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Sector Overview - Consulting, Engineering, Mining and Infrastructure
The Economic Engine Of Growth In SA
By Shumirai Chimombe
Consulting Engineering: A High Value-adding Sector
Mining and infrastructure are key to the growth of consulting engineering as both sectors require the skills and services of this industry. This demand is likely to increase significantly with new projects coming onstream thanks to the roll-out of the government’s infrastructure investment programme to build a critical network infrastructure such as ports, roads and rail, energy and power, and real estate across the country. An increase in demand for high-value natural resources will also boost investment in the mining industry.
The construction sector offers the largest amount of business opportunities for consulting engineering. South Africa is at the forefront in generating new construction projects in Africa, with the sector contributing an annualised added value of R109.5 billion to the GDP in the fourth quarter of 2023 according to Statista, and 3% to total output. The government has historically been the largest provider of the major construction contracts in the country where the input of consulting engineers is much more required.
The Who Owns Whom (WOW) Consulting
Engineering Services in South Africa - July 2022 report indicates that this is a high-value-adding sector in the economy which leads to innovations and productivity enhancements in a very diverse range of industries including energy generation, oil refining, innovative technologies in recycling and water treatment, electronics design, and wireless transmissions. The shift to the private sector and looking to the future Consulting engineering companies, like others that are reliant on government business, had to face difficult adjustments over several years due to a reduction in public sector contracts.
The WOW report highlights that more and more consulting engineers have moved into working in the private sector such as in mining and alternative energy. However, this trend has the potential to change with the roll-out of the government’s Infrastructure Investment Plan 2050. Furthermore, long-term demand from other African countries mainly for infrastructure development will significantly benefit the consulting engineering industry.
Consulting Engineering In Numbers
The Bi-Annual Economic and Capacity Survey for June 2024 released by Consulting Engineers South Africa (CESA) offers an analysis of the industry based on feedback from 45 participating firms.
Total Fee Income - R2,7 billion
People Employed -4 646
Increase In Employment - 3%
Consulting Services Outsourced - 18%
Growth In Real Earnings Year-on-Year, Driven Mainly By Private Sector Projects - 7,7%
Rise In Earnings Compared To The Last Half of 2023 - 3,6%
Portion Of This Outsourcing Directed To Black-owned Enterprises - 20,3%
The challenges faced by the industry included declining capacity utilisation signalling a reduction in workload, increased competition, and project cancellations. Despite these challenges the overall outlook for the consulting engineering industry appears cautiously optimistic with firms expecting better conditions in the near future.
Mining: An Economic Pillar And A Provider To Communities
South Africa has long been known for its vast wealth in mineral resources and a robust mining industry that is a key contributor to the country’s economy and a major employer. It contributed some R202 billion (roughly $10.9 billion) to the country’s GDP in 2023, and the total value of mining industry merger and acquisition transactions in South Africa reached nearly $1.5 billion according to Statista. In 2023, South Africa’s platinum group metal production amounted to 239.9 metric tons. Platinum group metals include platinum, palladium, rhodium, ruthenium, osmium, and iridium.
The PwC South Africa publication, SA Mine 2024, indicates that the South African mining sector saw a significant increase in deal values. The increase is in line with global trends driven by the increased need for critical minerals that are essential for the energy transition. In South Africa, the deal-critical mineral of focus was copper which experienced excellent price performance. Other reasons for the upturn in deal values include consolidation and operational synergies within the industry, as well as diversification and strategic realignment.
Mining By Numbers
R202.1 BILLION - contribution by the mining sector to SA’s GDP
7.53% - mining sector’s contribution to GDP
477 000 - people employed in the mining industry in 2023
181 806 - people employed in the platinum group metals mining industry in 2023
91 000 - people employed by coal mining in 2022
239.9 - metric tons produced by South Africa’s platinum groups
23% - of South Africa’s global exports accounted for by platinum exports in 2022
26% - of the mineral mining revenue accounted for by coal in 2023
Source: Statista
Mineral Production In South Africa In 2023 By Commodity
Mining Production - August 2024
Year on Year Percentage Change
June 2024: -3,5%
July 2024: -1%
August 2024: 0,3%
Month on Month Percentage Change
June 2024: -1,8%
July 2024: -0,8%
August 2024: 2,9%
3 Month June-August 2024: -1,4%
Source:Stats SA monthly indicators October 2024
Stats SA reports that nationally, mining activity increased by a marginal 0,3% year-on-year in August 2024. Manganese ore, platinum group metals and chromium ore were the largest drivers of growth. Nickel and copper also recorded a good month.
Looking To The Future
Mining companies play a pivotal role in the communities they operate in. They are significant employers and are central to driving the economies around them. In addition, communities benefit from other services provided by mining companies such as clean water and infrastructure. PwC South Africa points out that it is therefore crucial to start thinking and planning for a mining sector that is sustainable when operations close and that, where possible, uses available technologies to improve safety, productivity and efficiencies to extend the life of its mines.
Infrastructure - Scaling Up Public-Private Partnerships
Infrastructure In Brief
Higher investment and more effective delivery of infrastructure are needed to grow the economy and create jobs
Government is reforming its approach to infrastructure development, focusing on partnerships with the private sector
Lessons from other successful programmes will be used to accelerate infrastructure delivery and adapt institutions
In addition to scaling up private sector participation, the proposed reforms are designed to ensure coordinated decision making and promote climate resilience
2024 Medium Term Budget Policy Statement
In the 2024 Medium Term Budget Policy Statement (MTBPS) delivered on 30 October, Minister Enoch Godongwana stated that over the medium term, government is transforming its approach to public-sector infrastructure by creating the conditions to attract private-sector participation.
“Beginning in 2025/26, the National Treasury will combine project preparation support, transaction advice for public-private partnership (PPP) projects and ringfenced financing from government borrowing in a single structure.
“The consolidation of project preparation and financial structuring functions will strengthen planning and preparation, helping large-scale projects and programmes to reach financial close faster. In addition, the National Treasury will make greater use of financial instruments such as dedicated bilateral loans, concessional financing and infrastructure bonds to fund large infrastructure projects. Engagements with the private sector, including by sourcing technical skills and facilitating contracting arrangements, will underpin delivery.”
Consulting Engineers South Africa (CESA) welcomed the MTBPS’ focus on infrastructure with CESA CEO Chris Campbell stating that “If we intend to spend money on infrastructure, we must recognise that without adequate funding, we risk stagnation in economic growth and further decline.”
He reaffirmed CESA’s commitment to collaborating with government and industry stakeholders to drive meaningful change and enhance South Africa’s economic landscape.
The reforms that the MTBPS spelled out echoed the plans that the Minister of Public Works and Infrastructure, Dean Macpherson stated in his 2024/25 budget policy speech.
He said that the Department of Public Works and Infrastructure (DPWI) will play a leading role in growing an inclusive South African economy through infrastructure-led growth - infrastructure becoming a top priority by putting in place measures that will increase the ratio of gross fixed capital formation from 14% to 30% of GDP. He also stressed that the DPWI will “work relentlessly to build new public-private partnerships to roll out new energy, communication, water, and transport infrastructure. Amplify the SDGs’ use and impact by leveraging private sector involvement through procurement.
“Infrastructure serves as the foundation of a nations’ economy by providing the necessary physical and social systems for sustained growth and development. Through the infrastructure networks, we can improve productivity, attract investment, and enhance the overall well-being of every South African,” he added.
Scaling Up Private Sector Participation
The Medium Term Budget Policy Statement outlined a series of reforms which are under way that are expected to enable greater private-sector participation in public infrastructure projects.
Credit Enhancements To Mobilise Private Finance
Government is developing a blended financing risk-sharing platform which will include a credit guarantee vehicle to help de-risk public-sector projects – starting with the energy sector – for private-sector developers and lenders. The initial focus will be on independent transmission projects to bridge the energy transmission deficit. The vehicle is expected to be operational by the end of 2025.
Increasing Private Participation In Transactions
The Department of Water and Sanitation Water Partnerships Office has two priority programmes for non-revenue water (the revenue lost from leaking water infrastructure) and recycling wastewater for different uses. The private sector can participate through performance-based contracts and public-private-partnerships (PPPs).
To improve passenger rail services, Transnet and the Passenger Rail Agency of South Africa are finalising a list of priority projects. Transaction advisors will then be appointed to structure the transactions and prepare requests for proposals, which will be issued to the market in 2025/26.
Implementing The PPP Review Recommendations
The 2024 national Budget outlined reforms to the PPP regulations to accelerate infrastructure delivery. The new regulations will reduce procedural complexity in PPP implementation and close regulatory gaps. Regulations relating to unsolicited proposals will make it easier for a private company to make a proposal to the public sector for an investment opportunity.
Grant Reforms To Support Sustainable Urban Development
Electricity, water, sanitation and waste management services are normally supplied through trading services. Detailed reforms are being rolled out and in 2025/26, government will create a performance-based conditional grant to trigger these changes to improve the functioning of trading services.
Enhance Private Sector Participation
Revise public-private partnership regulation
Take a programmatic approach to private sector participation
Augment balance sheets of Eskom and Transnet
Implement Budget Reforms
Reconfigure capital budgeting
Reform infrastructure conditional grants to improve performance
Increase efficiency in disbursement of immediate response disaster grants
Increase Infrastructure Finance
• Enhance credit to de-risk projects and mobilise funding
• Create an infrastructure asset class to crowd in new investors
• Increase liquidity for immediate response to disasters
2024 Medium Term Budget Policy Statement
