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A blueprint for the rejuvenation of the South African economy – Construction sector input – Part 1

Inclusive Society Institute has embarked on an extensive economic research project, which will culminate in a comprehensive ‘Blueprint for rejuvenating South Africa’s economy’. The methodology includes a series of dialogues with various sectoral stakeholders and policymakers. These dialogues each have two parts to them:

  • Gaining an understanding from the particular sectors perspective as to what the country needs to correct policy wise

  • What new initiatives / policies should be introduced to shift the economy onto a higher growth trajectory.

The dialogue with the construction community was held on 19 October 2021. A sampling of points made during the discussion included, amongst others:

  • Do we have a construction industry? The construction sector has contracted over successive quarters, especially as a result of the pandemic. The sector is under severe strain and confidence is low. So little is happening but so many depend on the sector for survival.

  • Infrastructure constraints in respect of water and electricity, too little land for development, losing skills and inadequate skills development processes. Fibre and affordable broadband internet access. Inadequate maintenance of infrastructure beyond project completion and sustainable employment. These constraints are recognised but not addressed.

  • Municipalities need to function to create a conducive environment for infrastructure development. Planning approvals take too long – processes that should take 6 months takes 4 years. Water use licences process also stifle development. Municipalities seldom plan beyond 3-5 years. Political interference in the execution, corruption and mismanagement of resources. Town planning is non-existent, buildings appear haphazardly on vacant land without consideration of complementary infrastructure. Government to employ competent and experienced personnel.

  • Long lead time to implementation of infrastructure projects and inadequate scale: Government has announced infrastructure programmes but little visible evidence. Long lead time to implementation.

  • There is poor planning and uncoordinated implementation. Shouldn’t work in silos to build a construction section. Example of a development – private sector proceeds with the bonded section, but the budgets and the planning not aligned. Schools, police stations not built, solid waste infrastructure. Instead of stimulating growth it becomes a dormitory suburb. Plans go one way (NDP), but reality goes another, widening backlogs. Municipalities don’t have accurate estimates for their populations and in and outflows of people and businesses. Town planning is non-existent, buildings appear on vacant land without consideration of complementary infrastructure.

  • Budgeting not integrated with planning: IDPs, SDFs not quantified, because not costed, and can’t monitor. Densification is a policy objective, but it is more expensive and may not be financially affordable. Government is not a good payer which may undermine project feasibility.

  • Supply Chain Management: Poor budget execution including SCM and supplier selection – government can’t determine a reasonable cost of infrastructure to avoid inflated tenders being awarded, or under-estimates of the true cost resulting in budget over-runs. Results in increase in performance bonds because of uncertainty about whether private sector can deliver on spec and budget. Abuse of panels on SCM, and only panellists can bid which causes corruption and frustration. Lack of transparency in tender adjudication. Guatrans is more transparent. Disqualification of bidders appears to be arbitrary and vague. Time to adjudicate tenders is too long – frequent extensions. Ratio of bids awarded as to those requested is low which wastes private sector time. Subcontractors need to be paid within 30 days, but the main contractor isn’t paid on time. 30% transformation spend. While transformation is imperative, it is often misinterpreted – it should be where feasible for subcontracting 30% and not applied across the board, holistically in the supply chain, not just between main and subcontractors.

  • Ideology: Government sees private sector as funders not as partners in development. Government doesn’t consult the construction industry and contractors in infrastructure planning and design. Government doesn’t appreciate that it cannot create sustainable jobs it can only create an environment. Government has been attracted to social grants rather than infrastructure investment. Lack of trust of the private sector.

  • Limited involvement of local communities: Builder’s mafia” – how can local communities be involved to ensure skills transfer. Government isn’t geared towards smaller businesses.

  • Recommendations: Infrastructure development can catalyse growth and reduce poverty but need to re-industrialise the industry. Instead of importing, materials in the supply chain can be developed locally e.g. valves. The design codes need to be put in place, not only for local content development but for maintenance. Need early contractor consultation as part of holistic development and a single planning vision. Need to fast track PPPs. Now these have come to a halt.

  • Skills: Government needs to understand contracting and specifying outputs and attract competent personnel, and train them using competence based assessment and apprenticeship programmes. Not just technical but social skills and ethics. There needs to be more accountability and incentives for accountability.

  • There needs to be a process review not a policy review. There is a proliferation of policies but little follow through and follow up to the industry.

  • SCM: Emulate Gautrans in being transparent about the bidding process, giving feedback to the bidders. SCM bids should be clear to avoid interpretation. Get the professionals who specified these bids to be more involved in adjudication. Address interpretation of 30% BEE spend requirement – should there be feasibility studies for this?

  • Need combined public sector/municipality-private teams can stimulate green infrastructure.

  • International partnerships need to considered and attract foreign investment. Good practices must be interpreted in the light of our context and constitution.

A full report on the deliberations will be released in due course.


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