Impact of government delays on critical infrastructure projects in South Africa with a focus on SANRAL projects
Written by; Rejoice Vukela and Khanya Swartbooi
The South African government is divided into a three-tier system, consisting out of the national, provincial, and local levels of government (Gov, 2023: online). The three-tier government system consists of the below government clusters (Gov, 2023: online).
Economic Sectors, Investment, Employment, and Infrastructure Development.
Governance, State Capacity, and Institutional Development.
Social Protection, Community and Human Development.
International Cooperation, Trade, and Security.
Justice, Crime Prevention, and Security.
The above-mentioned government clusters consist of various departments which have an objective to properly coordinate all government-wide priorities and to facilitate and monitor the implementation of priority programmes (Gov, 2023: online).
The Department of Transport (DOT) falls under cluster one and it is managing several entities, including SANRAL. With that brief understanding of the structures at hand, we shall focus our blog on the South African National Road Agency Limited ( SANRAL).
Halt in SANRAL projects
The South African National Road Agency (SANRAL) had to re-advertise tenders due to a violation of crucial internal control in the valuation processes which resulted in five projects with a collective value of R17.4 billion being put on halt in June 2022. (Phakathi, online: 2022)
To find out why and how there could have been issues in the internal processes within SANRAL, we took a closer look at their procurement process. The process followed in awarding projects is quite lengthy and there are different committees required to review submitted tender documents.
The projects were put back in place as of November 2022 and SANRAL has persuaded the Development Bank of Southern Africa to oversee the road improvement and construction projects that are crucial to support economic growth. (Phakathi, online:2022).
Collapse in critical infrastructure
The lack of infrastructure maintenance over the years and the way in which “suspicious” companies have been awarded tenders for work that they do not have the capacity and or the technical skill set to handle, is one of the major reasons why we are seeing a system failure in our public infrastructure. Perhaps one should consider that our own agencies do not have the technical expertise to procure some of these projects in a proper and diligent manner which result in the poor choice of preferred bidders. The blame can surely go both ways if one dug deep enough.
The damages of lives lost, infrastructure collapse and repair costs from the floods in KZN last year, could have been less if the public infrastructure had been better maintained, better built, and better managed. (Gumede, online: 2022)
Water delivery infrastructure at municipal level has also collapsed across the country. This infrastructure collapse caused widespread areas to experience excessive water outages which is the key contributing factor to the latest cholera outbreak in Tshwane. Most importantly, it has resulted in many protests across the country where citizens fight for their basic human right to safe, clean, and reliable water.
Collapse of the infrastructure industry
The global pandemic caused major issues for the construction industry in South Africa and the knock-on effects are still being felt. One could argue that the COVID-19 pandemic was the last nail in the coffin after a decade of sluggish non-activity in the industry following the 2010 World Cup and 2008 recession. Even though the industry has somewhat tried to recover over the years, experts believe that the construction companies across the country will continue to suffer as material costs and interest keep rising. (McElroy, Jurss-Lewis, online: 2023)
We also highlight what we as a country have termed the Construction Mafia’s. They are a group of people/communities who have organized themselves into groups known as ‘local business forums’ who have invaded construction sites across the country, demanding a portion of the awarded work, money or stake in development projects in what can only be described as “systemic extortion”. (Qhobosheane, online: 2022).
Such groups have become deeply entrenched in the construction sector and with the absence of any effective legal action against such groups, many businesses have had to concede to their demands. This could have a disastrous economic effect in the long term for a sector that is already under strain. (Van Der Heever, online: 2022).
One must also look at their plight for work opportunities and how the lack of decisive and effective communication of the procurement and sub-contracting goals has led to this so-called mis-understanding that has seen some individuals take advantage of the fact that 30% of deliverables must be allocated to local businesses and communities.
Will it be the responsibility of the private sector to upgrade its own infrastructure and provide basic services?
Service delivery can be defined as the fulfillment of basic services such as electricity, health, roads, safe water, traffic controls, refuse collection, sewage disposal and maintenance, as well as municipal parks and recreation (DBSA, online: 2023).
The South African Constitution Act No. 108 of 1996, outlines that the duties of municipalities are to “structure, manage its administration, budgeting, and planning processes to give priority to the basic needs of the community (DBSA, online: 2023).
As part of the National Development Plan of the South African government, Finance Minister Enoch Godongwana presented a budget speech on the 22nd of February 2023. It is evident from the budget speech that the South African government is committed to infrastructure development. The speech stipulated that the public sector expenditure on infrastructure is estimated at R 903 billion (Omarjee, online: 2023).
A significant amount of budget is to be spent on key projects in transport and logistics amounting to a total of R 351.1 billion being allocated to this endeavour. (Omarjee, online: 2023).
SANRAL, as a reporting entity to the DOT, is set to focus on the construction, maintenance, and preservation of the national road network (Omarjee, online: 2023).
Evidently there are challenges that the South African government faces at all levels of governance in successfully implementing infrastructure projects in particular. These challenges hinder successful, basic service delivery (Gumede, online: 2022). Reports state that the biggest challenges are tender irregularities and inconsistent governance by officials, which are construed as the brain drain of the public sector that results in loss of “project memory”.
Over and above already mentioned, the South African government have a bigger task at hand – to stabilize the country’s debt. Biznews reported that the country’s debt has surged to unsustainable levels, and it is projected to peak at over 90% of GDP by 2025/26. (BizNews, online: 2023)
Further reports suggests that the government will not be able to tackle the country’s challenges alone and therefore private sector participation is required especially with regards to capital investment in the country (BizNews, online: 2023).
Additionally, the National Treasury recorded that the public and private capital investment in 2021 amounted to 13% of the GDP, while between 2011-2021 private sector was at 11% of the GDP and the public sector was at 5,6% of the GDP (South Africa. Department of National Treasury.2023. 2023 Budget Review Public-Sector Infrastructure and Public-Private Partnerships Update: Government Printer)
The government is aware of the challenges they are facing in infrastructure development resulting in a recent report published by the Department of Public Works and Infrastructure (DPWI) wherein Minister Sihle Zikalala has encouraged Public Private Partnerships (PPP) to boost infrastructure development (ICE,2023: online).
An overview on Public Private Partnerships (PPP)
Public Private Partnerships (PPP) are defined by the National Treasury as a contract between the public and private sector, where the private sector is engaged to perform service delivery duties which traditionally form within the mandate of the public sector (South Africa. Department of National Treasury. 2023. 2023 Budget Review Public-Sector Infrastructure and Public-Private Partnerships Update: Government Printer).
Public Private Partnerships (PPP) are all about collaboration between the private sector and the public sector and not function as a gateway for the public sector to forfeit their mandate of service delivery to the citizens of the Republic of South Africa, as it sometimes appears to be.
Public Private Partnerships (PPP) started in 1998 in South Africa, and the National Treasury reports that to date there are 34 projects which have been concluded under such partnerships, with a total value of R 89.3 billion (South Africa. Department of National Treasury. 2023. 2023 Budget Review Public-Sector Infrastructure and Public-Private Partnerships Update: Government Printer). Currently, SANRAL is operating three PPP’s namely the N3 toll road, the N4 East toll road, and the N4 West toll road.
PPPs are viewed as a way to accelerate economic growth in South Africa. In order for Public Private Partnerships (PPPs) to be successful, legislative or policy frameworks governing such partnerships must be clear and tender irregularities must be avoided (Neethling, online: 2023).
Why South Africa is still considered as Africa’s gateway to the world
In the fourth Quarter of 2022 (October – December) Statistic SA recorded that the GDP of South Africa decreased by 1,3%, which resulted in seven of the ten sectors contracting, as per the below figure 3 (Smith, online: 2023).
Comparing pre-and-post-pandemic levels of production it is clear to see that the construction industry was the worst-performing sector with a decrease 23.1% compared to the pre-pandemic period. (StatsSA, online: 2023).
The Reserve Bank’s medium-term forecast is not promising excessive growth for the South African economy, with the economy forecasted to expand by 0.7% in 2024 and by 1% in 2025 (Smith, online: 2023).
With a focus of economic growth on the African continent the United Nations World Economic Situation and Prospects (WESP) reported that economic growth in Africa is expected to slow from 4,1% in 2022 to 3,8% in 2023 (LEX Africa, online, 2023). The IMF predicts that six African countries will be among the top fast-growing economies in 2023, which were identified as Libya (17.9%), Senegal (8.1%), Niger (7.3%), DRC (6.7%), Rwanda (6.7%) and Cote d’Ivoire (6.5%) (LEX Africa, online: 2023).
It has been recorded that Rwanda is amongst the fast-growing economies with a low median age population totalling over 12 million (LEX Africa, online: 2023).
Despite the growth reported in Rwanda, the country is facing several challenges that hinder strategic investments.
These challenges consist of infrastructure gaps, limited access to electricity, poor transportation, securing funding for its developing financial sector, and cumbersome processes of obtaining necessary permits and licenses to do business (LEX Africa, online: 2023).
The above challenges seem to be widely identified in developing countries in Africa.
Nevertheless, LEX Africa identified the top ten (10) African countries that are attractive for investment opportunities (LEX Africa, online: 2023). Despite the challenges that South Africa is facing the country was listed as number two (2) after Egypt who was recorded as number one (1) as the largest economy in Africa (LEX Africa, online: 2023).
In conclusion, the delays in implementing or executing critical infrastructure projects, particularly SANRAL projects, in South Africa have a significant impact on service delivery, economic growth, and the overall stability of the infrastructure sector.
To address these issues and mitigate the delays in SANRAL projects, the following suggestions could be considered:
Strengthen Internal Processes: SANRAL must enhance its internal controls and procurement processes to avoid tender irregularities and ensure greater transparency.
Partnerships of government implementing entities: Identifying entities capable of successfully implementing projects is essential. These entities should then establish partnerships with those facing challenges in project implementation. This ensures responsible budget utilization whilst focusing on critical priorities such as infrastructure development.
Improve Technical Expertise within SANRAL: Efforts must be made to enhance the technical expertise within government implementing entities that are responsible for infrastructure projects. This can involve training and capacity-building initiatives to ensure better project planning, tender evaluation, and selection of qualified tenderers.
Public-Private Partnerships (PPPs): Encouraging PPPs can assist in attracting critical private sector investment and experts in infrastructure projects. Clear policy frameworks and regulations governing PPPs should be established to ensure effective collaboration between the public and private sectors.
Prioritize Maintenance: Investing in regular maintenance and upkeep of existing infrastructure is crucial to prevent further deterioration. Delays or halts in rolling out critical infrastructure projects prohibits the ability of SANRAL to address maintenance of infrastructure and limits the lifespan of critical infrastructure while increasing the cost of repair in the long run.
Address Construction Mafia: Government should take decisive legal action against organized groups involved in the extortion and disruption of construction projects. Strict law enforcement and collaboration with law enforcement agencies can assist to mitigate the influence of these groups and create a conducive environment for construction activities.
Stimulate Private Sector Investment: Government must create an environment that attracts private sector investment in infrastructure. This can be achieved through policy stability, favourable investment conditions and avoiding/ limiting cumbersome bureaucratic processes.
By implementing these recommendations the government can overcome delays in SANRAL projects and improve overall infrastructure development in South Africa. This will enhance service delivery, support economic growth, and contribute to the stability and resilience of the infrastructure sector. This will ensure that budgets allocated by The National Treasury are used responsibly towards addressing key priorities in South Africa.
https://www.wits.ac.za/news/latest-news/opinion/2022/2022-07/sas-entire-infrastructure-is-on-the-verge-of-total-collapse.html#:~:text=The%20lack%20of%20infrastructure%20maintenance,the%20breakdown%2OHANNESBURG – The Development Bank of Southern Africa has been appointed to handle a multi-billion tender procurement project on behalf of the South African National Roads Agency (Sanral).