Latest / Drive with John Perlman / Billions for infrastructure - little spending

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Billions for infrastructure - little spending · Drive with John Perlman

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  Speaker 1: John Perlman on 702.
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  Speaker 2: 3 to 6 p.m.
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  Speaker 1: 702 Drive, it's good to have you with us on
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  Speaker 1: the show. Coming up a little bit later, we'll be
• 0:12
  Speaker 1: looking in more detail at that water crisis out in Broncos.
• 0:16
  Speaker 1: Sprayed Professor Anya Duplessis, a water expert, and she's got
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  Speaker 1: some insights and ideas as to what needs to be
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  Speaker 1: fixed in regard to the water supply and cleansing systems,
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  Speaker 1: because it appears that there's a problem in both of them.
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  Speaker 1: But right now, let's focus our attention on this. A
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  Speaker 1: very interesting story on the MoneyWeb site looked at how
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  Speaker 1: the huge amounts of money that have actually been allocated
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  Speaker 1: for infrastructure. And I've referred a number of times in
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  Speaker 1: the past, a number of times in the past to
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  Speaker 1: the fact that this is always, for example, part of
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  Speaker 1: the state of the nation address. It's part of the
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  Speaker 1: budget presentation and we'll be having the medium term budget
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  Speaker 1: policy statement tomorrow where no doubt infrastructure is once again
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  Speaker 1: highlighted as a driver of of economic growth, a creator
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  Speaker 1: of jobs, a generator of revenue and tax, plus, of course,
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  Speaker 1: the building of roads and bridges and hospitals and all
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  Speaker 1: the other things they need. However, the numbers suggest that
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  Speaker 1: we actually have a problem. There are lots and lots
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  Speaker 1: of government tenders advertised, but around 17% only were actually awarded.
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  Speaker 1: And even after that, It takes a lot of time
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  Speaker 1: for shovels to actually hit the ground, for cranes to
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  Speaker 1: be put on site, for earth-moving equipment to actually start
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  Speaker 1: up and start moving earth. So what exactly is going wrong?
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  Speaker 1: is with the entity Infrastructure South Africa, where he is
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  Speaker 1: a program manager responsible for the infrastructure pipeline development and management.
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  Speaker 1: A very good afternoon to you, and thanks so much
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  Speaker 1: for giving us your time. The intention is there, the
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  Speaker 1: money is there, the tenders are supposedly out there, and
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  Speaker 1: yet we're not building the bridges and the buildings. Why not?
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  Speaker 1: Good afternoon to you.
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  Speaker 2: Good afternoon, John, and good afternoon to your listeners. Thank
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  Speaker 2: you for having us. I think, John, the reality is
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  Speaker 2: that South Africa's infrastructure challenge is not only about what
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  Speaker 2: is allocated to projects. We have a significant infrastructure need
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  Speaker 2: and substantial investments and commitments have been made. But the
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  Speaker 2: real challenge is converting those into projects that are ready
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  Speaker 2: for implementation. And that requires, amongst others, proper feasibility studies
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  Speaker 2: and preparation, business cases, ensuring that regulatory bottlenecks are unlocked
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  Speaker 2: and there's funding certainty. So if those fundamentals are not
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  Speaker 2: in place, we are likely to experience delays in procurement
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  Speaker 2: efficiencies and ultimately underspending. So essentially, the focus must be
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  Speaker 2: to strengthen the entire infrastructure delivery value chain from project
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  Speaker 2: preparation through to implementation, which is what is initially missed
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  Speaker 2: in the beginning, preparing proper, bankable, credible projects.
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  Speaker 1: Why are people committing money to things that have not
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  Speaker 1: had a feasibility study done that are not bankable in
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  Speaker 1: the way that you've just outlined and described for us, Mr. Ndlovu?
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  Speaker 1: I mean, isn't it creating an illusion of activity and
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  Speaker 1: an illusion of possibility? It looks great at investment summits,
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  Speaker 1: which certainly this presidency has been hugely fond of. But
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  Speaker 1: in fact, it might actually be misleading, not only the public,
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  Speaker 1: but the investment community suggesting a level of readiness that
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  Speaker 1: doesn't exist.
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  Speaker 2: So, John, it's a combination of two things, right? So,
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  Speaker 2: projects that are not properly prepared or properly scoped. do
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  Speaker 2: result in delays in awarding tenders, number one, as you've
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  Speaker 2: seen in the article that we've, or in the stats
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  Speaker 2: that we've just explored from the eTender portal.
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  Speaker 1: Right.
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  Speaker 2: But it doesn't mean that because tenders are not awarded,
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  Speaker 2: activity won't happen. If you look at the statistics, it's
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  Speaker 2: very important to distinguish canceled tenders and closed tenders. So
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  Speaker 2: the closed tenders, they basically distinguish that tenders are somewhere
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  Speaker 2: within evaluation but have not been canceled. And those reasons
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  Speaker 2: are not very clear from the portal, but that's some
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  Speaker 2: of the work that we are doing. If you've seen
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  Speaker 2: as Infrastructure South Africa, we've launched our third edition of
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  Speaker 2: the construction book, which intends to give some transparency to
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  Speaker 2: the market. The construction book essentially highlights projects that are
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  Speaker 2: coming to market in the next financial year. And we'll
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  Speaker 2: be doing a regular review of those projects tomorrow. as
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  Speaker 2: we continue to go through the financial year, to ensure
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  Speaker 2: that there's some form of accountability and we can reflect
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  Speaker 2: on what successes we have and where the bottlenecks are.
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  Speaker 1: I mean, these bottlenecks, I think it's fair to say,
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  Speaker 1: have been around for a long, long time. This is
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  Speaker 1: not a new set of debates and conversations, Mr Ndlovu.
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  Speaker 1: And I'm wondering how much damage this is starting to
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  Speaker 1: do out in the investment community, because there's clearly goodwill
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  Speaker 1: judging by the amount of money that people are willing
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  Speaker 1: to pledge when, you know, there's a certain performative element
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  Speaker 1: like at summits, but also real commitments are being made. But,
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  Speaker 1: you know, people surely are starting to say, well, we
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  Speaker 1: would love to have funded that bridge across a river
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  Speaker 1: in the Eastern Cape that either needed building or refurbishing
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  Speaker 1: in some way, but nothing's happened. You know, we're going
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  Speaker 1: to send our money somewhere else.
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  Speaker 2: Yeah, John, and we must acknowledge that in terms of
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  Speaker 2: where we are, this obviously has dampened investor confidence, especially
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  Speaker 2: from the private sector. Obviously, we all know that the
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  Speaker 2: fiscus is constrained. And again, you mentioned the medium-term budget
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  Speaker 2: speech that we're going to have. We know that we
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  Speaker 2: have constraints on the fiscus. But what's important is we
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  Speaker 2: need to strengthen private sector confidence in the projects we prepare.
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  Speaker 2: And private sector really looks for just a couple of things. Transparency,
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  Speaker 2: investment readiness, properly prepared projects that they can invest in,
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  Speaker 2: and obviously sort of financial models. that allow them to
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  Speaker 2: participate in the projects. And one of the big reforms
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  Speaker 2: that have happened is the Triple P framework, the REC16,
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  Speaker 2: which needs to be promoted, basically, to ignite this private
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  Speaker 2: sector investment in advancing these projects to implementation.
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  Speaker 1: Isn't it the harsh reality, though, Mr Ndlovu, and I
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  Speaker 1: do understand you may need to be a little discreet
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  Speaker 1: on this because these are your partners in trying to
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  Speaker 1: get this done, but isn't the harsh reality that there
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  Speaker 1: are just way too many people in key government departments
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  Speaker 1: who are either under-resourced or under-qualified to actually deliver on
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  Speaker 1: this and that this should have been recognized by government
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  Speaker 1: as part of a much larger project problem of state
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  Speaker 1: incapacity and that before embarking on this infrastructure drive, they
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  Speaker 1: should have fixed that first. I mean, you know, put
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  Speaker 1: at the start line a vehicle that is a drivable
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  Speaker 1: and has fuel.
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  Speaker 2: John, a difficult question, but listen, from my perspective, I think, yes,
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  Speaker 2: we acknowledge that there are huge technical capacity gaps within
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  Speaker 2: government and And that's why entities like Infrastructure South Africa exist.
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  Speaker 2: We focus on assisting our partners, as you say, to
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  Speaker 2: prepare projects better. Just because a project has allocated funding
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  Speaker 2: doesn't mean it's sufficiently prepared. And that's where the bottlenecks arise.
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  Speaker 2: So if we can get the preparation of the projects
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  Speaker 2: right and they are commercially viable, that automatically ignites investor interest.
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  Speaker 2: Of course, we need to accept that not all projects
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  Speaker 2: are going to be commercially viable. Some projects need to
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  Speaker 2: be funded from the Cisco's and that's a reality. So,
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  Speaker 2: Those that can attract blended finance, PPPs, private sector participation
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  Speaker 2: are the ones that we really need to ignite and
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  Speaker 2: focus on while we preserve some of the fiscus allocation
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  Speaker 2: to focus on the social infrastructure in terms of bringing
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  Speaker 2: service delivery to communities.
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  Speaker 1: Just a final question, and I hope it's a simple one,
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  Speaker 1: Mr Ndlovu. Is an inadequately prepared project simply a matter
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  Speaker 1: of competence? That, yes, there will be complexities, I get that,
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  Speaker 1: Some infrastructure interventions are more complicated than others. But fundamentally,
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  Speaker 1: we're looking at a problem of competence, aren't we? Not at,
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  Speaker 1: you know, complexities that are impossible to get your head around.
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  Speaker 2: So, John, we need to realize that historically, a lot
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  Speaker 2: of the government projects or state projects were... We're purely
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  Speaker 2: state funded. Right. So in a sense, we would look
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  Speaker 2: at technical feasibility, but a proper feasibility study is more
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  Speaker 2: than that. It should prove affordability from the state value
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  Speaker 2: for money, their funding arrangements and its readiness to be implemented.
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  Speaker 2: And I think that is, that is everything that we
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  Speaker 2: are incorporating into project prep as we go forward. Um,
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  Speaker 2: that should strengthen the pipeline of bankable projects that will
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  Speaker 2: come to the market.
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  Speaker 1: Thank you so much. Sumpiwe Ndlovu joining us from Infrastructure
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  Speaker 1: South Africa. I mean, there must be some of you
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  Speaker 1: out there who work on big projects, who are project
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  Speaker 1: managers and so on. And I'm not for a moment
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  Speaker 1: suggesting this work is easy because that would be wrong
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  Speaker 1: and it would be based on ignorance. But surely there's
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  Speaker 1: a set of, standard skills, predictable skills that need to
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  Speaker 1: be acquired, brought to bear on the project at hand,
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  Speaker 1: and then we get the stuff out there and we
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  Speaker 1: start investing the money that is already available. I'm still
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  Speaker 1: struggling to understand why we're being so slow at this
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  Speaker 1: as a country. Maybe you've got some thoughts. Call me, 011-883-0702.