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Nov 20, 2007

2010 infrastructure costs could rise by as much as 20%

Deputy Finance Minister Jabu Moleketi explains governments position on 2010 cost inflation
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The South African government's preparations to host the 2010 FIFA World Cup could overshoot their budgets by R2,8-billion to R3,4-billion, owing to cost escalations, the National Treasury said on Tuesday.

These were initial estimates, and more concrete figures on cost escalations in stadium and transport construction were expected to emerge in mid-December, deputy Finance Minister Jabu Moleketi told the media at a briefing, in Pretoria.

Rising input prices for materials, such as steel and cement, were to blame for the projected surge, but government had technical teams scrutinising what was contributing to these escalations.

The State had budgeted R8,4-billion for stadium construction and upgrades, and R9-billion for supporting infrastructure.

"By mid-December we are hoping to have a clear idea of the escalation of inputs," Moleketi stated. "It is only at that point when we will take a view on how to deal with the escalation and how the funding is going to take place."

He added that Finance Minister Trevor Manuel could provide more details in the 2008 budget vote.

"At the end of the day, we are going to ensure that we get a rand's value for all of the items that we procure, as well as all construction of the infrastructure," said Moleketi.

He said that government was also going to interrogate projections for "each and every item that goes into building the infrastructure".

Some 60% of the projected spend at some World Cup stadiums were based on "provisional sums", which meant that they had actually not yet been quantified, Moleketi commented, adding that government needed to "tie down" these contracts.

Moleketi concluded the media briefing by stressing that South Africa was "indeed, on time", and that there was no need for scepticism.

"Those sceptics will eat their words," he stated. "By 2010, they will have forgotten that they were sceptical in the first place."

Edited by: Mariaan Webb
Creamer Media Senior Researcher and Deputy Editor Online
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