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Sep 28, 2012

Urgent need to close SA’s infrastructure funding, regulatory gaps – report

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For South Africa to raise the developmental impact of its large-scale economic infrastructure investment programme, there is a need not only for improved planning within the energy, transport, water and telecommunications sectors, but also integrated planning across sectors, a new report argues.

The ‘State of Infrastructure Report’ has been produced jointly by the Development Bank of Southern Africa (DBSA) and The Presidency’s Department of Performance Monitoring and Evaluation and was released at the biannual Cabinet lekgotla held in early September.

Integrated planning, it says, is necessary to ensure that the right investment choices are made, which, together with effective delivery, has been proved to “distinguish high-growth economies from low-growth ones”.

To illustrate the point, the authors argue that the water sector cannot operate without electricity, which, in turn, cannot operate without water. Similarly, they argue that the use of information communication technologies across, rail, roads and harbours will be “imperative” for enhancing management capability and increasing efficiencies.

“In short, a systematic infrastructure development planning process is required to prioritise, sequence and resource projects, including the mobilisation of private sector participation,” the reports avers.

It is also incumbent on structures such as recently instituted Presidential Infrastructure Coordination Commission (PICC), to facilitate alignment between the deployment of economic infrastructure and the country’s national socioeconomic objectives.

Finance Minister Pravin Gordhan has indicated that South Africa plans to develop a 10- to 20-year pipeline of projects so as to move away from the current stop/start dynamic that has been so debilitating for the construction profession in recent years.

“What we need in South Africa is efficient delivery systems so that intentions and policies begin to be converted, very efficiently, into actions on the ground that make a positive impact on our economy,” Gordhan said at a recent briefing held after government met with new World Bank president Dr Jim Yong Kim.

The DBSA study says it is also critical to urgently “reform” the financing mechanisms available, to ensure that finance is available for the infrastructure priorities that are selected through integrated infrastructure planning.

“Government budgets are often underspent and opportunities are missed to crowd-in the private sector. Importantly, resources are not targeted at high-impact priorities,” the report says.

It warns there are few dedicated funding streams for operations and maintenance and that planning processes have historically neglected to build these costs into infrastructure plans. “The priority is, therefore, to create ring-fenced resource streams for infrastructure rehabilitation and maintenance, notably at the municipal level.”

It is also important to monitor the elimination of backlogs as a separate stream of delivery, while ensuring that the life cycle of the asset is fully taken into account and not just the delivery. “If you can’t afford the life-cycle cost, do not build it,” the authors say.

The regulatory framework for the six economic infrastructure sectors reviewed – electricity, rail, roads, ports, water and telecommunications – is also in need of an overhaul. In some instances, such as rail, an economic regulator remains absent, while in others, such as roads, there is a failure to effectively regulate issues such as overloading.

“South Africa will benefit from improving the regulatory environment in all six economic infrastructure sectors examined in this report. In particular, enhancing the capacity of regulators and giving them the ability to impose sanctions for uncompetitive behaviour must be a policy priority,” the study says, while calling for the regulatory gaps to be closed as a matter of urgency.

Writing in the foreword, Minister in The Presidency for Performance Monitoring and Evaluation as well as Administration Collins Chabane says the PICC has clustered, sequenced and prioritised 17 strategic integrated projects and the issues raised in the report will assist government in “thinking outside our existing paradigm”

.

The report concludes that the review highlights the need for a consolidated governance framework for infrastructure delivery so as to ensure projects are aligned with the country’s socioeconomic needs, respond to real demand and that the costs are equitable. It also stresses that implementation capacity needs to be developed and enhanced, particularly given South Africa’s chronic skills shortages.

Edited by: Martin Zhuwakinyu
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