‘Treasury flaw’ puts brakes on building the economy
Mismanaged spending dooms construction industry, says engineer
● 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