirements such as fire detection, smoke control ventilation, fire extinguishers, fire hose reels and fire hydrants – together with on-site stored water supplies – must also be included in the early design phase.” The post-construction phase of the project must focus on training, inspection, testing and maintenance of fire safety equipment, Van Niekerk continues. This should cover sprinklers, fire alarm systems, fire hose reels, extinguishers and fire hydrants. Leaving the fire safety design of a building to the end of the construction phase results in a suboptimal design. This requires a great deal more funding and effort to implement effectively. “Obviously, there must be a strong focus on ongoing training, inspection, testing and maintenance of all fire equipment. This is to ensure that safety systems are fully operational at all times, and that trained personnel are able to carry out first aid and fire

fighting until the emergency services professionals are able to intervene. “Remember that buildings represent high-value assets that house large personnel populations, expensive equipment and critical services. Fire protection must be achieved at the lowest possible cost, while attaining the highest level of fire protection. It is only by engaging the services of professional fire engineers at the concept development stage of a project that one is able to attain the balance between cost and benefit,” states van Niekerk. OPERATIONAL SAFETY Safety doesn’t stop once the building is occupied, says Pat Masithela, CIO at Liberty Two Degrees (L2D), a precinct-focused real estate investment and development firm. He says that that what underpins L2D’s Safe Spaces strategic pillar is the quest to provide a safe environment for tenants, customers, service providers and employees. “L2D’s Smart Camera system has improved the CCTV

OHS guidelines govern working safely at height.

security system within our malls by transforming the original standard system into a real time machine-learning intelligence solution. “The system is currently being commissioned and, once fully operational, will allow for each of the cameras on-site to report on threats or operational events in real time, without the need for human intervention. This will significantly improve the ability of security and on-site management to make critical real-time judgements along with better strategic decisions using complete and accurate empirical data.” “The system gives every CCTV camera on-site the ability to detect, identify and report, thereby turning each camera into a proactive assistant that is also not subject to normal human fatigue. The assistant can then alert the security officer or management on site to intervene and attend to any issue, as well as verifying that the event has been attended to,” Masithela concludes. n I N F R A ST R U C T U R E

www.businessmediamags.co.za

THE SA PROFESSIONAL’S PORTAL TO INDUSTRY INSIGHTS

BUSINESS MEDIA MAGS FEATURES SECTORS INCLUDING:

Mining Infrastructure Health Architecture Green Local Government

Business ICT Construction & Engineering Skills Development Travel Textiles

@businessmediaMAGS @BMMagazines Business Media MAGS business_media_mags

SA MIN NG

We are now giving our readers and clients an opportunity to take their news and advertising online in real time through www.samining.co.za

www.samining.co.za

READ WHAT REALLY GOES DOWN IN SADC

WHY ADVERTISE ONLINE ●

ADDED VALUE/EXPOSURE TO YOUR BUSINESS VIA ONLINE CONTENT.

●

Help build/strengthen your company’s brand.

●

DRIVE TRAFFIC TO YOUR COMPANY’S WEBSITE.

●

Banner 728 x 90 px

Expand your reach with various packaged offerings suited to your company’s needs, such as bundling your advertising with news/corporate profiles and/or a video online.

Island / Med ium

300 x 250

Rectang le px

SA Mining, South Africa’s oldest mining magazine, has been providing insight into the local, Southern African and African mining space for 125 years.

COMBINLE DIGITA INT WITH PRREAT FOR G GS! SAVIN

SCAN HER E To visit our website. businessmediamags.co.za/mining/sa-mining/subscribe/

www.linkedin.com/company/samining/

twitter.com/BMMagazines

www.facebook.com/businessmediaMAGS/company/samining/

www.instagram.com/business_media_mags/

ADVERTISING: Ilonka Moolman 011 280 3120 moolmani@samining.co.za

Tshepo Monyamane +27 62 239 3538 Tshepom@samining.co.za

YOUR ADS HERE

INFRASTRUCTURE FUNDING IN AFRICA

F U N D I N G – C OV E R STO RY

Despite the Covid-19 pandemic, rising debt levels and the current turmoil in Ukraine, African governments have maintained spending on infrastructure. For the first time since 2016, West Africa has led the continent in the number and value of infrastructure projects, writes Benjamin van der Veen

I N F R A ST R U C T U R E

WEST AFRICAN INVESTMENTS Investec has recently helped the Ghanaian government secure over R15.9-billion in funding for two new hospitals, roads and an 18-year fully funded railway project. Irvine uses these projects to help further explain recourse lending, export and credit agency (ECA) funding and sovereign financing, as well as some of the challenges that may arise during the funding process. “It’s the Republic of Ghana acting through the Ministry of Finance. They will be the borrower, with various infrastructure projects that need to be built across all their line ministries. You deal with the Ministry

"OF ALL THE CAPITAL EXPENDITURES ON THE CONTINENT, MORE THAN 90 PER CENT OF THE SPEND IS NOT PROJECT FINANCE – THUS, RECOURSE LENDING." – IRVINE of Roads and Public Highways if it’s roads; if it’s healthcare, you deal with that specific ministry, and so on.” That’s the first essential concept. So, when you talk about challenges and financing infrastructure in Africa, if it’s a sovereign loan, it’s about a credit view and an investor appetite or the lack thereof for a particular country. “Clearly, however, some countries are

he recent Africa Construction Trends Report 2021 by Deloitte Africa tracked infrastructure and capital projects (I&CP) activity across Africa in 2021. The report monitored the continental, regional and sectoral trends of I&CP projects valued at least R800million that had broken ground but had not been commissioned by 1 June 2021, covering 462 projects with a record project value of R8.3-trillion. To further understand how African governments receive their funding, Brian Irvine, head of Africa structured debt and trade solutions at Investec, explains: “To start with, we must distinguish between what we would call project financing or non-recourse lending, which takes the risk on a project, versus infrastructure spent outside of non-recourse, effectively taking risk on borrower/ sovereigns in the examples below.” Irvine adds that recourse lending represents the bulk of capital expenditure that is required on the continent. A government’s constitutional obligation includes the delivery of critical infrastructure to its people. Projects that require funding by African governments/sovereigns include: ▪ Hospitals ▪ Roads that are not necessarily tolled ▪ Water and sanitation ▪ Healthcare ▪ Universities ▪ Agricultural projects “These are not necessarily commercially viable projects, so you cannot ring-fence them and finance them on a stand-alone project finance basis. Of all the capital expenditure on the continent, more than 90 per cent of the spend is not project finance – thus recourse lending.”

economically far more substantial than others,” continues Irvine. “Those are typically the countries that managed to get these infrastructure projects across the line. It varies from the best credits in Africa, like Botswana, the more significant economies such as South Africa, Nigeria, Egypt and those kinds of places that have formal fiscal strength, to countries that are challenging and small, where concessional financing becomes more appropriate.” HOW ECA AND SOVEREIGN FUNDING WORK The Ghanaian hospital project funds two regional hospitals that will cost R3.7-billion to build. When looking at the financial breakdown of the funds required, a significant component of the goods and services needed (such as specialist equipment) must be imported as they can’t be manufactured locally. Companies like Philips and Siemens supply specialist medical equipment, and due to the equipment cost, these products make up a large

KEY HIGHLIGHTS FROM DELOITTE’S AFRICA CONSTRUCTION TRENDS REPORT 2021 In value terms, West Africa registered R2.75-trillion, while Southern Africa recorded R2.35-trillion and North Africa R2.1-trillion worth of projects. ▪ The transport sector recorded the highest number of projects at 197 (or 42.6 per cent of total projects). The energy and power sector registered 88 projects (19 per cent), while the real estate sector increased to 85 projects (18.4 per cent) under construction. ▪ African governments own the largest share of the projects (73.8 per cent) under study. ▪ China continues to play a significant role in building Africa’s infrastructure projects.

▪

"ECA FINANCING CONTRIBUTES GREATLY TO ENSURING THAT PROJECTS ARE BEING COMPLETED AND THAT PROPER GOVERNANCE PROCESSES ARE FOLLOWED, INCLUDING ENVIRONMENTAL CONSIDERATIONS." – IRVINE percentage of the total project budget. To finance these kinds of projects, governments can use ECA funding. “An ECA is effectively an extension of a particular government,” explains Irvine. “The Dutch government has an ECA called Atradius, which enjoys the full faith of and is underwritten by the government. Their view is if a Dutch company like Philips is going to supply the equipment for this hospital project, and if indeed they can get, say, at least 20–30 per cent Dutch content into the project, then the Dutch ECA is prepared to guarantee typically 85 per cent of the total project funding.” However, there still remains the 15 per cent that needs to be funded. This is called the down payment or commercial loan, which is effectively an uncovered piece. “This is the riskier piece, as investors are taking a risk on the Ghanaian government,” says Irvine. “Banks and lenders will often get additional risk mitigation in place, and for that require private insurance – a typical Lloyds syndicate, for example, or other means

of structuring. And once we restructure it to an acceptable risk level, then we get to place that 15 per cent.” ECA financing ensures that the invested monies are not squandered. How it works is that with ECA financing, the sovereign or borrower does not receive the funding upfront, as it would if it had to issue a sovereign bond. Instead, the funding is preallocated and dedicated to a particular project, and can only be applied to that project during the construction and commissioning phases. Thus, the bank acts as agents for the ECAs and lenders, and in this example, Investec disperses the funds directly to the engineering, procurement and construction contractors, ensuring that the project is completed and the invested money is being used correctly. “ECA financing contributes greatly to ensuring that projects are being completed and that proper governance processes are followed, including environmental considerations,” says Irvine. “From a construction company’s point of view, there is the security of knowing that they will be paid

Brian Irvine.

on time when they deliver according to targets. After all, sometimes governments are not able to pay timeously or have hard currency reserve constraints. The benefit for African sovereigns is that ECA financing is the most responsible, sustainable and affordable way of funding after concessional lending,” he concludes. n I N F R A ST R U C T U R E

S A F E T Y – C O R P O R AT E P R O F I L E

FEM CAMPAIGNS TO ELIMINATE CONSTRUCTION ACCIDENTS

tatistics released by the Federated Employers Mutual Assurance Company RF Proprietary Limited (FEM) show an alarming number of injuries in the construction industry. FEM was established in 1936 as a mutual insurer and is licensed by the Department of Employment and Labour to provide workmen’s compensation for the construction industry. Employers in the construction industry (licensed under the 0500 industry classifications) have a choice of taking out their workmen’s compensation cover with FEM or with the Compensation Fund. FEM covers around 6 000 construction companies employing around 300 000 individuals. In line with the high injury statistics, FEM has launched a campaign to raise awareness of construction site injuries and get the industry onboard and committed to reducing the unacceptably high

With over 54 900 construction site injuries between 2015 and 2021, it is no surprise to witness the launch of the ‘ZERO Is No Accident’ Campaign accidents. The campaign is branded ‘ZERO Is No Accident’. “We firmly believe that every accident is preventable, and that a construction industry with zero accidents is achievable,” explains FEM CEO, Ndivhuwo Manyonga. “The figures relate only to employers who are insured by FEM, though we estimate that the FEM policyholders employ around 50% of the formal workforce within construction. The actual number of accidents across the entire industry is even higher than what is reported to FEM, particularly considering that injuries are also likely to occur in the informal construction sector,” she adds. “The initiative seeks to educate, influence and create advocacy around health and safety (H&S) in the industry. FEM regularly engages with lives that are severely affected by workplace safety. Whether

"EMPLOYERS MUST ENSURE THEIR WORKFORCE IS CONSTANTLY TRAINED ON H&S ISSUES." – MANYONGA 20

I N F R A ST R U C T U R E

it be a loss of life, an injury, a claim or a settlement, lives are changed by these events.” FEM notes that the campaign will run for 12 months and will include through-the-line marketing activities, all aimed at raising awareness on the risks of poor H&S compliance in the industry, and the impact on employees and construction workers. The campaign initiative will culminate in an educational road show that will reach industry employees on the ground and aim to foster positive behavioural change. SIGNIFICANT STATISTICS On average, 36 people are injured on construction sites daily. In total, for the period 2015 to 2021, there were 54 964 injuries requiring medical attention. Two of the major types of injuries sustained on construction sites were ‘falling to different levels’ and ‘struck by’. These are standard statistical reporting categories used to record and report incidents both nationally and internationally. Over the 2015 to 2021 period, extracted as of March 2022, of the 54 964 injuries that required > medical attention, a total of 5 842 ‘falling to

S A F E T Y – C O R P O R AT E P R O F I L E

"WE FIRMLY BELIEVE THAT EVERY ACCIDENT IS PREVENTABLE, AND THAT A CONSTRUCTION INDUSTRY WITH ZERO ACCIDENTS IS ACHIEVABLE." – MANYONGA different levels’ cases were recorded, and 18 165 ‘struck by’ cases, accounting for 44% of all accidents and 35% of fatal accidents. In addition, the two incidents accounted for 120 out of 243 people becoming permanently disabled, representing 5% of total disabilities during that period. The medical costs attributed to these two types of injuries totalled over R1 billion, or 44% of the total cost of injuries between 2015 and 2021. Accidents in the industry continued despite COVID-19 and its impact on construction activity. In the 24 months to Dec 2021, some 12 317 accidents were reported to FEM. The top four accident categories were ‘struck by’ with 4 032 incidents; ‘slip or over-exertion’ with 1 743 accidents; ‘striking against’ with 1 484 accidents ; and ‘motor vehicle accidents’ with 1 086 accidents. In addition, 1 046 work-related COVID-19 incidents were reported, this is however deemed to be a temporary trend. These figures, in most cases, align with international trends, FEM says. In addition to the immeasurable human impact and the operational impact from a business perspective , each accident on average cost R51 494 of workmen compensation benefits. The accident 22

I N F R A ST R U C T U R E

cause with the highest average cost was ‘contact with electric current ’ at R185 000 per injury. ’Falling to different levels’: This definition typically describes an incident in which a person falls while working in an elevated position, such as from a ladder or a scaffold. ‘Struck by’: This definition captures a number of different types of incidents. For instance, a person struck by a motor vehicle while working next to a public road would be classified as a ‘struck by’. Other typical examples of ‘struck by’ injuries would include a brick or timber boards falling on someone. IMPORTANCE OF INSURANCE Ms Manyonga explains that training needs to be intensified regarding H&S protocols and processes. “Employees are required to hold their employers accountable when these processes are not adhered to, and vice versa. Employers who are neglecting health and safety processes can be reported to the Department of Employment and Labour inspectors.” “Stringent measures also need to be put in place to reduce the number of injuries. This can be achieved by creating a safe working environment and ensuring that employees receive proper

training. To lower the level of on-site accidents, employers must also ensure that their workforce is constantly trained on issues relating to H&S,” adds Manyonga. Because Workmen’s Compensation is compulsory, employers are at risk. Without insurance, if a staff member is injured on a construction site, the employer will be legally responsible for the medical costs. Also, tender applications usually require a Letter of Good Standing to confirm that workmen’s compensation payments are up to date. With insurance, employers benefit because FEM provides its policyholders with, among numerous other benefits, industry statistics to better understand the current shortcomings in relation to H&S in the industry and how to achieve best practices. FEM policyholders also benefit from its associations with industry role players and through its H&S grants to industry bodies (such as SAFCEC and the Master Builders Associations), while FEM provides access to the various services offered by organisations aimed at improving H&S within the industry. FEM also focuses on efficient pay-outs, quality care and empathy towards claimants, and ensures provision of wage replacement and medical benefits to employees injured in the course of their employment. Lastly, FEM provides compensation to employees or their dependants in the case of death or disablement. n

CONSTRUCTION

CAN SUSTAINABLE MODULAR CONSTRUCTION

COMBAT THE CLIMATE CHANGE CRISIS? New construction methods that are both modular and offer solutions to the climate crisis are critical to the future of the construction industry, writes Benjamin van der Veen

he World Health Organization views climate change as “the greatest threat to global health in the 21st century”. This threat necessitates a global response akin to that mobilised against the COVID-19 pandemic. According to the special report of the Intergovernmental Panel on Climate Change, disadvantaged and vulnerable populations around the world will experience the most significant adverse effects of climate change. This includes an increased risk to “health, livelihoods, food security, human security, water supply, and economic growth”. The South African building sector’s greenhouse gas emissions and energy consumption are significant contributors to the overall emissions problem the country currently faces. If this problem is not addressed in a timely fashion, South Africa may not be able to meet its commitments to the recently signed Paris Agreement, which aims to limit the effects of global climate change. So what can the local building industry do to combat the ill effects of rapid urbanisation and decrease South Africa’s carbon emissions? Should the industry be looking abroad for answers?

sized volumetric units, typically fully fitted out in manufacture and installed on-site as load-bearing “building blocks”. The main economic advantages of implementing modular construction are: ▪ Economies of scale in manufacture ▪ Speed of installation on-site ▪ Improved quality and accuracy in manufacture In addition, modular buildings can potentially be dismantled and reused, thereby effectively maintaining their asset value. A 2012 study conducted in New Zealand by research organisation BRANZ regarding the economics of prefabrication underlined the following: ▪ Modular home construction is almost 50 per cent faster than traditional construction. This reduction in construction/assembly time brings around a savings of R16 000–R25 500 per week. ▪ General productivity (in terms of labour) is also greatly improved in modular construction (up to 10 per cent), and even a 1 per cent increase in productivity in the factory and on-site directly translated to R74.4-million for the New Zealand economy.

THE MODULAR METHOD Modular or volumetric construction has seen strong uptake in residential buildings, and health and educational buildings around the globe. Modular construction uses prefabricated room-

IMPROVED RESOURCE CONTROL Modular construction offers more control over all aspects of the production of the modules, which significantly contributes to its environmental benefits. This means that energy and resources are utilised

more efficiently while also preventing material wastage in the factory and on-site, ultimately reducing the ecological footprint of the building’s construction. This is achieved in several ways. Improved energy and water consumption: Modular construction uses building processes that are energy and water efficient. Modular construction is 40 per cent more efficient at utilising raw materials, while prefabrication uses energy resources 50 per cent more efficiently and water resources 30 per cent more efficiently. Reduction in harmful emissions: Using materials that are non-toxic and low in volatile organic compounds is a significant focus when designing and constructing modular housing and buildings. Reduction of waste: Because the modules are manufactured in factories, materials are used efficiently with minimal wastage and then assembled to stringent guidelines on-site, resulting in a reduction in construction waste of 40 per cent. Optimal usage of manufactured materials and natural resources: Raw material efficiency can be increased by up to 40 per cent during factory production, as builders can use green and recycled materials and insulation. A GROWING INDUSTRY One manufacturer of eco/green construction materials is Afrimat Hemp, a subsidiary of Afrimat, > a Cape Town-based company specialising in I N F R A ST R U C T U R E

FE C OAT N SUTRREU C T I O N

SUSTAINABLE CONSTRUCTION FACTS Expanded polystyrene sheets remain unaffected by micro-organisms in the soil, making them ideal for geothermic insulation beneath roads, around foundations and in embankments, where it prevents soil break-up caused by freezing. ▪ The Afrimat Hemp block (110x190x390mm) can be used in modular construction to form partitioning walls. ▪ The Afrimat Hemp block has a fire protection rating of two hours. ▪ Hempcrete is made from hemp shiv and lime, which are naturally vapour permeable and make for an inherently healthy living environment. During the 80s, it re-emerged in France to revolutionise medieval timber-frame buildings by enhancing thermal performance and fire resistance, and mitigating pest, rot and mould damage. ▪

"EXPANDED POLYSTYRENE SHEET BOARDS ARE USED FOR THERMAL AND SOUND INSULATION IN WALLS, ROOFS AND FLOORS, WHILE LOOSE BEADS ARE USED AS AN AGGREGATE IN LIGHTWEIGHT CONCRETE, PLASTERS AND RENDERINGS." – JAMES natural, carbon-negative construction materials including hempcrete blocks, premixed plasters and breathable paints. When asked why Afrimat’s hempcrete is ideal for sustainable construction, MD Boshoff Muller explains: “Hempcrete absorbs CO₂. According to studies conducted by a European hempcrete company, every 1m³ of (their) hempcrete can absorb up to 75kg of CO₂ from the atmosphere.” Hempcrete’s embodied carbon footprint therefore has a positive impact on the environment. In addition, Muller notes, hemp is one of the fastest CO₂-to-biomass conversion tools available, because of its short, four-month growth cycle. Hemp sequesters between 10-15 tonnes of CO₂ per hectare. In addition, says Muller, hemp hurd (deriving from the core of the plant’s stem) is used as an aggregate in hempcrete together with lime, which is calcined using less energy than cement, at 950°C as opposed to 1400°C, and lime also reabsorbs CO₂ 24

I N F R AST R U C T U R E

to set. “Hemp not only delivers carbon-negative construction materials, but hemp construction (using hempcrete blocks, plasters and paints) is eco-friendly, offers excellent insulating properties, is sound absorbing, fire-resistant, energy-saving, durable and is of course 100 per cent natural.” “Hemp construction is ideal for heritage restorations, new builds, or interior and exterior renovations. It should also be understood that because hempcrete’s ability to efficiently absorb and release moisture assists with regulating a building’s internal humidity, it plays a role in maintaining healthy indoor air quality.” INSULATION STATIONS Another popular alternative material currently in use is Isowall’s insulated panels. These insulated panels are made from expanded polystyrene sheets (EPS). Neil James, sales and marketing director of Isowall Group, says: “In the construction business, these EPS boards are used for thermal and sound

insulation in walls, roofs and floors, while loose beads are used as an aggregate in lightweight concrete, plasters and renderings. Other uses include underfloor heating systems, drainage boards, permanent formwork, foundation and prefabricated wall systems. He notes that modular construction can significantly reduce energy usage in production, operation and maintenance. Well-planned insulation and self-sustainable modular homes (for example solar-powered houses) can help reduce energy consumption by up to 72 per cent, significantly reducing the building’s carbon footprint. The production of these units in a controlled environment within a factory means that materials and labour are less susceptible to natural hazards such as wind, fire and rain. There is a minimal intervention at the site, except in the case of an installation requiring a permanent foundation, resulting in a significant environmental impact reduction of between 30 and 70 per cent. n

Where Green Tech Grows

Atlantis in the Western Cape has been prioritised as a greentech hub by all three tiers of government. The Atlantis Special Economic Zone Company (ASEZCo) is driving sustainable development and job creation in the area by harnessing the opportunities in a growing green economy. The ASEZCo, with its greentech theme, is a unique SEZ that speaks to the needs of investors in greentech. It is a key element in the Western Cape government’s Economic Recovery Plan, and the scheduling of the company as a provincial business enterprise bodes very well for its role as a game changer in the renewable energy and green technology sectors of the Western Cape’s economy. The company seeks to attract greentech investors that embody the elements and ethos of green technology manufacturing and resource-efficient cleaner production. The Atlantis SEZ is positioning itself as an eco-industrial park following the UN Industrial Development Organisation (UNIDO)’s framework and aims to actively explore ways of achieving sustainable manufacturing through its Living Lab. The Living Lab is about working in collaboration with tenants, investors and other partners to finds ways to improve resource efficiency and reduce carbon in manufacturing processes. The ASEZ is currently finalising the detailed design for the civil infrastructure for the first portion of the zone to be developed. The plan is pushing the envelope on green design and civils. Aside from things like solar powered street lights and ducting for future electric vehicle charging, the design is also focusing on creating a pedestrian and worker-friendly zone with emphasis on landscaping, combined with on-site stormwater infiltration

Tel: +27 (087) 183 7017

special

to recharge the aquifer. The design is also evaluating the opportunity to test and pilot other green civil infrastructure. Green skills development and growing technical capabilities within the Atlantis community are part of the ASEZCo’s strategic objectives, aligned to the legislative requirement of the Special Economic Zones Act to grow the regional economy and drive socio-economic impact. The investment into skills development and community initiatives is aligned to many of the Sustainable Development Goals (SDGs), collectively aiming to provide a resilient and more sustainable future for Atlantis. The concept of ‘shared value’ refers to identifying and expanding connections between societal and economic progress. This is a powerful practice, as it is driven by the core of business, thus ensuring that sustainable and equitable impact on communities is not extractive by nature, but value adding. The integration of business and community, through intentional engagement and action, actively enables participation in the economy and accessing employment opportunities.

Email: info@AtlantisSEZ.co.za

special economic zone

www.atlantissez.com

I N F R A S T R U C T U R E – C O R P O R AT E P R O F I L E

THE FUTURE OF SPECIAL ECONOMIC ZONES

he Atlantis SEZ represents a new, unilateral compromise between the three tiers of government and the market, while still contributing to economic globalisation, by presenting itself as a complementary, or alternative, approach to integrate with the global market. The Atlantis SEZ Company, which acquired the land in the Atlantis SEZ through a shareholder agreement with the City of Cape Town, is now - alongside the national and provincial governments - the key partner working with the private sector to develop the Atlantis SEZ. Despite the prevalence of SEZs worldwide, their performance and impact on the economy and structural transformation are quite mixed. In South Africa, they are often referred to as ‘failures’. Among the many lessons learned from successful SEZ programmes, the key elements include a strategic location, integration of zone strategy with the overall development strategy of the region, understanding the market and leveraging comparative advantage, and, most importantly, ensuring that zones are ‘special’ in terms of an agile business-friendly environment, especially a sound

The Atlantis Special Economic Zone (SEZ) is putting into practice lessons learned from SEZs around the world, to become both business friendly and the embodiment of sustainability.

administrative framework and an embodiment of sustainability – often a rarity in South Africa. GREEN INFRASTRUCTURE Other than the boosting of manufacturing that adds value upstream and downstream, another important aspect is infrastructure - including both physical and non-physical infrastructure. For the former, a zone should provide high-quality connectivity through roads, ports, fibre, etc. and essential utilities, including reliable power and water supply, as well as environmental facilities such as waste and effluent treatment plants. The Atlantis SEZ is not only a greentech investment destination, but also a zone that will be increasingly operated on green principles. Green infrastructure can be defined as services derived from well-functioning ecosystems, such as wetlands purifying water, which enhance and support human well-being and are healthy and resilient. The definition can be extended to mechanical infrastructure that, over its entire lifespan, minimises carbon emissions, pollution, is resource efficient and supports the functioning of natural systems

"THE ATLANTIS SEZ HAS ADOPTED AN UNCONVENTIONAL APPROACH; AN APPROACH THAT THINKS DIFFERENTLY ABOUT INFRASTRUCTURE, COMMERCIALISATION AND GREENTECH OPERATIONS." – VOGES 26

I N F R A ST R U C T U R E

like soil, land, water, and biodiversity. Other good examples would be wind or solar energy or industrial waste-water treatment and filtration systems. It is important to recognise that there is human agency at work in any infrastructure provision. From this perspective, infrastructure projects must be designed and planned with a good understanding of their whole of life costs. In other words, not just their cost of ownership and operation, but also including an understanding of how they will enhance - or at least not undermine - natural processes and human well-being. From a climate crisis perspective, this can also be considered as contributing to resilienc, which is defined as the ability to absorb short-term shocks and to selforganise to adapt to long-term stress. Green infrastructure, according to this definition, would seek to support local resilience rather than erode it. The inclusion of whole of life costing for infrastructure requires that the construction, management, maintenance and decommissioning costs and impacts of the project are considered – both internally and in terms of the natural and human systems", says Matthew Cullinan, Infrastructure Executive Beyond the physical infrastructures, zones also need to provide important non-physical infrastructures, such as skilled labour, education and skills training, innovation platforms and non-physical connectivity. This includes efficient trade and logistics services, etc - plans are currently in place to open the defunct railway line between the Atlantis SEZ and the Port of Cape Town. Skills

FAST FACT Green infrastructure can be defined as services derived from well-functioning ecosystems that enhance and support human well-being and are healthy and resilient. training must be constantly updated to keep pace with changing business and industrial development needs. It is also important to catalyse and facilitate industrial upgrading, by promoting technology innovation and transfer, and higher-valued sectors corresponding to different development stages. In the long run, zones should be linked to the local economy through local supplier networks. FINANCE AND FUNDING The Atlantis SEZ has accepted that traditional national capital funding set aside for these zones will not fund 100% of bulk infrastructure, civil works and top structures. Zones also need to strike a good balance between industrial development and social/ urban development. The impacts of zones on host societies go well beyond economic efficiency. Zone programmes are unlikely to succeed if they fail to offer opportunities for quality employment and upward mobility for trained staff, neglect environmental sustainability, and/or if they derive their competitive advantage from exploiting low-wage workers. Such programmes would fail to achieve the possible dynamic benefits such as industrial upgrading and positive spill overs to the local economy. By contrast, zone programmes that recognise the value of skilled workers, and seek to provide the social infrastructure and working or physical environments in which such workers thrive, will be able to facilitate upgrading. The basic social infrastructure and living environment such

as the quality and cost of housing, health services, schooling, along with the incidence of crime are uppermost concerns for any group of workers. THE PRIVATE SECTOR It is quite clear for any SEZ in SA to make a meaningful difference in its manufacturing, infrastructure and community impact, it needs to appeal commercially to the private sector. It is the comparative advantage of an SEZ that will provide the private investor with the comfort of an attractive return on investment. Public infrastructure provision in South Africa is at a crossroads. The public sector budget to cater for such infrastructure alone does not exist any more. First class water, transportation, energy and telecommunications infrastructure are essential to the growth and survival of a developing economy such as South Africa. When it is planned, funded, and maintained well, infrastructure plays a vital role in supporting a high standard of living and facilitation of commerce and trade, thereby extending a nation’s global reach and serving as a basis for foreign direct investment. Many government organisations can tap the private sector for capital, technology and expertise to finance, develop and manage public-sector infrastructure projects. With failure in electricity and water provision in SA, is it not time to embark on a better model? The public sector is often able to shift risks related to lack of demand and revenue, design and construction, operations and maintenance, as well

Pierre Voges.

as finance, to the private sector. To do so, the right avenues must be developed. It is important to look at various Public Private Partnership models such as SEZs. It is also important, though, to devise models that consider local circumstances and local demand. With the right circumstances in place, PPPs can prove a winning partnership. “The Atlantis SEZ has adopted an unconventional approach; an approach that thinks differently about infrastructure, commercialisation and greentech operations. Atlantis is a classic example of Apartheid’s impacts, with people relocated out of the Cape Town CBD during the Apartheid years. This makes the development challenge so much ‘sweeter’. says ASEZCo’s CEO, Pierre Voges. n I N F R A ST R U C T U R E

C O R P O R AT E P R O F I L E S

The Federated Employers Mutual Assurance Company (Rf) (Pty) Ltd (FEM) was established as a mutual insurer in 1936. FEM provides workmen’s compensation insurance for the construction industry. Workmen’s compensation is a compulsory form of insurance providing wage replacement and medical benefits to employees or their dependents, in the case of injuries or diseases sustained in the course of their employment and is governed by the Compensation for Occupational Injuries and Diseases Act, (130 of 1993) (COID Act). Our business operations are essentially confined to the insurance of employers against their liabilities under the Compensation for Occupational Injuries and Diseases Act 1993 (COIDA). The Federated Employers Mutual Assurance Company (RF) (Pty) Ltd (“FEM”) is licensed to conduct non-life insurance business. Website: www.fem.co.za Email: enquiries@fema.co.za Tel: 011 359 4300

TO ADVERTISE IN

SA MIN NG

IN GREAT COMPANY

www.samining.co.za

READ WHAT REALLY GOES DOWN IN SADC

CONTACT ADVERTISING Ilonka Moolman 011 280 3120 moolmani@samining.co.za

I N F R AST R U C T U R E

Tshepo Monyamane 011 280 3110 tshepom@samining.co.za

If working with a group of lawyers who value having fun as much as they’re committed to the fundamentals sounds good to you, you’re in great company at NSDV. We left the boys’ club behind a long time ago, preferring partnership to cliquey condescension and bureaucracy, any day of the week. We’ve got experience in multiple territories, each of which has its own way of doing things – but wherever we operate, it’s always with a less formal and more ‘hands-on’ approach. When you come to us for legal advice, our experts will analyse your operation from every relevant perspective, identifying areas that could be made to function more optimally. NSDV is Africa’s first fully integrated law and professional consultancy firm, specialising in base industries including mining, construction, energy, renewables, agriculture, and the environment. Website: www.nsdv.co.za Tel: +27 10 880 3285

GENERATE RENEWABLE POWER FOR YOUR OPERATIONS Make a measurable difference New energy market regulations have opened the door for private partnerships through large scale generation projects, providing renewable energy sources to assist corporates in both diversifying their power sourcing requirements and meeting their net zero carbon commitments. Partner with us for sustainable, renewable power using our specialised ﬁnance solutions, with the support of our expert ESG Advisory services.

Watch the discussion on generating more renewable energy rmb.co.za/u/ipp

2020

2019

YEARS

2018

R4.5M R2.5M R1.5M

CORPORATE AND INVESTMENT BANKING

a division of FirstRand Bank Limited, is an Authorised Financial Services and Credit Provider NCRCP20..