Construction sector welcomes contribution to infrastructure fund

25-09-2018
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IOL Business Report
Source

PRETORIA – Construction industry organisations have welcomed the R400 billion contribution over the next three years by the fiscus to a new Infrastructure Fund to be established to drive the revitalisation of South Africa's economy.

However, they say it might have come too late to save some of the financially stressed companies in the sector.

Despite a number of major listed construction sector heavyweights being in financial difficulties, resulting in the slashing of overhead costs by cutting jobs and closing operating divisions, the organisations believe there is still sufficient capacity in the construction sector to execute the projects likely to flow from the infrastructure stimulus plan.

President Cyril Ramaphosa said on Friday that the plan prioritised infrastructure spending as a critical driver of economic activity. “Infrastructure expansion and maintenance has the potential to create jobs on a large scale, attract investment and lay a foundation for sustainable economic expansion,” he said.

Ramaphosa said the fund would fundamentally transform government's approach to the roll-out, building and implementation of infrastructure projects, adding the private sector would be invited to enter into meaningful partnerships with the government.

“The contribution from the fiscus towards the Infrastructure Fund over the medium-term expenditure framework period would be in excess of R400bn, which we will use to leverage additional resources from developmental finance institutions, multilateral development banks and private lenders and investors.

“To ensure these funds are used effectively and projects are completed on time and on budget, we are establishing a dedicated Infrastructure Executive Team in the Presidency that has extensive project management and engineering expertise to assist with project design and implementation,” Ramaphosa said.

Webster Mfebe, the chief executive of the SA Forum of Civil Engineering Contractors, said Ramaphosa had hit the nail on the head with the plan, adding infrastructure development was the engine for economic growth in South Africa.

Mfebe welcomed the increased focus on the proper co-ordination of infrastructure development, but stressed the need for a re-look at the procurement regime.

He said the industry had been frustrated by the plethora of construction rules by various arms of government and state entities, which created policy uncertainty.

Mfebe said the construction sector was “on its knees with a lot of the big companies that had enormous capacity falling apart” and the infrastructure development plan might be coming too late for some of them.

But Mfebe believed with the progression of emerging and black-owned contractors up the Construction Industry Development Board grades, there would be sufficient capacity to execute the projects.

Roy Mnisi, the executive director of Master Builders South Africa, said the creation of the fund would go a long way to not only stimulate economic growth, but also bring back confidence to the construction industry, which had experienced an unprecedented decline this year.

– BUSINESS REPORT