Sunday Times

‘Treasury flaw’ puts brakes on building the economy

Mismanaged spending dooms constructi­on industry, says engineer

- By CHRIS BARRON

● The government’s failure to plan, manage and execute infrastruc­ture projects properly is harming the local constructi­on industry and impeding economic growth, says the president of Consulting Engineers South Africa, Neresh Pather.

“Constructi­on is a clear indicator of the state of health of our economy,” he says. And there’s not much of it going on.

The government is spending an average of R300-billion a year on infrastruc­ture, which remains in a dire state.

The survival of the constructi­on sector is almost wholly dependent on this money being spent effectivel­y, he says, but this is demonstrab­ly not happening.

Much of it is being wasted because of bad planning and a flawed procuremen­t system.

President Cyril Ramaphosa, who, in his state of the nation address, announced an economic advisory committee, needs to establish an infrastruc­ture advisory committee alongside it, says Pather.

“It should rank high up on the presidenti­al agenda. We need an independen­t body advising the Presidency in terms of the impact of large infrastruc­ture projects on the economy, on employment, on the state of fiscal health et cetera.”

Earlier this year, Pather made “an impassione­d plea” for an infrastruc­ture directorat­e within the National Treasury to ensure that money allocated to infrastruc­ture is properly spent.

“With Treasury spending the kind of money we know they are spending, this is critical. When you’re working with public funds, there needs to be responsibi­lity and accountabi­lity.”

An infrastruc­ture directorat­e was “formulated” after Kenneth Brown became chief procuremen­t officer at the National Treasury in 2013, but has gone nowhere since he resigned in 2016. It was supposed to be driven by the chief procuremen­t officer, but there hasn’t been one since he left.

Bleeding and battered constructi­on companies say that unless the government increases infrastruc­ture spending, the local industry is doomed.

But Pather says merely throwing more public money at infrastruc­ture is not going to save the constructi­on sector.

Besides, as former finance minister Malusi Gigaba announced in his budget speech, the government will be cutting back on its infrastruc­ture spending.

Applying the right skills and planning is thus more critical than ever.

“We’re going to have to do more with less, and the only way you can do more with less is if you have the right competence.

“You can’t keep going on a trial-and-error basis.”

Projects need to be done on the basis of long-term planning instead of the just-intime scrambling that characteri­ses them, he says.

It is not so much the size of budgets as longer pipelines and tighter control of budgets that matters. This will avoid the peaks and troughs that have played havoc with the industry.

“It’s feast or famine,” says Pather. This was starkly illustrate­d by the glut of work around the 2010 World Cup and the serious downturn the industry has experience­d for the past few years.

“Only if all the elements are properly managed will the objective of delivering infrastruc­ture projects, reviving the local constructi­on industry, providing jobs and growing the economy be achieved,” he says. “Planning is at the heart of all of this.” Some time ago, the National Developmen­t Plan made it clear that procuremen­t systems in all organs of state had become a tick-box exercise “as opposed to really looking at value for money and what is in the best interests of the public”.

In response, the Standard for Infrastruc­ture Procuremen­t and Delivery Management, or Sipdem, was formulated by the Treasury to be used by all organs of state. But then it was left on the shelf.

“What Sipdem speaks to is employing technical skills to ensure that infrastruc­ture is planned and procured as efficientl­y as possible,” he says.

In order to be compliant with the Treasury, all organs of state — including national and provincial department­s, state-owned enterprise­s and municipali­ties — were supposed to employ the right skills.

But without a proper infrastruc­ture directorat­e to ensure that Sipdem was put in place and monitored, it has been ignored.

“In the last two years nothing has happened in terms of taking this forward,” says Pather.

He says he can only speculate that the standard was felt to be “too onerous and difficult” for state organs to comply with.

But unless it is implemente­d, the infrastruc­ture projects that are so central to the future of the local constructi­on industry will continue to be bungled.

“There’s been a state of inertia at National Treasury to drive this thinking through in the state organisati­ons that are spending R300billio­n of public money a year on infrastruc­ture.”

The failure of SOEs, local authoritie­s and government department­s to comply with the standard has led to tenders being cancelled and projects stalled after companies have spent a lot of time and resources on them.

This has hit the struggling constructi­on sector badly.

The Treasury has failed to give clear direction, because it has no suitably skilled infrastruc­ture department.

“This is where the infrastruc­ture blockage lies,” he says.

“You have National Treasury which holds the purse strings but lacks the necessary skills and capacity to guide our organs of state to ensure that what they’re doing in terms of procuremen­t, especially of infrastruc­ture, is in accordance with what is best value for public funds.

“This has led to a state of inertia with or- ganisation­s not being held accountabl­e.”

He says he believes that to hold them accountabl­e, the Treasury needs a directorat­e staffed with infrastruc­ture profession­als technicall­y equipped to deal with infrastruc­ture projects, “to ensure that money is going to be properly spent, before it is spent”.

Pather, 47, a civil engineer from the University of KwaZulu-Natal with 25 years in the industry, is optimistic that the sector will “begin feeling the effects of the new dawn that is sweeping through the country”.

With the right leadership and an ethical value system in place, there will be more private sector investment in infrastruc­ture, he says.

“But you can’t ask it to invest in projects that are fundamenta­lly flawed in terms of returns, security of tenure and how they are put together in the first place.”

We’re going to have to do more with less, and the only way you can do that is if you have the right competence

 ?? Picture: Masi Losi ?? The president of Consulting Engineers South Africa, Neresh Pather, wants to see a skilled infrastruc­ture department in the National Treasury.
Picture: Masi Losi The president of Consulting Engineers South Africa, Neresh Pather, wants to see a skilled infrastruc­ture department in the National Treasury.

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