Business

Patel upbeat on big build

Lynley Donnelly

Minister outlines progress on state infrastructure projects, including social planning to prevent unrest.

Ebrahim Patel admits the government ‘has challenges with delivery’ for budgeted projects. (David Harrison, M&G)

Economic Development Minister Ebrahim Patel stepped into the breach to defend government's infrastructure plans this week, following a relatively lacklustre State of the Nation address by President Jacob Zuma last Thursday.

Patel attempted to allay fears that the state infrastructure roll-out has been slow despite complaints from the private sector; to soothe worries about the recently released Infrastructure Development Bill, which grants extensive power to the presidential infrastructure co-ordinating commission; and to emphasise that the government was looking for ways to prevent the labour unrest that had blighted major state projects, notably the Medupi power plant, through better social planning.

Patel is the chair of the commission secretariat, which has become the chief planning arm for the state's ambitious national infrastructure plan, representing about R4-trillion in investment.

The plan consists of 18 strategic integrated projects covering everything from energy to social infrastructure and regional integration. A number of these projects include pre-existing undertakings by the government or state entities, such as Eskom's Medupi and Kusile power stations that now fall under the rubric of the commission.

Progress had been made on a number of projects, said Patel, both in terms of getting past the starting blocks and reaching an advanced planning stage. He elaborated on examples given in the president's address, including the De Hoop and Mooi-Mgeni dam and pipeline projects, both of which have begun and will yield 126-million cubic metres of water, the consumption equivalent of a city such as Bloemfontein.

Other projects at an advanced stage include the Majuba rail line, with sod turning planned in the next six weeks, he said. The 140km-long railway line is part of the first of five geographically integrated projects aimed at unlocking the northern mineral belt of the country, with the Waterberg region as catalyst. It incorporates a shift from road to rail transport in Mpumulanga.

Systems had now been put in place to ­enable the co-ordination and monitoring of all the proposals on the state's big-build book, including a planning dashboard that will monitor progress across the range of projects, Patel said.

"The state recognises that we often have the money on budget, we have great plans but we have challenges with delivery," Patel told the Mail & Guardian.

Challenges included the often cited disconnect between various arms of government, which led to bureaucratic and regulatory delays. The new Infrastructure Development Bill, gazetted earlier this month, aimed to address these co-ordination problems and put in place "a set of instruments that will bring greater coherence to the state's ability to ensure that money gets spent", he said.

But the Bill grants the commission ­extensive power, including the power to expropriate land.

The right to expropriate land was constitutional, Patel stressed, which allowed for expropriation in the public interest, subject to compensation that was deemed fair and equitable. But to "the extent that a fight is about money" between government and the owner of the land, the Bill provides for the state to go ahead with construction of a project while differences over compensation are battled out in court.

The Bill represented a "first draft of what the state had in mind" and was open to amendments, where warranted, stemming from public comment. Some of the proposals under the various strategic integrated projects must still be deemed economically viable. For instance, debate remains over the establishment of the Mthombo oil refinery, which has been incorporated into the development of a south-eastern economic node for the country. The various ­elements of each strategic integrated project gazetted under the Bill would still need to meet the test of "economic viability" before being implemented, said Patel.

The government aims to have the Bill passed into law by the end of the year. Labour unrest remains a potential impediment to the smooth implementation of major projects. Continued strikes at Medupi have resulted in a warning by Eskom that delivery could be delayed.

Workers' right to strike was part of the reality of a constitutional democracy, Patel said. Using the lessons learned from Medupi, the state aimed to address the insecurity about jobs that came with projects of a limited duration.

This included increasing training on state projects, which would leave workers, often employed by private subcontractors, more employable once construction came to an end. The state could also help by promoting regional industrial development in an area where a project was winding down.

It was also looking at ways to improve social planning to ensure that workers on state projects, along with their families, had better housing, healthcare and education facilities to ameliorate any potential dissatisfaction over living and working conditions.

Nevertheless, there needed to be a stronger partnership between other role players, namely business and labour, to ensure timeous delivery while containing costs.

The complaints of slow implementation by construction and engineering firms came against the backdrop of a fall in private-sector work unrelated to state development, said Patel. But as the state infrastructure roll-out gathered momentum, it would provide a catalyst for private-sector investment.

Finding ways to foot the bill

How is the government going to meet the financial requirements of developing infrastructure and its social obligations? President Jacob Zuma, in his State of the Nation address, said the government would review current tax policies.

Ernie Lai-King, of the law firm Edward Nathan Sonnenbergs, said infrastructure was key to the government's delivery promises. Spending on it would contribute to economic growth but it did not happen in a vacuum, he said. The government had proved to be an inefficient creator of employment compared with the private sector, and there was a close interrelation between business' ability to grow and the infrastructure provided by the government, he said.

An agreed-upon and co-ordinated ­economic strategy was needed before South Africa could overhaul its tax strategy. But that did not exist because of policy differences within the tripartite alliance. As a result, this led to a tax strategy that amounted to "squeezing blood from a stone", he said.

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