Jul 31, 2012
Integrated approach key to successful infrastructure developmentBack
Construction|Africa|Consulting|Deloitte|PROJECT|Projects|Africa|Brazil|China|Egypt|India|Nigeria|Russia|South Africa|United States|USD|Appointed Contractor|Services|Alan Richard|Andre Pottas|Andrew Mackie|Ebrahim Patel|Infrastructure|Michael Vincent|Sub-Saharan Africa
© Reuse this
But, with over 40% of global capital projects running over budget and past deadline, capital construction project owners needed to develop a more “owner-educated” and integrated approach to developing successful projects, advisory firm Deloitte construction advisory services director Alan Richard said on Tuesday.
Deloitte partner Andrew Mackie added that the interests and risk ratios of the project driver and appointed contractor should be fully aligned. He pointed to an example in which the owner placed significant risk on the contractor, but also offered significant gain share should the project be successful.
Richard believed that the development of the project owner’s understanding and involvement in the process could be the key to delivering successful projects.
The National Planning Commission, which is responsible for strategic planning for the country, also noted earlier this year that an integrated approach to infrastructure would achieve better outcomes.
In April, Economic Development Minister Ebrahim Patel commented that future public-private partnerships (PPPs) required an "equitable risk transfer" to the private sector, instead of previous models that placed the bulk of the risk on the public sector.
He called for dialogue on the appropriate structuring of PPPs, adding that there was an opportunity for the private sector to be integrated into the 17 strategic infrastructure projects contained in the Presidential Infrastrucutre Plan.
South Africa has earmarked public-sector projects totalling R844.5-billion in its medium-term framework, and R3.2-trillion infrastructure projects are under consideration for between 2012 and 2020. Only the most cost-effective projects providing long-term optimal benefits would be selected.
Deloitte director Andre Pottas commented that there continued to be a level of distrust between the public and private sectors. There was a lack of fully transparent PPP approaches as both parties held mutual suspicions.
Greater collaboration was required between government and the private sector as South Africa’s competiveness, even against other African countries, was decreasing, stressed Deloitte consulting director Michael Vincent.
Pottas noted that the country’s PPP model was evolving and that the National Treasury was taking larger risks with loosening its funding guidelines to increase projects’ attractiveness to potential funders.
He also suggested a “central oversight unit” should be established to coordinate, oversee and streamline all PPP projects.
Meanwhile, Pottas said that, with governments across the continent committing billions of dollars to infrastructure, Africa was at the start of a 20- to 30-year infrastructure development boom.
However, to overhaul sub-Saharan Africa’s infrastructure, about $93-billion a year was needed for the next ten years, compared with the current expenditure of $25-billion a year.
But, he noted, more private sector investment would be seen in Africa.
Richard pointed out that major investors were increasingly attracted to Africa, as Europe and the US failed to gain sufficient returns in their own market.
Despite global economy instability, major capital project players were still investing about 85% of their capital expenditure investment.
Besides a number of funding banks and investment firms taking up the challenge of infrastructure project investment, China-based companies and contractors either owned or were directly involved in 28% of the projects currently under way in Africa.
Further, newswire Reuters reported in April that the Brics group, comprising Brazil, Russia, India, China and South Africa, would establish a bank committed to funding infrastructure and acting as an alternate lender to the World Bank and other development finance bodies.
Private equity firm Actis also stated that it was aiming to invest $300-million a year in Africa, with the bulk of that in the continent's biggest economies, South Africa, Egypt and Nigeria.
It was also reported that South Africa's government pension fund Public Investment Corporation could invest up to $3.8-billion in private equity to boost its Africa exposure.
Edited by: Mariaan Webb© Reuse this Comment Guidelines (150 word limit)
Recent Research Reports
Steel 2015: A review of South Africa's steel sector (PDF Report)
Creamer Media’s Steel 2015 report provides an overview of the key developments in the global steel industry and particularly of South Africa’s steel sector over the past year, including details of production and consumption, as well as the country's primary carbon...
Projects in Progress 2015 - First Edition (PDF Report)
In fact, this edition of Creamer Media’s Projects in Progress 2015 supplement tracks developments taking place under the Renewable Energy Independent Power Producer Procurement Programme, which has had four bidding rounds. It appears to remain a shining light on the...
Electricity 2015: A review of South Africa's electricity sector (PDF Report)
Creamer Media’s Electricity 2015 report provides an overview of State-owned power utility Eskom and independent power producers, as well as electricity planning, transmission, distribution and the theft thereof, besides other issues.
Construction 2015: A review of South Africa’s construction sector (PDF Report)
Creamer Media’s Construction 2015 Report examines South Africa’s construction industry over the past 12 months. The report provides insight into the business environment; the key participants in the sector; local construction demand; geographic diversification;...
Liquid Fuels 2014 - A review of South Africa's Liquid Fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2014 Report examines these issues, focusing on the business environment, oil and gas exploration, the country’s feedstock supplies, the development of South Africa’s biofuels industry, fuel pricing, competition in the sector, the...
Water 2014: A review of South Africa's water sector (PDF Report)
Creamer Media’s Water 2014 report considers the aforementioned issues, not only in the South African context, but also in the African and global context, and examines the issues of water and sanitation, water quality and the demand for water, among others.
This Week's Magazine
Projected capital expenditure (capex) in the South African automotive assembly industry should reach a record R7.48-billion this year, says the National Association of Automobile Manufacturers of South Africa (Naamsa) in its 2014 fourth quarter business review. Capex...
After several years of navigating project-threatening red tape and currency fluctuations, the 4.4 MW Bronkhorstspruit biogas power plant, which will supply clean energy to a leading automotive manufacturer in Gauteng, is expected to enter production before June....
South African paper and pulp producer Sappi reported earlier this month that it would build a pilot plant for the production of low-cost Cellulose NanoFibrils, or CNF (nanocellulose) at the Brightlands Chemelot Campus in Sittard-Geleen in the Netherlands.
The long-term outlook for Nigeria is a country that has the potential to be very strong. So affirmed International Monetary Fund (IMF) Nigeria Mission Chief and Senior Resident Representative Dr Gene Leon on recently. "But we are starting from a point of huge...
Poor infrastructure planning and inadequate maintenance are becoming increasingly problematic for new developments and the associated infrastructure required to support such developments. In many urban and rural municipalities, the state of infrastructure has been...