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Meeting Socio-economic Challenges

through Sustained Infrastructure

Investment

onsulting Engineers South Africa’s (CESA) Leveraging Private Sector Resources
President, Abe Thela, recently presented his
The use of the Public-Private Partnerships (PPPs)
Cpresidential message and theme for the year
in the financing, design, building and operation of
at a function held in Johannesburg. With the theme
infrastructure has emerged as the most important
of ‘Meeting Socio-economic Challenges through
model employed by governments around the world to
Sustained Infrastructure Investment’ Thela stated that
close the infrastructure gap. South Africa has not yet
this year CESA will be focusing on the role infrastructure
realized the full potential of this model of infrastructure
plays in the socio-economic development of our country
delivery. Many opportunities exist in various economic
and how this role can be enhanced through an increase
sectors such as renewable energy, transportation,
in infrastructure investment and skills development.
water, alternative energy sources, education, etc. where
Social, Political and Economic Realities the PPP model can be used to maintain the momentum
of infrastructure development in the country. However,
The National Planning Commission identified the two the process must be transparent, the project pipeline
most pressing challenges facing the country as being clearly defined, regulatory red tape removed and the
the fact that too few South Africans are employed public must get better and more cost effective services.
and that the quality of education for poor black South
Africans is substandard. The unemployment rate is Addressing Inefficiencies in the Procurement
estimated at 25.4% and of great concern is the fact that System
50% of unemployed South Africans are youth between
CESA has, for some time now, been aware that there
the ages of 15 and 24 years. This figure escalates to
are inefficiencies in the way public-sector infrastructure
63% if the discouraged youth job-seekers are added to
projects are implemented. These shortfalls include lack
the statistics.
of planning, inappropriate procurement approaches,
lack of project management capacity & capability, lack
Thela stated that, “These problems coupled with the
of other desired technical skills in the public sector,
rising youth population reflect a generation at risk,
rampant corruption, etc. In addition these inefficiencies
contribute to socio-political disorder, put heightened
rob South Africa of multiple billions of Rands annually,
strain on the country’s limited financial resources and
which could be effectively used to fund the much-
arrest economic growth”.
needed increase in infrastructure investment
Increasing Infrastructure Investment Improve Investment Credit Rating
According to the National Development Plan, South
In November 2014 Moody’s Rating Agency downgraded
Africa will need to spend at least 30% of its Gross
South Africa’s ‘investment grade’ credit rating to Baa2
Domestic Product on infrastructure development to
from Baa1 and adjusted the outlook to stable from
allow infrastructure to have a meaningful contribution in
negative. It is crucial for the country to improve its
eradicating poverty, halving the unemployment rate and
investment grade rating to continue to access credit from
contributing to economic growth to the desired level of
both local and foreign lenders at favourable interest-
between 5 and 7% per annum by 2030. Currently the
rates. Unfavourably high interest-rates on loans reduce
country is only managing 22.9% of GDP on infrastructure
the value of the loans and accordingly the amount spent
spending with the public sector contributing 13.95% and
on infrastructure.
the private sector 8.95%. The respective targets for the
public and private sectors are 20% and 10%.
Human Capital Development
He contended that, “It is therefore clear that the starting The increase in infrastructure investment will require
point for addressing the country’s socio-economic more engineers, technicians and artisans to implement
challenges is to increase investment in infrastructure new infrastructure projects and maintain the existing
development”. In order for South Africa to address its infrastructure. The availability of skills is one of the
socio-economic challenges both public and private elements that investors wanting to invest in a country
sectors will have to increase their spending on consider with the level of skills determining the country’s
infrastructure with the public sector needing to increase productivity and competitiveness.
more.

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