Construction World November 2017

PROJECTS & CONTRACTS

The status quo of SA’s INFRASTRUCTURE

Ashton Arch Bridge, preparation of formwork for first pour of the Arch (anchor).

Why are mega projects subdued? One of the primary issues relating to mega projects revolves around funding issues. Central here is the allocation and availability of budget as well as the cost of capital. Borrowed funds, if this should be the case, are becoming more expensive due to recent downgrades. Further issues revolve around general economic conditions in South Africa as well as the general resources/commodities that affect many African countries. Other factors that have a detrimental affect include institutional incapacity for project preparation, bringing these to market, the procurement process, implementation and delivery. What are the main factors that impact the construction industry – particularly infrastructure? Public sector funding is directly related to the status of the economy. In many instances budget allocations come from the general fiscus and this in turn is directly related to tax revenue and the performance of the economy. If funds are borrowed, the process of securing loans and terms of agreement result in higher interest rates due to the recent downgrades. Bond auctions are not well subscribed due to uncertain policy positions which affect appetite for these and security of returns. Procurement regulations, specifically new Preferential Procurement Regulations, impact the construction industry as a whole. Private funding is limited as confidence in the country is low. Darrin Green, AECOM’s Managing Director for Civil Infrastructure in Africa and Michael Bouwmeester, AECOM’s Highways and Bridges Lead for Africa recently spoke to Construction World about the sta- tus quo of infrastructure in South Africa and how the country is doing in the African and global context. Here they give a frank overview of the current status of the consulting and construction industries and outline what can potentially happen if current conditions continue.

The last factor, we would say, is that skills within the industry that relate to planning and procurement, are lacking. What role does the political climate in a country play in this? The political climate plays a significant role in terms of political will and socio-political stability, which when perceived negatively, result in limited infrastructure delivery. The political climate impacts the economy and the ability to pay for infrastructure. In an ideal world the focus would be on infrastructure project delivery and not so much on political aspects. What has the impact on larger consulting and construction firms been? This has had a negative impact. There are far fewer mega projects that can be targeted by larger consulting and construction companies. There is now also significantly more global competition into Africa, less readily available money funding for large infrastructure projects as a result of the performance of the global economy, and the lacklustre resources/commodity sector. There is competition from Chinese SOEs, who are difficult to compete with as many of the projects are negotiated at a

Construction of new Boy Retief Bridge in progress.

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CONSTRUCTION WORLD NOVEMBER 2017