NEWS: Is South Africa’s new infrastructure investment plan key to a revitalised construction sector?

In this opinion article, Aprio Strategic Communications founder Julian Gwillim writes about how infrastructure investment could benefit South Africa's struggling construction sector, but implementation of government's ambitious infrastructure investment plan is key.

Anyone who has driven through Johannesburg’s pothole-ridden streets, or who has wondered how remote learning is supposed to work in rural areas with no affordable access to data, or has lamented our moribund train network, recognises the necessity of a committed, well-managed infrastructure programme on the scale of Roosevelt’s New Deal. It would create employment, reinvigorate our once-proud construction sector, and set us up for future economic growth. One would think those would be good enough reasons to pursue it, but nothing is yet guaranteed.

South Africa’s new infrastructure investment plan, announced in October 2020, is billed as a “flywheel” for the country’s economic growth and recovery. It describes immediate, medium and long-term projects – involving an estimated R380-billion in investment – that will help revitalise the economy and reduce rampant unemployment.

It’s an ambitious document that acknowledges an historical underspend on infrastructure and the need for committed and targeted implementation. The infrastructure plan forms a pillar, alongside expansion of energy generation capacity, job creation and industrial growth, of South Africa’s R1.1-trillion Economic Reconstruction and Recovery Plan, also announced in October 2020.

ALSO READ: Government still has one lever to pull: Infrastructure investment

It makes particular reference to the woes of South Africa’s construction sector, which has been particularly hard hit by the effects of the coronavirus, contracting by about 14% in 2020. The sector has suffered over the past decade, especially without a dependable pipeline of high-value projects which would allow it to commit to much-needed investment in jobs and productivity-enhancing technology.

Initial data on the sector’s recovery from 2020 indicates the changing shape of the sector. According to Statistics South Africa: “The real value of recorded building plans passed increased by 55.9% year-on-year during January to July. Increases were recorded for residential buildings (69.1%), additions and alterations (50.7%) and non-residential buildings (33.1%).

A construction sector – particularly South Africa’s – cannot thrive on residential projects. It needs a pipeline of sustained activity. With demand for new office blocks unlikely to recover soon, this pipeline can only reasonably be sustained by either an expansion of South Africa’s manufacturing capacity or through investment into infrastructure.

The 2020 infrastructure investment plan makes the right noises about the importance of public-private partnerships, transparency, accountability, transformation, new technology and the green economy. And it draws a useful distinction between projects that could be implemented immediately, and those requiring medium and long-term planning.

But concerns have been raised about details of implementation, delays in awarding tenders and oversight mechanisms. And we’ve heard all this before: in 2012 the government adopted a national infrastructure plan that would, among other laudable goals, develop a twenty-year project pipeline, connect the poorest provinces to economic centres, support sustainable green energy initiatives on a national scale, accelerate the construction of new electricity generation capacity, provide for broadband coverage to all households by 2020 and achieve a host of developmental objectives. Few of those scenarios have materialised.

South Africa’s construction sector holds tremendous potential for driving employment and economic growth. The challenges facing it are imposing enough that only an ambitious programme on the scale of the proposed infrastructure plan will hope to solve them. There is clearly private, civil and public sector appetite to make such a programme a reality.

Source: Engineering News