KwaZulu-Natal’s infrastructure development outlook is brighter than South Africa realises, considering the current level of megaproject activity in the province, states professional services and advisory firm Deloitte.
Moreover, South Africa needs these megaprojects to continue to assist in employment creation in the region, says Deloitte Southern Africa KwaZulu-Natal corporate finance regional leader Andre Pottas.
“Infrastructure development is the best investment that can be made in growing the economy,” he says, emphasising that economic growth subsequently creates additional employment opportunities.
Pottas adds that, while megaprojects are long-term, ideally there should be more projects coming on stream as existing projects are completed and commissioned to enable the retention of construction jobs.
Although KwaZulu-Natal has some of the country’s largest infrastructure projects, and with 15 of the 17 Strategic Infrastructure Projects directly involving the province, MEC for Finance Belinda Scott warned at the African Economic Expansion Summit (AEES), held in Durban in November 2014, of budget cuts between 2014 and 2016, including the fiscal cuts that would amount to about R560-million in 2015/16 and to R522-million in 2016/17. She added that the province “faced tough economic times”.
Pottas, who is also the Deloitte infrastructure advisory leader for sub-Saharan Africa, notes that the value of the current eight megaprojects in KwaZulu-Natal, the second-largest contributor to the South African economy, amounts to about R180-billion. This amount excludes planned projects, such as the Durban Dig-Out Port.
The megaprojects currently under way in KwaZulu-Natal include the R24-billion Cornubia real estate mixed-use development project; sanitation projects such as the Western Aquaduct; transport and logistics and maritime projects such as the R110-billion expansion of the current Port of Durban; the Dube TradePort Phase 1; the Umhlanga Interchange project; energy generation projects, including the R12-billion Avon open-cycle gas turbine (OCGT) peaking power project; and the R25-billion Ingula pumped-storage scheme.
These projects are supported by a strong and mature local banking sector, as well as a strong local private construction sector, he adds.
Mirroring the Continental Trend
Citing the ‘Deloitte African Construction Trends Report 2014’, Pottas notes that the most active key sectors on the continent are currently the transport and logistics sector, followed by the energy and power sector.
“Energy, which is vital to support manufacturing growth, continues to be a key sector in the developing African infrastructure story. However, investment and construction activity in transport have also come through strongly this year.”
This sector has eclipsed energy as the key sector, as significant investment in rail and ports have been made, he reiterates.
However, the report states that energy and power dominated the Southern Africa mix, at 52% of the total number of new projects under construction, and that this can largely be attributed to the Renewable Energy Independent Power Producer Procurement Programme projects under construction.
Further, there was a 46.2% growth in megaproject construction value between 2013 and 2014 in Africa. The report forecasts that Africa is expected to grow by 5.3% in 2014 and 5.7% in 2015, with sub-Saharan Africa forecast to grow by 6.1% in 2014 and 5.8% in 2015.
“African growth will be driven by increased output in the natural resources sector, underpinning rising fiscal expenditure, especially in infrastructure projects, and by an expected increase in Africa’s trade and investment, which also ties with emerging and developing economies,” the report states.
Pottas notes that KwaZulu-Natal is mirroring the trends Deloitte is tracking on the continent, with the Port of Durban expansion and the Dube TradePort being transport and logistics projects, while the Ingula pumped-storage scheme and the Avon OCGT are energy projects.
“KwaZulu-Natal’s project focus certainly matches those in Africa, highlighting the impetus in improving the infrastructure network,” he concludes.