Transport International Investors Conference: briefing by Department of Transport

Meeting report

The Chairperson noted an apology on behalf of the Director-General of the Department of Transport who had to attend a Cabinet meeting. The delegated team he had sent was capable, hands on and directly responsible for coordinating the 2011 Investors Conference and it was not a sign of disrespect on the Director-General’s part. The Committee wanted to know how the department had prepared for the conference and what would be achieved by it, and what impact these achievements would have on the department’s overall goals. The Committee was also invited to the Investors Conference which was important as it would ensure there were enough financial resources to deliver on the mandate of transport.

Presentation on Investors Conference by the Department of Transport (DoT)
Mr Tami Ndigi, DoT Deputy Director: Communications, introduced the members of his delegation and noted that the Chief Director of Special Projects would take the Committee through the presentation. The reason for an Investors Conference was for funding infrastructure in the country, the continent and the world. One of the critical debates arising around funding, from politicians and government officials in the media, was the issue of tollgates which in their view should be located within the paradigm shift in the funding of infrastructure. Therefore the meeting would give Parliament via the Committee the opportunity to go through those debates so as to view were they stand in the funding of transport infrastructure in the country. The Investors Conference was also another platform they could use to attract investment into the transport industry. They had also identified the need for the transport sector to be pushed to a higher level in terms of partnerships because governmental budget alone would not solve the problem of infrastructure development in the country.

Mr Lwazi Mboyi, DoT Chief Director: Special Projects, stated that they were mandated by the Director-General to take the Committee through the high level discussions in terms of the Investor Conference which were more suitable for that kind of platform and debate some of the issues they were busy with in preparation for the conference. In terms of the background, one of the key things important to note was that they acknowledged there was a disproportionate amount of traffic, for instance, between road and rail with regards to both passengers and freight that had contributed much to the decline of roads over the past few years. This had led to deterioration before their projected life span. Secondly, they acknowledged there had been an under-investment in rail over the past years that had exerted a massive burden on the roads resulting in unprecedented congestions in the cities. Thirdly, most of the modes of transport such as rail, ports and aviation had also been victims of under-investment over the past years as well as under-development over the past two to three decades which had also led to a massive infrastructure backlog in all sectors, especially rail. Finally, they had pointed out that the national fiscus was overstretched and with that reality they could not be in a position to sustain and comprehensively fund government infrastructure. Social spending still remained a major priority for government and so it was a matter of striking a balance and as things stood, the national fiscus could not cover their ambitious infrastructure development programme.

In terms of hosting the Investor Conference there were two areas of consideration for the department, namely, the National Transport Master Plan 2050 and that should form the basis for their agenda in the conference and why they were hosting the conference. The National Master Plan sought to develop a long term multi-modal system to develop national infrastructure facilities. A major reason for the Investor Conference was to support that kind of initiative. It also indicated a scenario where by 2050 transport in South Africa would have met the needs of freight and passengers. That would be done by continually upgrading infrastructure and services ahead of demand. For the department those were the major areas why they were hosting the conference so they could not be accused that they came up with a conference that was not grounded.

Secondly, the Minister had signed a delivery agreement with the President last year and part of the outcomes of that delivery agreement spoke to the reasons for hosting the conference. Outcome 6 of the Minister’s delivery agreement talked to an efficient, competitive and responsive economic infrastructure network. The Minister chaired the Infrastructure Cluster which also combines all that work under its umbrella. Further, the delivery agreement lists certain outputs for its successful delivery such as Outcome 3 which dealt with ensuring the maintenance and strategic expansion of our roads and rail network and the competitiveness of our sea ports. Outcome 3 also acknowledged the significant backlog in infrastructure funding and under-investment in infrastructure over the past three decades. It also emphasised the need to secure adequate funding for infrastructure projects.

Mr Mboyi said the Investor Conference was an attempt by DoT to respond to the infrastructure challenges faced by the country and transport sector in particular. Secondly, it was an attempt to assist the Minister to meet the commitments of his delivery agreement. It was also aimed at assisting DoT to meet its long term infrastructure plans, despite the funding challenges faced by both government and the country.

The conference would identify and package all potential projects critical to the delivery of transport infrastructure objectives and showcase these with the objective of identifying and attracting the right calibre of investors. It would allow for an interaction between investors and government on current and future proposed projects. The conference would test the investor community eagerness to invest in the transport projects.

The theme chosen for the conference was “creating winning partnerships through investment”. It would be hosted on 13 and 14 June 2011 at the Cape Town International Convention Centre. It was hoped that President Zuma would open the conference. About 600 participants were expected drawn from domestic and foreign investors, especially fund and asset managers, merchant banks, service providers, international companies, etc. The categories of people they wanted at the conference were particularly from the financial sector, service providers in the construction and IT sectors, international companies in the transport space from leading rail, maritime, aviation, or roads countries in the world. They wanted to create a balance between the domestic and foreign companies in terms of participation in the conference as it had been identified that foreign companies had an appetite to invest and partner with South African companies. An exhibition space had been made available for companies that were expected to take part in the conference.

In terms of preparatory work, Mr Mboyi noted that the conference from the beginning was not the DoT on its own but it had created a joint structure together with Departments Trade and Industry (DTI) and Public Enterprises (DPE), National Treasury, Economic Development, the Development Bank of Southern Africa (DBSA) and the Standard Bank. There had been good cooperation between all departments. The task team driving the content of the conference took an all-inclusive approach bringing projects from the provinces and metros. The projects were drawn from all modes of transport - through the department agencies and units and strategic partners like Transnet. Sponsorships were secured from the department’s agencies and some of the Development Finance Institutions (DFIs) and private companies. Standard Bank had been very helpful in packaging the project because as a department they could not package in a manner that was investor friendly. Therefore the approach when looking at the projects was very comprehensive.

Also in terms of preparatory work, infrastructure ministers were invited to participate in the conference and those included Ministers Gigaba, Patel and Davis. There would be presentations from the CEOs of Transport Agencies about their different modes so that they could ignite interest from potential investors. There would also be a panel comprised of people from the private sector sharing their experiences about investing in the country in terms of challenges and successes, and as well as looking at funding models that were affecting them in the investment space. One of the key areas that affected all investments was economic regulation and they had thought it important to have someone presenting on the issue of economic regulation and its challenges. They had also invited National Treasury to indicate the national mandate as far as funding projects in the investment space was concerned. They were also hoping for a televised discussion with all the relevant ministers on the morning of the 14 June. This still needed to be confirmed by the national broadcaster. The Minister of Finance would be invited to address a gala dinner on the evening of 13 June so that he could deal with some of the issues investors were worried about in the country.

With regard to the criteria for projects, they were interested in projects that had undergone technical and financial feasibility, where an environmental impact assessment had already been done, and projects that were Cabinet approved. They also looked at the size and complexity of the projects needing technical assistance from foreign investors. The projects at a bankable stage and ready to be funded were categorised as A grade projects. B grade projects were those that were still in the pipeline with more work still needed to be done to them. So far the projects that DoT was confident about were: 5 projects in rail, 5 in roads, 1 in aviation, 3 provincial projects, and 6 Transnet projects. There were close to 20 projects to present to investors in the A grade category. Secondary to that, there would be B grade projects which still needed technical assistance, a financial feasibility study, Cabinet approval, or an environmental impact assessment study, etc.

Mr Mboyi noted that there were issues for policy consideration by Government and Parliament. The first one was how infrastructure investments could be handled in future. Should they, for instance, create a hub that would bring together all the projects from the different provinces and municipalities to create a common pot? Secondly, how do they process all proposed projects and potential investors because people came to government all the time as potential investors for projects. They needed to look at an institutional mechanism to support that work going forward. This needed to be talked about at the conference. The DG had set a team of four DDGs to begin to process the matter of an institutional mechanism and submit proposals on this to present to investors a way forward on policy considerations by the Department, Government and Parliament. There was also a need to consolidate so that as far as investments were concerned the DOT and its agencies and the transport fraternity spoke the same language.

Mr Mboyi concluded that these were the issues arising from various consultations. The advice they got from National Treasury was to avoid duplication with entities because some of the projects were run by entities such as Sanral and PRASA and others that had their own investment programme. It was important for the department to minimise conflict. DoT should clarify the investment process as it moved forward because this was a new journey for DoT. There should be a proper linkage with National Treasury. All investments from the transport fraternity should be consolidated and create a single channel. There should be consistency in approach. They should also create policy on funding models involving private sector participation. One of the questions coming from the World Bank, was if they were going ahead with Public Private Partnerships, what were some of the considerations they were having as far as funding models were concerned.

Discussion
The Chairperson thanked Mr Mboyi for a very straightforward and clear presentation.

Mr E Lucas (IFP) thanked the presenter for a clear presentation. There was a need to take charge of the investment projects in government and the Department of Transport should facilitate that role because there were divergent messages from different government departments and entities. It was important to consolidate all those processes into a single dedicated team that would be responsible and answerable and speak with one voice. The Investors Conference was a great idea but the only problem in South Africa was that there were too many middlemen and they needed to get rid of these people because they were a disaster from both the investor and government’s side. They needed to deal directly with investors so that they could make some progress. They should also identify short and long term goals because if they said 2050 then everyone in that meeting would not be accountable in 2050 and that was a problem. Therefore they needed both short and long term goals so they know were they were going.

Mr D Ndleleni (ANC) congratulated the presenter for a positive and direct presentation which talked to the Committee on how to attract investment for transport infrastructure. But the report fell short in emphasising the need for working together: amongst the departments, government and the potential investors in such projects. He did not know how they found the formula for working together in building transport infrastructure and it seemed to him they were focusing on a task team of key stakeholders in government. He asked if they agreed on the challenges of the Master Plan and was there consensus about the Master Plan they were putting forward at the conference. It would seem that after the conference and in terms of taking the work forward, they would continue to work together as a task team, taking the work of the conference forward. He asked if they had looked at how the task team functions and what would be the key challenges that it faced. Were they putting their heads together around the challenge of ensuring the conference work was indeed taken forward and people did not go in different directions but remained together to ensure conference resolutions and outcomes were implemented.

In terms of the bankable projects or Grade A projects, Mr Ndleleni asked if all of government had agreed that these transport infrastructure projects were the ones that required investment.

Ms R Motsepe (ANC) said she had no questions as the presenter had covered everything, especially the Transnet issue. The department should come back after the conference for further discussion on the outcomes of the conference. She thanked the delegation for a clear and progressive presentation.

The Chairperson asked if all government stakeholders were in agreement about the 2050 plans. South Africa was a funny and interesting country because government stakeholders would go to the Investor Conference in agreement with the proposals, such as the creation of a single channel, but when implementation time arrived, then one found some of them opposing what had been agreed to. She asked that because in terms of communication and management, there was no mention of pressure groups such as labour movements or civil society organisations in the list of people and companies invited to the conference. She asked if they were part of the conference and if not, did they have a strategy for engaging them afterwards or had they already engaged them.

In terms of bringing projects from provinces and metros, the Chairperson asked if the department had invited the Minister of Land and Rural Development because the transport infrastructure would be built on land and there was a need for investment in infrastructure development in rural areas. She also asked if they had consulted the Department of Cooperative Governance and Traditional Affairs, and the House of Traditional Leaders because they dealt with demarcation of municipal land. If they were not involved, they could be a hindrance in terms of implementation of the projects. Therefore, it was crucial that all relevant stakeholders were consulted and brought in so that the process would move forward seamlessly. If it was really true that Transport was the heartbeat of social and economic development, it would be crucial, even if projects were not ready, to sensitise investors to underdeveloped areas and two programmes in distress: the urban and rural renewal programmes. She asked if the Investors Conference concentrated on first world or third world South Africa.

Ms D Dlakude (ANC) asked how many jobs would be created by the project. She asked what plans they had for the maritime sector, given that there were no ships in the country.

The Chairperson emphasised that any document presented to the Committee had to talk to the social conditions of the country and the empowerment and development of communities because as government they were there to ensure that each and every infrastructure development in the country benefited ordinary people on the ground.

Mr Mboyi thanked the Committee for their comments and questions. He emphasised they viewed the whole process as a work in progress since DoT had never gone down this road before. It was a learning curve. On the question of involving other departments, he replied they had run out of time with their consultation process but they needed to engage with the Departments of Land Affairs and Environmental Affairs. This was since most projects would require environmental impact assessments prior to the implementation stage. They should clearly have a plan after the conference since this was ongoing work and there were people they had not consulted in the process going forward, including labour and civil society groups.

On short and long term goals, he replied that there were issues they needed to deal with in the short term. For instance, how would they structure themselves after the conference which was a once-off event. There should be a programme going forward which evolved to guide the agenda of transport infrastructure investments. They should look at whom they should consult and partner with post conference. Some of the projects still needed to be approved at Cabinet level before their implementation.

Mr Mboyi noted that the idea of working together had been noted in the presentation. They needed to find a way of pulling together all these initiatives because there was evidence that they were pulling in different directions in terms of attracting investment. One of the suggestions was to create an investment panel, constituted of Directors General of departments and CEOs of government entities and others to look at all potential investments in the state on an ongoing basis. They could perhaps meet quarterly to evaluate plans. However, this was not yet finalised.

In the maritime arena, they were a bit late in submitting projects but there was a proposal about a ship building industry for the country to provide job creation. The ship building industry would provide capacity which was absent in the country at the moment. There was also a proposal about buying a training vessel to train people in the maritime space. There was some thinking around the national fleet because there was no national carrier at the moment. Most projects should flag the element of job creation and the Investor Conference projects were helping the country to engage in job creation which the President had consistently raised.

The Chairperson interjected that that was exactly what the Committee meant. As much as they were building the infrastructure, they were also developing people on the ground. If they were addressing issues of job creation, they were also addressing issues of poverty. Infrastructure development was about improving and opening up opportunities for South Africans so they got out of poverty. That was what government was all about.

Mr Mboyi assured the Chairperson that in all their projects, job creation was the driver and the Minister was very emphatic on that.

Mr Ngidi commented that DoT should accept that social investment of job creation, which was a key socio-economic impact of building South African infrastructure, was not articulated in great detail. The focus was on human beings, not on hardcore infrastructure. DoT should take note of that. It was a valuable contribution from the Chairperson and the Committee. DoT should have explained more about the element of job creation in the presentation because it was in the delivery agreement signed by the Minister.

Mr Mboyi said about maritime space, that in the 2011/12 financial year, DoT was looking at increasing the countries that carried South African flags on their vessels. Research showed that in many countries including the European Union where they had removed a country flag, that country lost jobs by almost 15%. South Africa had lost significantly, upwards of 20-25%, as a result of removal of those flags from the vessels. It was therefore an error that they had prioritised in the current financial year and it was something that would be achieved in the next financial year and they had put it forward for discussion. In the Investors Conference itself they had not flagged investment in maritime as much as they should have.

With regard to coordination between the department and other government structures, they needed to have a point where they coordinated the investment drive and managed projects in a coordinated way. The role of the Project Management Unit (PMU) would be to manage the project outcomes emanating from the conference. The PMU would therefore have the duty to look at the entire transport sector and coordinate all the players involved with projects that would be carried out.

In terms of inclusion of other stakeholders in the conference, they had invited labour and other bodies but they still had time to ensure that a broader cross-section of organisations was part of the conference.

The Chairperson noted the word of caution from National Treasury to DoT about avoiding duplication and minimising conflicts amongst entities, and said it was crucial for the department to heed that call because most of the entities were speaking with divergent views when it came to investment for transport infrastructure. Skills development was crucial in South Africa. It was therefore important that all government stakeholders have a single channel to attract infrastructure investment which would lead to skills development for South Africans. She thanked the DoT delegation, saying the department was on the right path in terms of infrastructure development. It had never happened in the past - looking at how infrastructure got funded and how to coordinate this so that the approach was well managed and easy to implement. She said this was work in progress and a learning curve for the department and these were issues they needed revisit.

The meeting was adjourned.