Industry body welcomes infrastructure spend decision, but still concerned

Industry body Consulting Engineers South Africa (Cesa) welcomes the decision by government to allocate about R100-billon as seed funding for infrastructure development.

“The organisation would like to appeal to government to use competent capacity at municipal level, by leveraging the partnerships offered by the industry to ensure that the money that has been allocated will translate into meaningful spend on infrastructure,” says Cesa CEO Chris Campbell.

In 2012, R880-billion was allocated for infrastructure development for strategic integrated projects, but by 2014, only R300-billion was spent, leaving R500-billion worth of projects that were not implemented.

Campbell notes, this year, quite a bit has changed in the infrastructure industry, although more money would be needed to get the investment programmes for infrastructure back on track – this cannot be done from only the national fiscus.

“What is needed is a healthy collaboration in the form of partnerships between government and the private sector incorporating both local and foreign investors to bolster the shortage of funds. On the current trajectory, with the tax collection off target last year, coupled with a continued depressed economy and insufficient activity in mining and quarrying this year, we are going to be nowhere near realising our aspirations to ensure water security, keep the lights on and address the issues relating to the provisioning of basic and decent infrastructure. We know we deserve smart cities and bullet trains, but for now we need an urgent plan of action, coupled with real action to catch up on the backlog in basic infrastructure development.”

Campbell emphasises the importance of having collaborations between local and foreign investors, particularly amid Finance Minister Tito Mboweni’s announcing in his Budget speech in February that the country will not be able to collect the requisite tax revenue, with National Treasury expecting an overall budget deficit for 2018/2019 of 4.5%.

The only other source is private-sector investment and, in the absence of a heathy level of trust between all the parties, nothing will materialise to the extent to which it is needed, adds Campbell.

We realised four years ago already that we will have to try to do more with less, but failed to implement the Standard for the Infrastructure Procurement Delivery Management (SIPDM). Albeit possibly not have been perfect at the time, it at least sought to attempt to ensure the adherence by the public sector to best practice procurement of professional services in infrastructure delivery as opposed to buying cheap professional services and expecting the best quality of infrastructure delivery, he declares.

The aim of the SIPDM was to assist the public sector in differentiating between the procurement process used for consumable goods and professional consulting engineering services, so that it was possible to ensure more optimal procurement outcomes in infrastructure delivery. “Insufficient guidance is available and we simply continue to buy least cost professional services,” says Campbell.

Although the SIPDM has been revised and looks as if it might be relaunched, some time this year, Cesa is still concerned about the lost opportunity for ensuring the best value for the money being spent on infrastructure projects as it will take yet another year before public officials are adequately trained and held accountable for compliance.

Spending on economic infrastructure is crucial for unlocking funding that will stimulate and facilitate more trade for local industries – good roads and rail facilitate ease of transport and logistics, while security of energy and water mean that industries are able to produce enough goods for local and export sale, key for sustained employment and economic growth, he highlights.

“The Department of Water and Sanitation does not have any money, as funds have been inappropriately spent, resulting in its requiring help from the fiscus and the private sector to ensure water security.”

Campbell notes that economic growth and water security are crucial in South Africa, citing the current situation in Standerton, in Gauteng, for example, where the poultry industry is affected by job losses because the Lekwa municipality cannot provide adequate water to sustain the industry.

The consulting engineering industry, owing to the lack of capacity within the public sector has become so aggressively competitive, that often bids are so underpriced that companies are unable to absorb the trainee graduate engineers who are the future of the industry, Campbell says.

There is a desperate need for projects – not only for economic growth but also to sustain the industry and attract more young people to become engineers in a country where we are in desperately short supply – if we are to address the backlog in infrastructure development and develop the capacity for the future operation and maintenance of that which we develop today, he adds.

He notes that nonpayment and timely payment by government are issues that continue to hinder the infrastructure industry. Public-sector entities do not appreciate the cost of doing business with government through the current tender process. Tenders are frequently cancelled without due cognisance of the cost of responding. The process should not be regarded in the same way as “buying a lotto ticket”, which costs a few rands. These costs run into hundreds of thousands of rands and more due responsibility needs to be exercised before inviting tenders or subsequently cancelling these.

Campbell explains that consulting engineers are expected, after the bidding process, to further discount their fees to levels that make it impossible to ensure that companies remain in business. Client bodies have the responsibility of knowing what level and quality of service they can expect of professional service providers and the requisite costs. If they lack the expertise, they have the duty of care of commissioning the services of professionals who do.

With the dire shortage of projects locally, there is also the opportunity for those that have the appetite to look for business in neighbouring countries as a backup opportunity for growth.

Campbell concludes that companies need to consider cost competitiveness while clients need to match that with cost effectiveness, without compromising the quality of professional services, as the client is the ultimate owner of the investment, which, if ill considered at the onset, will result in high levels of long-term cost of ownership.