The topic was Boosting infrastructure productivity to secure long-term growth in South Africa, drawing from the recently released MGI Report, South Africa’s big five: Bold ideas to unleash inclusive growth.
Context: Since 1994, infrastructure delivery has been, and continues to be, a policy priority with a historical spend of 4.9% of GDP. These investments represent a tremendous economic opportunity for South Africa but constrained public finances, cost and schedule overruns, and mistrust between government and business, threatens to block progress. Strengthening public-private partnerships and focusing on four internationally proven levers could go a long way to optimizing delivery of critical infrastructure. The opportunity is significant: ZAR 1.4 trillion in savings over the next decade; a GDP boost of ZAR 260 billion per annum by 2030; and 660,000 new jobs. How do we mobilize this opportunity together?
The discussion that delved into some of the key challenges and opportunities in delivering infrastructure in South Africa. A summary of the key points and next steps are summarized below:
- South Africa is making a considerable investment in infrastructure (4.9% of GDP) but not getting our bang for the buck. Three levers can be applied to increase productivity and contribute to economic and social welfare:
- Make the most of existing infrastructure through operational improvements and increased spending on maintenance
- Optimise the capital project portfolio to drive social and economic impact
- Streamline delivery in design and engineering, procurement, and construction
- Establish a national process for efficient delivery. The public and private sector need to co-create a national process for streamlined infrastructure delivery, understanding the respective roles and incentives of key stakeholders. The UK model of Framework Agreements was cited as a good example of constructive collaboration.
- Build a strategy to meet the skills deficit. South Africa suffers from a major skills deficit in delivering critical infrastructure, ranging from senior management to basic trade skills. The public and private sector need to partner to identify the skills gap and implement a long term plan to develop and replicate these skills through tertiary institutions and in-house apprenticeship models.
- Increase private sector investment. The majority of South Africa’s infrastructure investment and risk is assumed by the public sector. The private sector could play a significantly larger role in financing infrastructure and preparing bankable projects. South Africa’s renewables procurement program was cited as a good example of increased private sector involvement.
- Foster a culture of partnership, trust and transparency. A combination of factors has resulted in less than optimal trust between the private and public sectors. To realize the potential detailed in the recently released MGI report, a concerted effort needs to be made to build trust and improve transparency, enabling healthy partnerships.
- Next step: Establish a working group to develop a vision and action steps to realize a full potential SA Inc. Significant appetite was expressed to form a group to shape the national agenda on infrastructure, under the banner of SA Inc. This would apply to realizing the full potential for the SA infrastructure industry, within and beyond our borders. Development Bank of South Africa has kindly offered to host this meeting and we will be following up with details in the coming weeks.