THE challenges facing Finance Minister Enoch Godongwana in preparing the national budget were impossible to ignore, they included low global economic growth, the spectre of rising inflation, high government debt levels and fierce competition for limited resources. Reaction to his delicate balancing act has been largely positive, although some industry organisations have expressed concern and disappointment regarding certain issues.
The South African Institution of Civil Engineering (SAICE) welcomed the focus on infrastructure. The institution said that “infrastructure is at the centre of public and economic wellbeing. The Minister pointed out that “Infrastructure investments lay the foundation for inclusive and sustainable growth; they address supply-side constraints; and expand access to basic services.”
“Implementation, implementation, implementation – it is one thing to allocate funds for infrastructure spend but it helps no one if it is not implemented to its fullest in the most value-for-money driven manner.” This was CEO of Consulting Engineers South Africa (CESA), Chris Campbell’s reaction to the Minister’s budget presentation.
Commenting on behalf of another sector whose performance is driven by infrastructure spend, the Steel and Engineering Industries Federation of Southern Africa (SEIFSA, welcomed the budget and its estimated R903 billion that will be spent on infrastructure over the medium-term, a key point the industry body highlights for the metals and engineering sector.
“However,” SEIFSA commented, “we note with concern the envisaged finalisation of the Public Procurement Bill, which National Treasury anticipates only to table through the parliamentary process in March 2023.
“In the continued absence of finalising this bill, there is considerable uncertainty around procurement by state organs, and particularly around aspects of preference for local companies.
“SEIFSA continues to call for an urgent and accelerated finalisation of the Public Procurement Bill to limit the opportunity being lost to domestic industrialisation,” the industry body said.
Infrastructure investment
Overall, the public sector is projected to spend R903 billion on infrastructure over the medium-term. The largest portion of this, around R448 billion, will be spent by state-owned companies, public entities and through public-private partnerships.
On the subject of the funds being allocated to state-owned entities, Campbell is pleased that these allocations will be accompanied by strict conditions to ensure sustainability, accountability and transparency.
Commenting on the budget, SAICE noted that “there is an allocated spend of R351.1 billion for transport and logistics, including for SANRAL to improve the road infrastructure network. While R132.5 billion is the planned spend for water and sanitation over the next three years, mainly by the water boards.”
Procurement, crime and unemployment
In reference to crime and corruption the Minister stated that as we undertake infrastructure projects, we need to crack down on criminality in the construction sector, going on to say that the extortion and intimidation of lawfully appointed contractors and the workers they employ cannot be tolerated. In addition, R14 billion has been allocated over the medium term to fight crime and corruption.
Commenting on this Campbell cautioned, “The construction mafia is a serious threat to the development of the infrastructure that our country sorely needs for economic growth and development. We need to focus on redeveloping our capacity for crime intelligence
and not simply be hiring just anyone off the street.”
SAICE said that it had expected more detail to address the critical short comings and the effective rollout and implementation of:
- Proper procurement processes in construction
- Rooting out of corruption – how will it be done?
- The effective rollout of infrastructure development
- The protection of infrastructure during construction and beyond
Unpacking South Africa’s employment crisis
SAICE says that “addressing these points is crucial. Through collaboration we need to move towards holistic appraisal practices, to make sure that investments prioritise projects with the highest overall impact. Criteria should include strategic fit, societal impact, and deliverability.
This must be done to sustain and grow the economy and create employment opportunities for all South Africans, including the many unemployed engineers in the country.
SAICE Said that because the lion’s share of the infrastructure spend, will be spent by state-owned companies, public entities and through public-private partnerships, “it is critical that we need professionalization of the Public sector to be implemented and rolled out effectively to ensure that funds are managed efficiently.”
Infrastructure maintenance
“The acknowledgement of the parlous state of the country’s road network and the water and sanitation crisis were highlighted by the Minister through the investments in these sectors. However, our focus is not only on building new infrastructure, but concurring with the Minister, on maintaining existing infrastructure” said SAICE.
“SAICE has always stressed the importance of maintaining the country’s existing infrastructure – allocating billions on new infrastructure then allowing it to degrade through lack of maintenance, is not only shamefully wasteful of resources but robs the very people it was designed for of basic dignities and a healthy, productive environment.”
On behalf of CESA, Campbell cautions, “In doing maintenance it is critical that during this rehabilitation process that it is carried out properly to ensure that the asset lifespan is effectively prolonged and that is not just a short-term fix.”
Building capacity and sustainability
“While we are allocating funds, we need to address the lack of capacity that is paralysing many municipalities, leaving citizens for decades without essential services. While building infrastructural capacity, allocations must be made to ensure that civil infrastructure investment and maintenance are monitored and audited. Instead of infrastructure deteriorating a few months after completion, why do we not build to last? We need to work on standardisation for durable infrastructure,” SAICE said.
“Further, SAICE welcomes the investment allocation for relief due to recent floods. The Minister said that for recent floods and the national disaster declared in various provinces, R695 million is available in this financial year for immediate relief.
“A further R1 billion will be available next year. With such events becoming more frequent, we must take cognisance of climate change in our infrastructure planning, construction techniques and maintenance activities to mitigate the effects of flooding on a large scale by embracing quality infrastructure that the nation can depend upon. We strongly believe that to enable the development of a greater engineering industry and to push forward the country’s infrastructure, the private sector and all South Africans must continue to hold the South African government accountable with regard to how it will provide society with environmentally and economically sustainable infrastructure. It is critical to protect and enhance physical infrastructure because of its daily existence and our common prosperity as a nation,” commented SAICE.
Rural development
SAICE said that it was also welcomed to see the investments being made in enabling infrastructure development in rural communities, such as Phase 2 of the Welisizwe Rural Bridges programme, which will see the installation of 96 bridges annually to enable rural communities in the Eastern Cape, KwaZulu-Natal, Mpumalanga, Limpopo, Free State, and North West provinces to safely access schools and workplaces,” commented SAICE.
Automotive industry disappointed
While the Automotive Business Council complimented the Minister for being generally progressive in his announcements, it noted that “the automotive industry was particularly disappointed that no solid commitment was made on the support programme for the manufacturing of New Energy Vehicles (NEVs) and NEV components in the country.
“The Minister did not provide any policy guarantees for the South African automotive industry’s inevitable transition to New Energy Vehicles notwithstanding SA’s commitments to just transition and decarbonisation strategies covered by the US$8,5 billion allocation.
“The industry further reiterated that the delays with the promulgation of the NEV white paper continue to pose one of the biggest risks towards investment and retention of jobs in many of our local production lines.
“As outlined in the recently released National Association of Automobile Manufacturers of South Africa (naamsa) thought leadership paper, the country’s policy makers must demonstrate tangible and deliberate intent to create and stimulate a competitive environment for the NEV market through various government support schemes for NEV production in order for the South African automotive industry to remain globally relevant, competitive and strong,” naamsa commented.
As the Minister stated in his conclusion, “Our economy is facing significant risks. Uncertainty is on the rise. It requires us to do bold things”, Campbell once again reiterated, “Without proper implementation and oversight that is driven by a value-for-money ethos, none of these bold plans will come to fruition.”
Renewable energy incentives
SEIFSA has consistently highlighted that while it is important to stabilise Eskom, and the debt relief package does that, the broader solution lies in allowing an accelerated deployment of generation capacity by businesses and households.
To this end, the tax measures allowing companies to recoup 125% of the capital cost of renewable energy investment, without limitation to the size of capacity installed, and the 25% rebate afforded to households for solar installation are welcomed.
“However, while National Treasury’s intention to induce this investment in the short-run by capping the window of these incentives to two and one year for companies and households, respectively is noted, SEIFSA submits that longer timeframes should be considered, given the extent of the energy crisis.”
SEIFSA suggests that, at a bare minimum the period should be the medium-term expenditure framework or five years. “Moreover, the precarious state of the economy at the current state and into the next fiscal year for companies and households, means that these economic agents have limited financial resources to make the energy investments. The risk of the very short timelines considered for these tax measures will lead to the measures only being taken up by companies that have the financial resources at the present moment, thereby limiting the full potential of the measure. The same observation regrettably applies to private households,” SEIFSA said.
