Construction shackled
Roll-out of infrastructure projects held back by red tape in both public and private sectors
AHEAD of hosting the third South Africa Investment Conference today and tomorrow, President Cyril Ramaphosa has played up the importance of infrastructure development as an employment stimulus measure and a key to boosting South Africa’s productivity and that of its citizens.
In his weekly letter to the country, Ramaphosa said: “Investor confidence has been boosted by, among other things, the establishment of the Infrastructure Fund. The conference will demonstrate that South Africa remains an attractive investment destination, and will show the progress we are making to improve the business climate. It will build on the positive momentum in investment in the years before the onset of the Covid-19 pandemic.
“Foreign direct investment flows into South Africa, for example, rose sharply from R26.8 billion in 2017 to R70.6bn in 2018.”
However, the Western Cape Property Development Forum has pointed out a hindrance to the rolling out of public infrastructure projects. Chairperson Deon van Zyl said: “Public procurement processes are the largest stumbling block to rolling out public infrastructure. In June, Public Works and Infrastructure Minister Patricia de Lille announced 276 projects aimed to fast-track a robust infrastructure pipeline purported to set South Africa’s economy back on track and kick-start the flailing property development and construction industry.
“Ironically, it is, to a large extent, the way in which the public sector has tied up our industry in red tape and legislation for years that has led to the critical situation we are now in,” he said. “Especially when it comes to procurement, which includes tendering…
“With government’s own inability to get its projects to market, the construction industry is desperate for private-sector projects to hit the ground. Yet applications by the private sector are also severely hindered by government red tape and ineffective bureaucracies, with statutory approvals required just being too slow for projects to remain economically viable.
“This means that private projects stagnate due to rising costs even before a shovel hits the ground, and thousands of planned jobs for construction workers… never materialise.
“Government is not spending money on its projects and is also actively delaying the spending by private-sector clients on their own projects due to delays in processing applications.
“While we believe the bill is a valiant attempt at ensuring that procurement becomes more transparent … it remains to be seen if the culture of change which the bill proposes will filter down to local municipal levels.”
Chief operating officer of civil engineering and construction company Civils 2000, Chris Botha, said: “Most contractors hope to have a funnel of work and to convert at least 10% of projects tendered into awarded projects. However, a huge frustration in terms of government projects is the withdrawal of tenders resulting in no awards being made at all.”
SOUTH Africa’s third investment conference, to be held today and tomorrow, looks set to be bigger and better than the previous two conferences, held in 2018 and last year.
At the inaugural SA Investment Conference (SAIC) held at the Sandton Convention Centre in 2018, President Cyril Ramaphosa announced that over the next five years, the country would embark on an ambitious drive to attract about $100 billion (R1.5 trillion) in investments.
This is aligned to the sixth administration’s commitment to grow the economy and address the high unemployment rate by creating muchneeded jobs, particularly for the youth in the country.
This year the conference happens at a time when Covid-19 has negatively affected the global economy, resulting in massive job losses.
South Africa may not be able to escape the sobering predictions, made by observers, of a persistent economic depression caused by the pandemic and other changes in geopolitics.
However, the country is known for its resilience and capability to overcome challenges. The country’s strong and stable financial sector has enabled it to weather many storms, including the 2008 global financial crisis.
It continues to remain an attractive investment destination with its rich ecosystem and biodiversity.
The third SAIC will build on investments that were attracted during the first and second investment conferences, which delivered investment projects worth more than $42bn.
Some of these projects have been completed and others are under way. Despite the slow trajectory of economic growth in South Africa owing to the Covid-19 pandemic, the initial target to attract $100bn is still on track, as the country has already bagged half the targeted investment.
The SAIC and the monetary figures that are being mentioned may not be enough to give confidence to unemployed people and those who were further dragged into poverty following the national lockdown.
However, South Africans can be assured that this investment drive and many other activities that the country is doing to get the economy growing will make a significant contribution towards building a secure and prosperous future for every citizen.
In the midst of global gloom, this is an opportune time for South Africa to demonstrate to investors that it can safeguard and grow their investments.
With strong and reliable banking and telecommunications infrastructure, as well as several well-developed and advanced economic sectors, South Africa stands out as an ideal springboard for trade, business and investment. As President Ramaphosa outlined last week, South Africa has taken many tangible actions to promote a conducive investment environment, with a focus on easing the way of doing business and tackling corruption.
The government has moved to increase South Africa’s competitiveness as a country by taking steps to address challenges at critical state-owned entities. New executives and boards were appointed at Eskom, and rail and ports; and critical issues such as infrastructure bottlenecks raised by investors as a constraint to doing business in South Africa are being addressed.
The Economic Reconstruction and Recovery Plan announced by President Ramaphosa recently continues to be anchored on a partnership that involves the government, labour and business. It also hinges on creating a conducive business and investment environment that will attract both foreign and domestic investors.
The plan is critical in the drive to unlock greater job creation and faster economic growth to create a fertile ground for investment.
The success of the plan depends on private-sector investments. One of the most significant steps taken to deal with corruption is the establishment of an open tender system, which introduces far greater transparency and accountability to the tender process.
Equally important is the decision to prohibit any relatives of office bearers from doing business with the government.
South Africa is going to this investment conference buoyed by growing African integration through the African Continental Free Trade Area (AfCFTA), which offers many opportunities for the country and the continent.
The AfCFTA agreement aims to create the largest free trade area in the world and bring together 1.3 billion people across 55 countries, with a combined gross domestic product valued at R7 trillion.
This is a huge opportunity for the continent and global investors. As a gateway to many African markets, South Africa stands ready to do everything possible to sustain a positive investment climate and believes the economic spin-offs will spill over to other African markets. Collectively, Africans will continue to work together to get policy and legislative conditions right to ease the business environment and attract more foreign direct investment to the continent.