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A R400-billion infrastructure fund to finance investment in critical infrastructure at national, provincial and local levels, was announced by President Cyril Ramaphosa on 21 September.

SANRAL welcomes the government’s emphasis on infrastructure as a primary driver for economic growth and job creation. Local and international investors take the quality of a country’s primary road network into consideration when they make decisions on where to establish projects that will stimulate broader growth and development.

National and provincial roads as well as infrastructure relating to human settlements and public transport will be among the top funding priorities.

The funds will go towards “shovel-ready infrastructure projects” – especially in the areas of roads and dams, President Ramaphosa said in a major policy speech at the Union Buildings.

This investment – the South African Infrastructure Fund – will be funded through the reprioritisation of existing government spending as well as resources coming from development finance banks and institutions and private sector investors.

The new plan is different from previous government initiatives because it is linked to implementation and specific timelines to ensure “projects are delivered on time and within budgets.”

A dedicated Infrastructure Execution Team has been created within the Presidency – consisting of people with extensive project management and engineering expertise to assist with project design and oversee implementation. The team will implement lessons learnt from the massive roll-out of infrastructure prior to the 2010 World Cup.

The role of the Presidential Infrastructure Commission will be strengthened to ensure improved coordination across the three spheres of government. This will “reduce the current fragmentation of infrastructure spend and ensure more efficient and effective use of resources.”

The private sector will also be invited “to enter into meaningful partnerships with government in this fund.”

Potential for job creation through investment

The President said infrastructure expansion and maintenance has the potential to create jobs on a large scale, attract investment and lay a foundation for sustainable economic expansion.

Details about the reprioritisation of revenue within the existing budget will be provided by the Minister of Finance, Nhlanhla Nene in his Medium-Term Budget Framework to be delivered in Parliament in October.

The contribution from the Fiscus will be more than R400-billion. This will then be used to leverage additional resources from developmental financial institutions, multilateral development banks, private lenders and investors.

The infrastructure investment is at the core of a comprehensive “economic stimulus and recovery plan” announced by Mr Ramaphosa which consists of –

• Growth enhancing economic reforms
• The reprioritisation of public funding to support job creation
• The establishment of the Infrastructure Fund
• Addressing urgent and pressing matters in education and health
• Investments in municipal social infrastructure improvement.

“These measures will be implemented immediately to ignite economic growth, restore investor confidence, prevent further job losses, create new jobs and address urgent challenges faced by vulnerable groups in the community,” he said.

He expressed his confidence that the new economic stimulus and recovery package will play a decisive role in reversing the current contraction in the South African economy.

Construction projects that are already being implemented by SANRAL will fit in seamlessly with other initiatives designed to attract investment from the private sector and develop finance banks. They are well-structured and well-managed, and SANRAL has a proven reputation of working in partnerships with the private sector.

• In the Eastern Cape work on the N2 Wild Coast Road is well underway including the construction of two of the largest bridges in Africa, across the Mtentu and Msikaba gorges. This development will boost tourism, stimulate trade and facilitate access to services in one of the most underdeveloped regions of the country. Contracts to the value of more than R2.7bn have been earmarked for small and black-owned enterprises.
• Construction on the Moloto Road has already started and some R4.5bn is allocated to this project in the current financial year. It includes major safety upgrades to a road that connects rural communities in Limpopo and Mpumalanga to the core of the Gauteng economy.
• The Mt Edgecombe interchange near Durban will be officially opened in October. This R900m project will provide improved access to tourism, agri-processing and commercial activities on the North Coast of KwaZulu-Natal.
• The N7 is a vital artery for economic development in both the Northern and Western Cape. It connects the Cape Peninsula with Namibia and feeds economic activity along the entire West Coast. Current upgrades between Hopefield and Melkbosstrand represents a R2.3bn investment in infrastructure in the region.

Following a Cabinet meeting held on 22 August 2018, it announced that five new non-executive members were appointed to SANRAL’s Board:

• Mr Themba Barrange Mhambi (Chairperson);
• Mr Alderman Robert Haswell;
• Ms Nkareng Mpobane;
• Mr Thamsanqa Piet Matosa; and
• Ms Lungile Madladla.

Ms Lungile Madlala returns to the Board. She was a member between 2008 and 2013, was a board member of the Construction Industry Development Board, was an executive committee member of the World Road Association and chairman of Inoxa Industries. She is a trained civil engineer with two decades corporate governance experience in both public and private spheres.

Mr Alderman Robert Haswell J.P. had a distinguished academic career here and internationally, was elected to the Pietermaritzburg city council in 1984 and was the first mayor of the Maritzburg-Msunduzi Transitional Local Council in 1995.

Ms Nkareng Mpobane has a degree in economics from the University of the Witwatersrand and has worked at RMB Private Bank.

Mr Thamsanqa Piet Matosa was president of the National Union of Mineworkers (NUM) in 2015 and in 2018 global deputy president of the Building and Woodworkers International Workers Union.

Mr Themba Barrange Mhambi did his BA Honours at the University of Johannesburg and his masters at New York University in the USA. He has been active as a lecturer, project manager and strategy developer at several educational institutions as well as state-owned enterprises.

Access to sophisticated equipment used in construction is one of the biggest hurdles facing emerging companies. They often do not have the capital to purchase major machinery used for excavations, ground moving and the grading of roads.

But emerging contractors in the construction industry will now be better able to participate in major projects following a landmark agreement between SANRAL and two construction machine suppliers, Barloworld and Bell.

The agreement with Barloworld Equipment will give black-owned enterprises greater access to equipment, financing and training which will enable them to tender more effectively on road construction projects managed by SANRAL.

“This will open up the industry to new participants and remove many of the barriers that prevent companies owned by black, women and youth entrepreneurs to compete effectively against the entrenched players in the construction sector,” says Skhumbuzo Macozoma, the Chief Executive Officer of SANRAL.

“Through our co-operation with Barloworld Equipment we are promoting the growth of black business and taking positive steps to support a sector with immense potential for growth and job creation.”

The Memorandum of Understanding sets out cooperation across a broad range of activities, including providing small contractors in the SANRAL supply chain with access to equipment, financing and training.

Together, SANRAL and Barloworld will promote partnerships in the fields of training, fleet management, marketing and communication.

Emmy Leeka, CEO of Barloworld Equipment Southern Africa, sees it as an opportunity to empower emerging contractors: “We have built valuable partnerships with black-owned enterprises through the years and this initiative will take our activities to a higher level.”

The other agreement, with Bell Equipment, will also help to promote fair competition in the construction and engineering sectors.

Small contractors will now be able to purchase, rent or lease road construction equipment that will enable them to participate in major tenders where high standards of equality are required. Bell will also leverage its existing partnerships with the financial sector to give small contractors access to financing.

Bell sees the agreement as an opportunity to position itself as a road construction equipment supplier of choice. “This partnership with SANRAL will enable us to grow our customer base and contribute greatly to the empowerment of emerging contractors in the industry,” says Bell chairman Gary Bell.

Macozoma says of the agreements: “Our primary objectives are to grow the construction and engineering sectors and attract new entrants, especially black contractors who can build businesses and create jobs.

“It is a trailblazing step for the South African construction industry.”

• Barloworld Equipment is a division of Barloworld Ltd, a multinational brand distribution company listed on the JSE.
• Bell Equipment has a global footprint and more than six decades of experience in the manufacturing of construction equipment.

Transforming the construction industry is a major thrust of SANRAL. The country-wide consultation on the draft transformation policy has been concluded, implementation of those sections that were generally supported has begun, the policy is now final with just some clauses requiring ministerial and cabinet approval.

But implementation of those sections that were generally supported has started. The various tender documents are being revised to give effect to the Transformation Policy.

Thus the market has been segmented to make for a more equitable approach – construction companies with CIDB grades 1-4, those with 5-7 and 8 & 9 compete in different sections of the contract market. Entry-level work packages (sub-contract) already normally go to those with CIDB grades 1 and 2.

There were two holdups in implementation, though.

One was the need to rework the evaluation system to ensure compliance with Treasury prescripts. This has meant a slow-down in awarding contracts, which had an impact on the broader construction industry.

The roll-out of some fifty projects has started, but these are in the design phase and construction will obviously start later than originally planned. The awarding of tenders has also resumed but the fact of the matter is simply that the effect of this delay will be felt for some time into the future

The second hurdle to overcome had a more serious effect. At times SANRAL’s road building operations countrywide came to a virtual standstill. This was due to the demands by so-called business forums which would just come onto a construction site, demanding 30% of the contract value but refusing to go through the proper prescribing procurement processes.

These “forums” remain an on-going risk. The route to counter this is to have more intensive stakeholder engagement with people and institutions in the affected areas, and engage the main contractor, subcontractors via the project liaison committee and the implementation of the principles of the 14-point plan.

It is only when all of this has failed that law enforcement authorities would be engaged.

Transformation does not simply mean that 30% of a contract value must go to the formerly disadvantaged without proper procurement processes being followed. It also means that the roads agency has to step in – to ensure there is open, equal and fair access, plus inclusivity. Classroom teaching and practical work on the ground are part of the approach. To prepare and guide the new small contractors to be able to execute the required tasks to fulfil the contract.

There is also a transformation desk to deal with all upcoming problems, as well as partnership agreements with various service providers for equipment, finance mentorship who can assist where SANRAL does not have the capacity.

The roads agency’s role in transformation has meant that more opportunities have to be provided. Support systems have to be in place to prepare, guide and mentor the new entrants into a highly competitive industry!