Minister's briefing: Economic Development Department's role in Presidential Infrastructure Coordinating Commission

Economic Development

11 June 2012
Chairperson: Ms E Coleman (ANC)
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Meeting Summary

The Minister of Economic Development briefed the Committee on the role that the Economic Development Department (EDD) would play in the Presidential Infrastructure Coordinating Commission. He introduced the Commission (PICC) by noting that the New Growth Path had set a goal of five million new jobs by 2020, but it was recognised that these could not be created unless South Africa addressed its infrastructure needs in a unified way. Currently, the obstacles to growth included weak implementation capacity in certain regions and poor project development planning and coordination. The PICC was set up to develop a single common Infrastructure Plan, to be monitored and driven centrally, with clear responsibilities. PICC would set short and long-term goals, promote development objectives, expand maintenance of new and existing infrastructure, extend infrastructure to poor and rural areas, addressing capacity, and address necessities such as rail, road, energy and water. It would also increase investment in infrastructure, consider the effects on pricing and competition, and look to improving infrastructure in the region.

The EDD would bolster the work of the PICC, by giving support in political coordination, communication and liaison, and administrative and technical support and coordination. Departments, provinces, municipalities, and state agencies would all have a role to play, and this would be monitored, with consequences for non-delivery. EDD had compiled an Infrastructure Book listing hundreds of infrastructure projects across South Africa, had also identified over 150 infrastructure components that could fast-track development and growth in South Africa, and then grouped these into 17 Strategic Integrated Projects (SIPs). Their breakdown was listed, showing a focus across geographic, spatial, energy, social infrastructure, knowledge and regional integration. Each had been audited for state of readiness, and the implementation process would be tracked. Coordination structures were to be put in place. The role of the EDD and each of the components, comprising the Technical Team, the Secretariat, the Management Committee and the PICC was described.

EDD had also conducted an audit in the public sector to identify engineers, technicians, procurement specialists, and artisans needed, had sorted it, and had identified where there were gaps, and where there were resources not being used to the full. It was now linking up the skills needed for each project with the manpower already available, and intended to expand capacity at universities to address the lack of available skills. EDD had also estimated the costs for each of the projects and developed funding strategies, to identify what funds could be mobilised, was working to identify private sector capacity and willingness to invest, and would also engage with foreign investors, State-owned companies and development finance institutions. It had drawn up a single dashboard to measure progress, covering construction, spending, development impact, and time scheduling. The Minister emphasised that the strategic plans had been aligned with this work, a new directorate was created, and the work was built in to the plans for the future.

Members asked questions about the effect of the infrastructure plans on job creation, particularly in the road transport sector, in view of the intended shift from road to rail. They were concerned about the willingness to implement the infrastructure plan, pointing out that it was quite different to the way in which matters had been run in the past, were concerned about the transfer of skills of any foreign contractors to South Africans, asked how it was ensured that local skills already existing were identified and used. They commented that markets should be linked to production facilities, whether there were plans to include historically disadvantaged people, how the development would empower cooperatives, and asked why ICT was not apparently included in the plans. They also asked if there were backup plans if projects fell behind or were financially over-extended, and if the PICC could halt any projects that failed to operate as expected.

Meeting report

Department of Economic Development: Co-ordination role in Presidential Infrastructure Coordinating Commission
Mr Ebrahim Patel, Minister of Economic Development, said that the New Growth Path set a goal of five million new jobs by 2020. This plan identified structural problems in the economy and pointed to “job drivers”, which were essentially opportunities in specific sectors and markets. Infrastructure was considered the first jobs driver, and would lay the basis for higher growth, inclusivity, and job creation. If South Africa did nothing around infrastructure, the pace of infrastructure development and spending was projected to fall from the current 9.1% of the country’s Gross Domestic Product (GDP) to 8.1% by 2013. Obstacles included weak implementation capacity in certain regions and poor project development planning. Projects were not always strategic, integrated, or aligned with national priorities. In addition, poor coordination negatively impacted the pace and impact of projects.

In July 2011, the Cabinet Lekgotla reviewed the steps taken to promote jobs and development, and adopted twelve Action Plans. The first Action Plan required better coordination, integration, and accelerated implementation of infrastructure. The Presidential Infrastructure Coordinating Commission (PICC) had been set up to develop a single common infrastructure plan that would be monitored and centrally driven, as well as to identify who would be responsible and held to account.

The PICC had identified several objectives, as follows: -
1) It identified five-year priorities, setting out imperatives to be achieved over the next few years.
2) It also recognised that infrastructure planning was a long-term endeavour that would last longer than an election cycle and thus needed to be revised by future administrations. A 20-year project pipeline had been developed.
3) South Africa needed to promote development objectives that not only focused on physical outcomes, but also on improving skills, industrialisation, broad-based empowerment, and research and development, in order to increase the technology base of society.
4) The PICC aimed to expand maintenance on new and existing infrastructure.
5) It recognised the importance of extending infrastructure links to areas without adequate infrastructure, and this was identified as a critical driver for growth for rural and poor provinces, who could benefit significantly from an integrated infrastructure programme.
6) It was also recognised as vital to address capacity constraints and improve coordination and integration of necessary elements for growth, such as rail, road, water, and energy.
7) There was agreement from all economic sectors that it was necessary to scale up investment in infrastructure to lay the foundation for long-term growth.
8) Since infrastructure programmes could drive up costs, and consequently limit the competitiveness of companies utilising that infrastructure, the infrastructure plan’s impact on prices needed to be addressed.
9) The lack of physical infrastructure through the African continent was identified as one of the major constraints to economic opportunity. A map of African transport routes revealed that it was easier to transport goods outside Africa than within it. Therefore, it was necessary to support African development and integration.

The first draft Plan was tabled at the Cabinet Lekgotla. This Plan intended to transform the economic landscape of South Africa, create a significant number of jobs, strengthen the delivery of basic services to the population, and support the integration of African economies.

The PICC comprised of Cabinet Ministers, Premiers, and Executive Mayors of the metropolitan local government. A Management Committee (MANCO) was chaired by the Minister of Rural Development and Land Reform, and this oversaw the work of the Secretariat, identified major work streams, and took decisions for tabling to the PICC and Cabinet. The Secretariat, chaired by the Minister of Economic Development, coordinated the operations of the PICC Technical Committee and processed matters to be tabled at the MANCO. The Technical Team consisted of officials drawn from public agencies and the Economic Development Department (EDD).

Mr Patel noted the oversight processes. The PICC had been meeting on a quarterly basis to consider the performance of every Strategic Integrated Project (SIP), would recommend policy changes to Cabinet, and would provide guidance to MANCO reports. MANCO had been meeting every two weeks to address challenges, monitor the development plan, and coordinate regulatory approvals and funding strategy. The Secretariat had also been meeting every two weeks to prepare issues for MANCO and PICC, and oversee the work of the Technical Team. Lastly, the work done by Technical Team included communication coordination and alignment, project-level monitoring, and capacity building.

The Economic Development Department supported the macro-coordination work of the PICC, which in turn included supporting political coordination, communication and liaison, administrative coordination and support, and technical coordination. The implementation of each of the infrastructure components was the responsibility of the relevant departments, provinces, municipalities, and state agencies. The PICC ensured that any under-delivery would be addressed by adequate responses and consequences.

The EDD’s Annual Performance Plan, Strategic Plan and internal structure had been adjusted to address its responsibility to coordinate and support the PICC’s work. Infrastructure covered all areas of the EDD’s organogram, in respect of policy, planning, spatial coordination, and dialogue. Staff across the EDD had been drawn into relevant parts of the PICC’s work.

A new directorate had been established to liaise with the departments across infrastructure projects, to monitor progress on the various SIPs, to take appropriate interventions if deadlines were not met, to manage the Project Office and to provide secretariat services to the MANCO and Secretariat of the PICC. The new directorate complemented the Technical Task Team, comprised of officials drawn from Eskom, the Presidency, Ports Regulator, and the Industrial Development Corporation (IDC). A different model was therefore being created, as, instead of creating a huge new bureaucracy, the EDD was instead targeting entities with specific expertise that could contribute effectively to addressing the EDD’s goals.

The EDD had conducted a spatial mapping exercise to identify key gaps and opportunities. This exercise covered geographical areas where basic needs, such as water, sanitation and electricity, were lacking. It also highlighted areas with new economic opportunities, analysed the state of existing infrastructure, identified the requirements for new infrastructure, and identified obstacles to potential economic opportunities. The EDD developed national, provincial, and local maps that illustrated current challenges and potential responses (see attached slides 12 and 13 for examples).

The EDD had compiled an Infrastructure Book containing hundreds of infrastructure projects across South Africa. These included everything from mega-projects with real catalytic features to small local projects, ranging through all levels of the implementation pipeline. Over 150 infrastructure components that could fast-track development and growth in South Africa were identified, grouped into 17 Strategic Integrated Projects (SIPs), further subdivided into five with a geographical focus, three with a spatial focus, three with an energy focus, three social infrastructure projects, two knowledge projects, and one regional integration project.

Mr Patel highlighted SIP 1, which involved unlocking the Northern Mineral Belt with Waterberg as the catalyst. Limpopo was one of the poorest provinces, but contained enormous resources of platinum, palladium, coal, and cadmium. The challenges were of an infrastructural nature, around the lack of rail, water, roads, and energy. If these infrastructure challenges were addressed, the only remaining matter would be how to manage a new flow of people to new economic opportunities, therefore requiring concentration on urban planning, with relevant investments in water, rail, and energy to unlock the opportunities. This project could potentially create around 98 000 direct jobs, in addition to creating transport lines between the Limpopo coal mines and the Mpumalanga power stations. The current focus was to shift coal transport from road to rail in Mpumalanga, given the massive recurring damage to road infrastructure caused by constant travel by heavy coal trucks.

Each of the 17 SIPs had been audited for their state of readiness, to ensure the plans moved from general planning to implementation. These audits showed the SIPs’ potential impact, their current status of planning and implementation, the challenges, as well as the timelines, funding strategies, and recommendations. The next step was to put coordination structures in place. The EDD and the Technical Team provided the administrative and technical support for key projects. Minister Patel listed eight of these key projects (see presentation slide 18).

EDD had also conducted an audit in the public sector to identify the main uses of skills, such as engineers, technicians, procurement specialists, electricians, and painters. EDD had then sorted the data by national entity, municipality, and public agency. The results indicated areas with gaps, and identified areas with significant resources that were not being used to their full potential. The EDD was now working to identify the skills needed for each SIP and to expand capacity at universities to address the lack of available skills.

EDD had projected costs for projects and had developed funding strategies to identify what funds could be mobilised from the public sector. It was also working to identify the private sector capacity and appetite for investment in infrastructure projects. Additionally, the EDD would work to engage with foreign investors, State Owned Companies (SOCs) and Development Financing Institutions for further investment avenues.   

The EDD had been working on a single dashboard to develop a common system for measuring the progress of infrastructure programmes. This dashboard covered construction, spending, development impact, and time scheduling. Although, at the moment, EDD was reporting to the PICC on a quarterly basis, this was moving towards real-time monitoring of individual projects. The dashboard currently contained information on active projects, such as amounts spent, level of progress, and information on current construction jobs. The EDD recognised that there were still gaps, as the dashboard could not yet measure the new skills that were being produced. EDD also needed to develop a comprehensive methodology to measure the local content across all the projects.

Mr Patel reiterated that at present the EDD provided administrative and technical support to the PICC, MANCO, and the Secretariat, by preparing documents for meetings, offering quality-control information and data, and following up on key decisions. This would continue, and it would provide strategic coordination and liaison support to the PICC, with specific emphasis on key areas such as developing material for public communication, media, industry, and international partners, offering access to technical expertise, and developing a visual operations room ensuring that all implementation information was streamed to one spot. EDD would also formulate and table policy positions for review, to accelerate the rollout of infrastructure, and would engage in social dialogue with the private sector and trade unions to ensure strategic alignment, and would work on the enablers’ support for the 20-year infrastructure plan.
 
Discussion
Mr H Hoosen (ID) emphasised that a coordinated approach to infrastructure development was absolutely essential. He commended the EDD for moving away from the past approaches. He commented that although it was important to link farmers to markets, it was also necessary to link markets to production facilities, because this was where jobs were going to be created. He felt that the most important indicator of success and progress was the number of jobs created. Although linking rails to mines sounded like a step in the right direction, he was concerned that the EDD’s presentation did not contain a plan for developing small businesses around the infrastructure projects.

Mr Hoosen enquired what role the PICC would play in coordinating with the provincial and local governments to ensure these projects moved in the same direction in the long term. He asked if the PICC would be able to halt projects that were not working as initially planned.

Mr X Mabasa (ANC) asked whether an audit had been conducted so that South Africa would not import skills that could already be found in the country. He asked how, when skilled workers were brought from other countries, the EDD and PICC would ensure that those skills were transferred to South Africans so that they would still remain in South Africa after the skilled workers departed. He asked if there were any strategies in place to include historically excluded people in these projects. He also enquired how EDD would ensure that infrastructure development empowered cooperatives.

Mr K Mubu (DA) pointed out that the plan to shift transportation of heavy goods such as coal from road to rail in Mpumalanga would create jobs in the rail transport sector, but would result in loss of jobs in the road transport sector, and asked how job losses by truck drivers would be addressed.

Ms D Tsotetsi (ANC) said that the presentation gave the impression that the chances of failing to achieve the infrastructure plan were slim. She asked if the implementers were serious about moving forward with the plans, and how EDD would address any unforeseen circumstances that may affect the timing and funding of the projects.

Ms S Van der Merwe (ANC) said that the presentation did not cover Information and Communications Technology (ICT) infrastructure, and said that this was a major infrastructure project on which South Africa would need to embark, particularly in light of the recent approval that South Africa build two-thirds of the Square Kilometre Array. She asked how PICC’s plan fitted with the national vision for developing South Africa.

Mr Z Ntuli (ANC) expressed concern over the potential stumbling blocks in trying to coordinate the three spheres of government to achieve these major infrastructure projects, and asked if any consequences would fall on those who were unwilling to comply.

The Chairperson interjected at this point to note that time constraints did not permit more questions to be asked. She asked that any questions that could not be answered immediately should be answered in writing.

Mr Patel said, as a broad comment, that the EDD was addressing challenges to the broader economic empowerment of government. He would give very brief comments on some concerns now. He noted the difficulties in coordination between the spheres of government, and agreed that the decentralised model posed a challenge, because plans may be devised according to one sphere’s vision, but these might not be attained because there was only one source of funding. PICC was trying to address this by bringing the executing players together to encourage early coordination and joint responsibility.

He noted that EDD had done an audit of key categories of skills, had recognised the gaps, and also realised that there was not enough use of expertise across multiple platforms, as there tended to be concentration on one institution. EDD had a dual approach to bringing in skills. Firstly, it aimed to attract back South Africans  living abroad, through the increased opportunities offered by this significant infrastructure programme. Secondly, a new approach to skills-transfer agreements made it mandatory for contractors to develop local skills during the project, by training local workers and interns.

He responded to Mr Mubu by saying that EDD was reflecting on financial challenges and past lessons. Dialogue was critical, and the PICC was addressing this by bringing players to the negotiating table at an early stage, and encouraging the sharing of visions and ideas for implementation.

Mr Patel recognised that jobs would be lost in the road transportation sector, as certain industries began shifting to rail transportation, and there would be challenges in how to transition the workers to other areas. However, he was adamant that it would be unsustainable to continue using road to transport heavy materials, so it was necessary to build strategies to adapt to the changing environment

Mr Patel responded to Ms van der Merwe’s concerns by assuring her that the Square Kilometre Array project was included as one of the 17 SIPs, and there was also a plan for a major broadband rollout beyond the significant metros.

Mr Patel said that more details could be furnished to the Committee.

The meeting was adjourned.

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