On government-led infrastructure projects – with minister also announcing project preparation bid window to ‘turbocharge infrastructure investment’.
The South African National Defence Force (SANDF) might be called on to assist government in dealing with the disruption of public infrastructure projects worth billions of rand by the construction mafia, much like it did previously to protect Eskom’s power stations and assets.
Minister of Public Works and Infrastructure Dean Macpherson said on Tuesday the construction mafia poses a difficult problem because it creates uncertainty in government’s ability to deliver projects on time and on budget – and if you are going to have stoppages and violence, it is a concern for investors.
“When I went to China and the United Kingdom, it was brought up repeatedly,” he said.
Macpherson was speaking at the unveiling – along with acting head of Infrastructure South Africa (ISA) Mameetse Masemola – of a first-of-its-kind project preparation bid window to extensively expand infrastructure investment to accelerate economic growth and create jobs.
He said the Department of Public Works and Infrastructure (DPWI) will be hosting a national summit in November in eThekwini, which is “kind of ground zero for this behaviour”.
He will attend together with a number of other cabinet ministers, including the minister of police, the national police commissioner, MECs, and industry players “to contemplate this very difficult problem that exists for infrastructure projects”.
Macpherson said the DPWI wants to work more closely with the South African Police Service (SAPS) and he will be meeting with Minister of Police Senzo Mchunu soon about how to secure government-led infrastructure projects.
“It’s not impossible. It’s been done before. You will recall that when Eskom was under attack and sabotaged, the SANDF was deployed to protect those sites and that stopped.
“We have got to do better work in crime intelligence and got to do better work in stopping these [construction site] stoppages,” he said.
Macpherson said there is a need for a common approach to deal with the construction mafia.
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Government has ‘incentivised’ criminality and violence
He said the other issue they must deal with concretely is the 30% so-called set-aside on projects for small and medium black-owned businesses.
“There is now a common position that the 30% so-called set-aside is the gateway for the construction mafia,” he said.
“What government has done unknowingly is that they have monetised and incentivised the acts of criminality, violence and murder that we have seen on these sites to the detriment of small and medium-sized black businesses that government wanted to bring into the construction space on government-led projects.”
Macpherson said small and medium-sized black-owned construction businesses have told him they are “actually the biggest losers because these guys arrive with AK-47s, they arrive to harass people, to inflict violence and so on”.
“So the question we also need to contemplate at the summit is how do we bring back and into construction projects small and medium-sized businesses that legitimately deserve to participate in government’s infrastructure plan instead of actually just putting a monetised number that the mafia look for?”
Master Builders South Africa (MBSA) executive director Roy Mnisi welcomed the initiatives to deal with the construction mafia, stressing that its activities are still rife.
However, Mnisi said the proof of these initiatives “will be in the eating” because MBSA has heard of initiatives several times before, even at presidential level.
What happened on the ground did not reflect that law enforcement or the government was in charge when it came to dealing with this problem, he added.
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‘Billions available’ for infrastructure
Macpherson said the project preparation bid window is a crucial step towards expanding infrastructure investment in South Africa.
“As we unveil the first-of-its kind project preparation bid window, we are taking a decisive step towards achieving the economic growth and job creation that our country so desperately needs,” he said.
“This initiative will enable us to move beyond the talking phase and focus on action – laying the foundations for sustainable infrastructure that will support long term development.”
ISA’s Masemola said R189 billion will be available in this bid window and builds on the 12 infrastructure initiatives announced by President Cyril Ramaphosa earlier this year at the Sustainable Infrastructure Symposium South Africa (Sidssa) – which have already benefitted from R179 million spent in project preparation funding allocated to ISA by National Treasury.
She said the project preparation support offered by ISA will include funding/financial structuring support, technical support, legal support and institutional/governance arrangements.
Masemola said priority sectors for this bid window are energy, water and sanitation, transport, human settlements excluding student accommodation, social infrastructure such as education and health, municipal infrastructure and industrial development zones/special economic zones.
Applications for this bid window are now open and will close on 6 December 2024.
It is specifically for projects valued at more than R1 billion that have the potential to crowd in investment from alternative sources, such as multilateral development banks and development finance institutions.
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‘Game-changer’
Macpherson said the bid window being unveiled is “a game-changer”.
“For far too long, one of the major barriers to infrastructure development in South Africa has been the lack of sufficient project preparation support.
“Without this critical support, many projects have stalled or failed to move beyond the planning stages but with this announcement, we are removing this obstacle,” he said.
“We are providing the tools necessary to ensure that infrastructure projects are shovel-ready so they can be implemented efficiently and effectively.”
Macpherson added that the bid window will mitigate the lack of capacity that inhibits the roll out of infrastructure programmes by municipalities and state-owned enterprises (SOEs).
“We are effectively saying we will help you deliver it. Seed it to us, we will still deliver it to you but we will do all the hard work because we understand there is no capacity or capability to do so,” he said.
“It will allow us to turbocharge infrastructure investment by ensuring that projects are not only well prepared but also attract the necessary funding to get off the ground.”
Macpherson said financing institutions in China and the UK expressed great interest in South Africa’s infrastructure pipeline during discussions on recent visits to these countries.
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Impact of infrastructure investment on GDP
He said the link between infrastructure investment and economic growth is well-established globally, with research from leading institutions such as the World Bank, McKinsey Global Institute and the International Monetary Fund consistently showing that for every 1% increase in infrastructure investment, a country’s GDP can grow by between 0.4% and 3%.
Macpherson said infrastructure investment is not just a priority but a necessity for South Africa, adding that the government of national unity (GNU) has committed to building an economy that creates jobs, reduces poverty and fosters inclusive growth.
“Infrastructure is the engine that will drive this transformation,” he said.
Macpherson acknowledged the vital role played by ISA and the Infrastructure Fund in this endeavour.
“The key question that we have to grapple with is how do we coordinate the work that the Infrastructure Fund and ISA does in relation to the R950 billion in the Medium-Term Expenditure Framework that is set aside for infrastructure development.
“Given the fiscal constraints South Africa faces, we cannot rely solely on public funding to finance our infrastructure ambitions,” Macpherson said.
“This is why we are embracing innovative financing models, such as blended finance and public-private partnerships (PPPs).”
Mnisi said the project preparation bid window is something that should excite the construction industry because it seeks to assist municipalities in particular to roll out infrastructure programmes.
He pointed out that the issue of capacity has proven to be one of the reasons municipalities struggle to deal with infrastructure programmes.
“Anything that seeks to address those inhibitors is something we can accept as a good move.”
This article was republished from Moneyweb. Read the original here.
