Big boost for plans to turn South Africa into a construction site

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16-10-2024
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The Department of Public Works and Infrastructure (DPWI) and Infrastructure South Africa (ISA) have launched a new project preparation bid window, which they say will accelerate infrastructure investment and boost private sector confidence in state infrastructure investments.

Launched on 15 October, submissions from national and provincial government departments, state-owned entities, public entities, municipalities, and private sector projects were invited to apply for project preparation support.

“The project preparation supports sets to extensively expand the ability of construction projects to be implemented in South Africa as one of the major contributing factors to under-investment in infrastructure is the lack of sufficient project preparation support,” said the DPWI and ISA in a joint statement.

Research from international institutions such as the World Bank, McKinsey Global Institute, and the International Monetary Fund say that state efforts to increase infrastructure investment by 1% can contribute to domestic economic growth of between 0.4% and 3%.

“The launch of our project preparation bid window will help to turbocharge infrastructure investment in South Africa as it will ensure that more Infrastructure projects are shovel-ready sooner while increasing the trust the private sector has to invest in state infrastructure projects,” said DPWI Minister Dean Macpherson.

“The project preparation will accelerate the pace and quality of infrastructure delivery, which will undoubtedly contribute to economic growth, with the aim that infrastructure investment contributes up to 1.5% economic growth in the medium term,” he added.

They said that this initiative is in line with the goal of turning the DPWI into a key driver of economic growth capable of creating thousands of new jobs.

The new bid window builds on 12 infrastructure initiatives previously announced by President Cyril Ramaphosa at the Sustainable Infrastructure Development Symposium South Africa (SIDSSA) in March.

These projects, worth about R180 billion, have already benefitted from the first R179 million in project preparation funding allocated by the National Treasury to ISA to support catalytic projects that otherwise would not progress to the implementation stage.

The following priority sectors will be considered for project preparation financing:

Water & Sanitation
Transport (major roads, airports, ports, and freight transport)
Human Settlements (excluding student accommodation)
Social Infrastructure (Education & Health)
Municipal Infrastructure (focus on projects that leverage private sector financing)
Industrial Development Zones & Special Economic Zones (IDZs & SEZs).

Acting Head of ISA, Mameetse Masemola said that projects considered for onboarding by Infrastructure South Africa will focus on those that attract private sector financing and support, especially through public-private partnerships (PPPs).

These projects typically require some fiscal allocation but aim to leverage additional funding from private sector participants to meet their overall financial needs.

Successful applicants will be announced at next year’s SIDSSA and selected projects are said to receive comprehensive preparation assistance, including funding, technical and legal support, governance arrangements, capacity deployment, and regulatory compliance studies.

Successful projects are expected to attract additional investment from multilateral development banks and development finance institutions, beyond national fiscal resources.

“The announcement forms part of the policy and regulatory changes we are embarking upon to rapidly turn South Africa into a construction site in order for us to ignite economic growth which will create jobs,” said Macpherson.

“I have no doubt that the project preparation bid window announced today – alongside expanding the role of Infrastructure SA and making it easier for the private sector to invest in state construction projects – we will be able to see more cranes in the sky to improve the lives of all South Africa,” he added.

Applications for this bid window, specifically for projects valued at over R1 billion, are open until December 6, 2024.

Applications can be made on the ISA website.

Problems persist

While the DPWI and ISA were upbeat about the initiativce, they highliughted that they are cognicant of the struggles the sector is facing.

One such issue is the construction mafia.

What started off as a few “business forums” in KwaZulu-Natal invading and extorting construction sites in around 2014/15 (as outlined by a report by Jenni Irish-Qhobosheane for the Global Initiative Against Transnational Organised Crime) has now morphed into a national crisis of booming “construction mafias.”

According to the State Investigating Unit (SIU), the “construction mafia refers to extortion groups that typically seek to forcefully extract protection fees from local construction companies and contractors or extort a portion of the cost of an infrastructure project, or that specific individuals affiliated with the mafia are recruited to work on the site.”

At the launch, Macpherson called out procurement policy for “incentivising” the construction mafia to wreak havoc on critical public infrastructure projects.

“The 30% so-called set-aside is the gateway for the construction mafia,” the minister said, referring to procurement policy which requires that 30% of project spend be set aside to promote small and medium businesses, co-operatives, rural and township enterprises.

“What government has done unknowingly is that they have monetised and incentivised the acts of criminality, violence and murder that we have seen on these sites,” he said, noting that this is to the detriment of legitimate small and medium-sized black businesses that the regulation had aimed to bring into the construction space during government-led projects. 

Macpherson stated that his department intends to engage directly with the minister of police regarding the securing of government-led infrastructure projects.

He cited the successful deployment of the South African National Defence Force to Eskom power plants in late 2022, which effectively prevented sabotage and attacks on this critical infrastructure.