State alone ‘can’t boost builders’

REFORM: CONCERN OVER INFRASTRUCTURE BACKLOGS

Private sector does not buy into promises made by Ramaphosa over past three years.

Government alone cannot lift the construction industry out of the ashes despite the R340 billion pipeline announced in infrastructure sectors, according to construction market intelligence firm Industry Insight.

The firm said it was becoming more and more apparent that the private sector did not buy into all the promises President Cyril Ramaphosa has made over the past two to three years because the country was still yet to see any meaningful economic reform and progress on reforming Eskom, corruption and so on.

“Very, very little has actually been done, with many of the president’s promises broken,” it said in response to Ramaphosa’s comments in his State Of the Nation Address (Sona) about the government’s infrastructure expenditure plan as part of the post Covid-19 economic recovery plan.

Industry Insight said Sona included bold promises to deliver “massive” infrastructure roll-out, but implementation paralysis persists within broader reforms. While the infrastructure roll-out relied heavily on private sector participation, contributions from the fiscus would determine success or failure.

It said Ramaphosa announced several large mega projects in the pipeline – funded in part by the private sector, the fiscus and contributions by the R100 billion Infrastructure Fund – adding that the economic impact of infrastructure expenditure was immense as it led to job creation and supported more sustainable growth. It should remain a pillar for economic prosperity.

The firm added that South Africa had significant infrastructure backlogs and an almost insoluble unemployment rate, highlighting that the private sector was a major contributor to investment, contributing over 50% to total investment in construction.

Peter Attard-Montalto, head of Capital Markets Research at SA consultancy and research company Intellidex, said the Sona exceeded a low bar, but there was excessive hype on non-energy infrastructure. There were deep problems with ongoing delivery now and delivery due shortly. He said current delivery on infrastructure was at odds with the sense of action everywhere.

In addition, the Infrastructure Fund did not exist as a pot of money but was a marketing wrapper around a disparate set of actual and potential line department and lower levels of government appropriations on infrastructure. This all served to give a sense of the speech being divorced from reality. “This is a key risk, especially with the budget coming up. For instance, the references to infrastructure spend and the presidential employment stimulus plan can both fall flat quickly as the budget cuts spending on both.

“The positioning of the Lanseria hub as a new ‘smart city’ is very interesting. This is one of the few infrastructure projects that is progressing through force of personality, yet it is hard to see it [being] replicated.

“A propensity to look at ‘job opportunities’ rather than ‘job years’, however, continues to cloud a sensible discussion of infrastructure impact.”