Infrastructure Investment Plan progress, with DPWI Minister

NCOP Transport, Public Service and Administration, Public Works and Infrastructure

01 December 2021
Chairperson: Mr M Mmoiemang (ANC, Northern Cape)
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Meeting Summary

In a virtual meeting, the Select Committee received an Infrastructure Investment Plan (IIP) progress report from the Department of Public Works and Infrastructure (DPWI) and Infrastructure South Africa (ISA), with Minister de Lille and the Head of Investment and Infrastructure in the Presidency in attendance.

The purpose of the IIP is to boost infrastructure and economic recovery in the country as there are concerns that there is under spending on infrastructure projects along with a lack of experienced personnel within the industry. Infrastructure development can play a role in addressing the high unemployment levels in the country. It is also to try facilitating better coordination between all spheres of government to accelerate projects at a faster pace and have them implemented and concluded on time.

DPWI outlined the funding constraints in being able to implement selected projects and it has had to rely on both public and private sector funding to start project preparations for the selected projects. There are spatial imbalances over the last two decades where infrastructure investments are directed to affluent areas receiving more investments than rural areas. Despite funding limitation, DPWI and ISA continue project preparation to potentially attract investments.

Committee members raised concerns that DPWI was stretching itself in trying to implement too many projects at the same time while faced with funding limitations. It was suggested that DPWI focus its efforts on a small number of projects that are feasible, easily implementable and will yield positive results. DPWI and ISA had noted that before any project commences, funding must be secured to reduce the number of stalled projects that will cause undue pressure on the fiscus.

Members also raised concerns on the feasibility of implementing Cabinet’s bulk infrastructure projects due to the jurisdiction limitations outlined in the Constitution, especially in municipalities. DPWI said ISA would be working with multiple stakeholders and various district municipalities to unlock these projects and provide guidance on how best to do their implementation.

An Inter-Ministerial Committee has been established to address water challenges in the country as it has been declared an urgent matter as infrastructure development cannot successfully proceed when most of the country is without access to clean and reliable water.

DPWI is behind its infrastructure development goal of reaching the NDP target of gross fixed capital formation as 30% ratio to GDP. Government, state owned enterprises and private sector businesses must collectively and exponentially increase infrastructure spending. It currently is 13.27%, leading to calls for more investments efforts from both public and private sector with 1/3 from the public sector and 2/3 from the private sector.

ISA is currently not empowered to design, plan, and implement projects nor intervene when there are delays in projects. This has led to plans for ISA to become a state-owned entity to have the necessary authority to meet these obligations, guide infrastructure funding and to have the necessary budget to fulfill its mandate. The Committee was concerned that ISA would be another entity that would not be able to make substantial changes without necessary funding.

Meeting report

The Chairperson welcomed the Minister with her team from DPWI and Infrastructure South Africa (ISA) to give a progress report on the Infrastructure Investment Plan (IIP) to establish what work has been done since its September 2020 report to the Committee and how the funding was being managed. He noted that infrastructure investment was vital for the country’s economic recovery and growth of job security.

Minister’s overview
Minister Patricia de Lille thanked the Committee for its oversight support of the Infrastructure Investment Plan (IIP). She was joined by Dr Kgosientsho Ramokgopa, Head of Investment and Infrastructure in the Presidency and ISA CEO; Dr Hubert Joynt: ISA Leader of Economics Units, Mr Alvino Wildschutt-Prins and Ms Mameetse Masemola from ISA.

The Infrastructure Development Plan was drafted after national government had established 276 projects from all three spheres of government and state-owned entities. DPWI had to assess which of the projects were ready for development and if they would help grow and sustain economic growth in the country. A total of 50 projects were deemed ready which then formed the Infrastructure Investment Plan (IIP). Within the IIP, a further 12 social infrastructure projects were identified which brought the total number of projects to 62. The IIP was approved by Cabinet in May 2020 and gazetted in July 2020 in terms of the Infrastructure Development Act of 2014 so that the selected projects would qualify for Schedule 2 procurement. The Minister must provide progress reports of the IIP to Cabinet and the Presidential Infrastructure Coordinating Council (PICC) every three months.

The IIP does not take away responsibilities from government departments carrying out their service delivery mandates. DPWI through ISA may offer advice to government departments to fulfill their infrastructure targets however, departments must still execute their respective projects.

Infrastructure Investment Plan progress report
Dr Kgosientsho Ramokgopa, Head of Investment and Infrastructure in the Presidency and ISA CEO, said that the purpose of IIP is to aid infrastructure recovery efforts and ensure that projects are correctly spent on and properly executed. There have been concerns that there has been acute under expenditure on infrastructure projects which can be attributed to the absence of qualified technical personal within government and a lack of coordination between the three spheres of government. Each sphere is empowered by the Constitution to implement projects they deem fit however there is often misalignment between each sphere, causing delays in projects being implemented. There is also limited funding available for project implementation to meet the target of universal access to services in the National Development Plan (NDP) which states that there must be 30% investment of the GDP allocated to development efforts. These targets currently are far from being reached with the NDP target pre-COVID-19 sitting at 15.35% which has now contracted to 13.27%.

This has led to calls for both private and public sector involvement to address these concerns by preparing projects that can be invested in by the debt capital market and not purely depend on the fiscus. What is required for adequate project funding is 1/3 of investment from the public sector and 2/3 from the private sector.

Most investments are situated in affluent areas however there is little to no investment in rural areas over the past 27 years. There are spatial imbalances for investment in the country which also explains why there are high levels of migration to the affluent areas to find work opportunities and access to basic services. Most industries are located in areas where there is functional infrastructure network. The Northern Cape is steadily becoming an investment centre for renewable energy investments because of large unoccupied land and high levels of irradiation however there are no trickledown benefits to the people of the Northern Cape as most investor headquarters and consumer markets are in Gauteng.

Dr Hubert Joynt, Transport Infrastructure Specialist: Presidential Infrastructure Coordination Commission (PICC), said that to reach the NDP goal, a spend of R6.6 trillion (R4.4 trillion private sector; R2.2 trillion public sector) will be required by 2030 of which R4.8 trillion was required to close the infrastructure gap. This means that an additional R600 billion per year is required for the next eight years. The investment split will be R1.58 trillion from the public sector and R3.20 trillion from the private sector.

Spatial disparities of construction work show that Gauteng, Western Cape and KwaZulu Natal have attracted the most investments, indicating a need for more funding directed to provinces not considered for funding.

Mr Alvino Wildschutt-Prins from ISA outlined notable highlights of the Strategic Integration Projects (SIPS). The bulk of the gazetted SIPS were allocated to SIPS 19 being water and sanitation projects worth R115 billion. Most of these projects are still in the preparation stages: pre-feasibility, feasibility or design stages. ISA is working closely with project sponsors such as the Department of Water and Sanitation (DWS) and Trans-Caledon Tunnel Authority (TCTA) to drive project preparation funding for these projects.

SIPS 20 are the energy projects with R45bn in investments targeted to reach financial closure by 31 January 2022. The latest Independent Power Producers (IPP) Procurement Programme was announced by the Minister of Mineral Resources and Energy on 18 March 2021 which is linked to a 2019 Integrated Resource Plan directive. This was the first step that government took in procuring 13 800 MW of renewable energy over the next decade. The proposed deadline may be delayed on some projects due to the pending UG court appeal process. ISA is working closely with the preferred energy bidders and relevant departments to obtain the necessary approvals and licences which is slowly taking shape.

SIPS 21 are transport projects worth R34 billion which are in various stages of implementation. It should be noted that SANRAL requires its borrowing limit to be increased as well as the associate guarantees for implementation. The Department of Transport has started drafting a road funding policy in discussion with stakeholders which will aid in more roads being built through SANRAL.

The Small Harbour Development Programme has refurbished 13 projects in the Western Cape with a further three being prepared in KwaZulu-Natal, Northern Cape, and Eastern Cape. DPWI will be launching the refurbished Hermanus harbour in December. The transport projects are progressing relatively well despite funding limitations.

SIPS 22 are the digital projects mainly in the development of satellite infrastructure. The Space Infrastructure Hub is worth R4.4 billion which aims to reduce South Africa’s reliance on other countries to retrieve information made available from satellite technology and reduce the timeframes to collect necessary data that can be used to address socio-economic and infrastructural challenges. The South African National Space Agency (SANSA) and GTech have started working on the bankable feasibility study of the project with focus placed on the financial model, product specification, costing and revenue components as well as the market and business potential of the project. A final report will be available by January 2022 which will be used to decide who should be approached for funding.

SIPS 23 is the aquaculture projects that focuses on sustainable fish feeding, manufacturing and fish processing. The rollout of the programme will start with an incubator at the Mbhashe coastline worth R5 billion which is stuck in pre-feasibility stages. The Budget Facility for Infrastructure (BFI) funding application has been submitted and they are awaiting the outcome.

SIPS 24 is the human settlement projects which has been quite successfully in reaching its deliverables due to a close relationship between ISA, Department of Human Settlements and Social Housing Regulatory Authority (SHRA). Around 90% of social housing is in the construction phase and the Infrastructure Fund (IF) is being roped into funding additional social housing and social infrastructure. More work still needs to be done to address bulk infrastructure programmes which are currently held up at municipal level. There are however talks of how municipalities can implement these programmes and the necessary funding required to do so.

Funding requirements for special programmes (SIPS 25-36) are more fiscus driven with the option of private sector funding being secured. SIPS 33 is the Solar Water Initiatives Programme which is currently in talks with other funding and support partners such as Industrial Development Corporation (IDC) and African Development Bank to accelerate the programmes as quickly as possible.

To date, 29 projects are currently in effect which amounts to R119 billion. In 2020, over 200 projects were submitted to ISA however they mostly remain in the preparation stages, or they require gap funding to be delivered. ISA’s aim is to unlock these projects through bulk infrastructure funding with the support of National Treasury, relevant departments and other stakeholders.

Ms Mameetse Masemola from ISA said that the Infrastructure Fund became operationalised last year with the signing of a Memorandum of Understanding between the Minister and the Development Bank of Southern Africa (DBSA) Board Chairperson in June 2020. This was followed by the signing of the Memorandum of Agreement between DBSA, National Treasury and ISA which enabled the operational funds to set up the IF. The IF key governance structure is the Infrastructure Fund Strategic Advisory Committee which advises the IF on infrastructure project pipelines. It is made of infrastructure experts from the public and private sector.

There are talks between ISA, National Treasury and DBSA to invest on bulk infrastructure projects and for there be an alignment between municipalities and sector departments. The proposal is to have ring-fenced funding and to work with municipalities in ensuring these projects are implemented.

Project preparation resources are critical for infrastructure development and having bankable projects that can create worthwhile development in the country. DPWI has been working with PricewaterhouseCoopers (PwC) to assess current and future projects and it was estimated that project preparations require R4.1 billion per year.

A critical focus of ISA are the social infrastructure delivery projects, particularly water and schooling projects. There is a need to refurbish 3225 schools and ensuring access to clean water in schools and communities. A Programme Management Office is required for implementation, monitoring, and evaluation. There is an Inter Ministerial Committee (IMC) on Water and Sanitation chaired by the Deputy President, along with the Department of Cooperative Governance and Traditional Affairs (COGTA), Municipal Infrastructure Support Agent (MISA), ISA, DWS, DBSA to address challenges affecting the sector.

DPWI, through the Infrastructure Development Act and the Minister, has developed the National Infrastructure Plan (NIP) 2050 and has received comments from the public between August-October 2021. The Plan has been redrafted based on the comments and a final draft has been submitted to the economic cluster of Directors General on 19 November 2021. It was approved for consideration for Cabinet’s approval. The NIP prioritises high-priority network infrastructure. One of its objectives is to direct infrastructure investments from the private sector to selected projects to achieve the NDP goal.

The first NIP 2050 focuses on foundational network infrastructure in energy, freight transport, water, and digital communications while a second phase of the NIP 2050 will focus on distributed infrastructure, commuter transport and municipal services and is likely to be finalised by 2022/23.

DPWI and ISA are in regular meetings with provinces to track the progress of their projects. ISA has hired full-time technical advisors to help facilitate better coordination between ISA and the provinces' infrastructure pipelines.

There are plans for ISA to be a state-owned entity in alignment with a Cabinet directive. A business case is being prepared while also following the establishment process as per guidelines issued by the Department of Public Service and Administration (DPSA) and National Treasury. This will require the Infrastructure Development Act to be amended to allow for ISA to be established as a stand-alone entity.

Mr T Brauteseth (DA, KZN) said that while he would like to see the proposed projects come to life, funding challenges need to be addressed. The lack of funding means that DPWI should streamline its focus on specific projects it is able to execute under funding constraints. The establishment of ISA as a stand-alone entity risks it being reduced to an employment entity which may have competent people wanting to implement the infrastructure plan but due to lack of funding for the large number of DPWI projects, they will only be able to plan each project but not execute them or monitor their progress. Why does DPWI not focus on ten projects and ensure that they are well executed and fully functional? What is the status of the Maitland Metro project as there currently seeming to be a delay in reaching the milestones set by DPWI?

What is the return of investment for potential investors considering the current South African economic climate such as load shedding, the pandemic and expropriation without compensation likely to be implemented? Investors want certainty that will receive a return of their investment and if that cannot be guaranteed, they will not support any projects put forward by DPWI.

What are the plans for DPWI and ISA to report back to Parliament? They should report to Parliament on a quarterly basis and provide a status report on all projects so Parliament can monitor these projects on an ongoing basis instead of when problems arise. This also applies to procurement procedure – they should outline how the projects have been procured, who has placed a bid for the projects and if there are any process changes.

Mr M Rayi (ANC, Eastern Cape) said that DPWI needed to outline the rand value of the identified projects to track if allocated budgets are consistent with expected deliverables. There also needs to be a breakdown of potential and actual job creation figures which would aid in determining the value of the projects in job development, especially as the country has recorded a over 30% unemployment rate which urgently needs to be addressed. He asked from where the funding would come to close the infrastructure investment gap which DPWI said was R4.732 trillion.

Currently the IF has a R1 billion guarantee that will be spent over ten years on infrastructure projects. Are there similar funding guarantees for infrastructure development of SOEs and the three spheres of government? This will help government and Parliament to determine if the infrastructure targets of NDP will likely be met.

It has been reported that government and state-owned entities are continually underspending their infrastructure budgets. What was the status of underspending by both entities and has it been addressed?

There has been concerns about the bulk infrastructure proposal by Cabinet’s lekgotla. Is it implementable in terms of existing legislation and does it align to the Constitution? How does the proposal ensure that it does not infringe on the mandate of municipalities in developing projects they wish according to the rights afforded them by the Constitution and the Municipal Finance Management Act (MFMA)?

SA Connect Phase One programme is currently on hold due to no funding secured. What is the way forward now that funding has not been secured, despite the planning phase already having been concluded?

How does sanitation and human settlements form part of the NIP as it currently is not factored in the DPWI presentation which refers only to railway, water and energy. Does it mean that sanitation and human settlement do not form part of future infrastructure plans? Are these not infrastructure related?

Ms B Mathevula (EFF, Limpopo) asked why water infrastructure projects face continual delays in all provinces and what DPWI is doing to ensure they are concluded on time.

How will DPWI ensure that the infrastructure government owns is properly maintained as most buildings are not in good condition and need urgent attention. What is DPWI’s monitoring and evaluation plan in ensuring that municipal roads in rural areas are properly maintained as they too are not in a good condition?

Mr M Dangor (ANC, Gauteng) asked if DPWI had a plan to address the effluent crisis that is occurring in Region G of Johannesburg which is flowing to the Vaal River. While there are effluent flows from Tshwane and Johannesburg, the crisis will continue. This calls for the development of a new city that is ecofriendly, clean and has job security which why infrastructure development is critical in addressing such concerns.

Mr T Apleni (EFF, Eastern Cape) asked why the DPWI presentation was not sent to the Committee prior to the meeting for its consideration.

He asked if DPWI should not first focus on ensuring access to roads, water, and power supply in the areas it has earmarked for the infrastructure rollout.

How involved is DPWI when it comes to adequately informing communities of likely developments in their areas? There are instances where communities are restricted or removed from their areas without thorough consultation. The reason the community is given is that it is a DPWI directive and that it has plans for the areas. He referred to the Mbhashe coastal line where communities were not properly consulted about development plans except municipal officials told them DPWI will be developing the area hence their removal.

The Chairperson asked the Minister if the Transnet projects for increasing railway capacity in various parts of the country, form an integral part of DPWI plans as these should form part of the projects that DPWI has earmarked for development.

What are the coordination plans at district level on social infrastructure development projects and how does the private sector play a role in supporting and executing similar projects, particularly in the mining and energy sectors which have a direct impact on local communities. This would ensure quality projects are delivered, tapping into corporate social responsibility and having the private sector play a role in reaching the 30% target stipulated in the NDP. How does COGTA play a role in ensuring that such goals are fulfilled as there are the municipal grants that are meant to boost infrastructure development?  

Minister response
Minister de Lille replied that when DPWI was established in 2019 after the reconfiguration of the State, DPWI had to fulfill two functions in drafting the IIP and establishing ISA with the help of the DPSA. Since the establishment of DPWI, there has been a change in how infrastructure development is planned and organised and it is positively disrupting the infrastructure sector.

The Minister agreed with Mr Brauteseth that DPWI should prioritise some of the identified projects. National Treasury is not able to fund all the projects, which is why DPWI seeks external funding from international investors, pension funds and commercial banks. In June 2020, DPWI had a symposium where it pitched the projects to the market and successfully raised R403 billion. A subsequent symposium was held in October 2021 which also successfully led to funds being raised.

One of the lessons DPWI has learnt is that prior to projects being gazetted, funding must be secured. DPWI has also had to work to renew investor confidence between the public and private sectors as there has been a trust deficit in the ability of South Africa to implement its development goals. Work had to be done to assure investors that South Africa was open for business and a worthy investor destination. This is an ongoing task which is starting to yield positive results. There are discussions between DPWI, National Treasury and the Presidency in developing a framework that makes it easy to conduct business in South Africa and for there to be structural reform processes to the construction industry.

There are currently delays in releasing the funds made available in the IF. Efforts are being made to speed up the processes within government to have the funds disbursed to start building the necessary projects. DPWI is in talks with the Minister of Finance to have an infrastructure budget item in the 2022/23 budget. Currently, this is linked to National Treasury’s Budget Facility for Infrastructure (BFI) which only meets twice a year. Most of the DPWI projects, through its Infrastructure Investment Committee and ISA, have been approved. However, there is a delay in proceeding with these projects as they need to be approved by the BFI. The Minister of Finance is assisting DPWI in establishing ways to reduce the red tape and lessen the bureaucratic processes.  

DPWI in its 2020/21 maintenance programme rated 454 government facilities which have been classified to be in poor or very poor condition. 376 facilities have been funded in the current financial year to restore the conditions of state-owned buildings. It is hard for DPWI to prioritise the ailing buildings in a single financial year due to the large number that need to be maintained along with the maintenance costs based on frequency use of the buildings and accommodation. As a result, 600 buildings have been prioritised for technical conditional assessment for 2021/22 and a further 660 buildings in 2022/23.

On the Small Harbours Development Package, Hermanus harbour has been completed and will be launched on 6 December 2021. Extensive restoration has been done to the vandalised Lusitania Building Office Block with CCTV cameras now installed. This project has created 96 jobs of which 47 are young people, seven are female and 85 are male. Twelve divers from the community have been trained under the electrical infrastructure contract. The programme has reached its goal of giving 40% business opportunities to Small and Medium Enterprises, with the target set at 45%. The Minister has written to the Committee to invite it to the launch.

DPWI is committed to reporting back to Parliament quarterly. DPWI will take guidance on the specific details the Committee would like to see. DPWI already reports quarterly to Cabinet and to the Economic Reconstruction and Recovery Plan (ERRP) council.

The procurement processes are managed by the responsible line departments. For example, if it is an educational project, the Department of Education will be responsible for procuring the project. If it is a project classified as a Strategic Infrastructure Project for education, then ISA will be involved in guiding the Department on the specifications of procurement and establish due diligence systems and form the creation of anti-corruption forums. The Auditor-General will then be responsible for auditing the procurement and spend on projects.

DPWI did not want to bring "another plan" to the country without implementation. What was built into the NIP was for current projects that can be implemented in the next three years. There is a second phase of the NIP that will be released in due course which will include the National Spatial Development Framework, Social Infrastructure Plan and public input on NIP in its current form.

Infrastructure South Africa (ISA) response
Mr Wildschutt-Prins replied that progress has been made on the Maitland project. 140 apartments have been completed and DPWI was assured that the project would be complete within three months after their last visit to the project. Final sign-off is required from the City of Cape Town to provide an occupancy certificate so that occupation can commence from January 2022. The social housing project next to the Maitland project is currently in construction and that will add a further 203 housing units.

An Inter-Ministerial Committee (IMC) has been established to navigate the difficulty of fulfilling water infrastructure programmes. This is being led by the Deputy President, Dr Ramakgopa and ISA in discussion with the Deputy Minister of Finance.

The gap that currently exists is the funding required for the planning stages and not necessarily in the start of larger projects which generally have the support of external funders such as the KfW Development Bank and the World Bank. DPWI is trying not to put a burden on the fiscus which is why attempts are made to work through the IF to see how to formulate a structure that will not create unnecessary debt and place undue pressure on the fiscus.  

On SA Connect, it is a R53 billion project for which the feasibility study has been completed and it is currently under review to assess whether to continue with the project under the current study or find an alternative feasibility mechanism in which the project can commence. Once DPWI signs off the feasibility study, the project can be implemented as it is also in the pipeline of the IF.

Transnet is involved in the DPWI infrastructure plan and work is currently being undertaken in the KZN, Free State and Gauteng logistics industrial corridor which was planned in the previous administration. DPWI is monitoring the status of this project and assessing what additional funding or support may be needed to successfully ensure completion. This is like the Gauteng and Eastern Cape rail corridor programme where a meeting held between the public and private sector was held with commitments received from the IDC and DTIC and DBSA to fund project preparation efforts with a pre-feasibility study needing to be completed. A pre-feasibility study required R9 million and bankable feasibility of R375 million. DPWI works with the necessary state-owned entities to facilitate or bring entities together to bring projects to life.

DPWI will add rand values and job creation figures in future reports to the Committee.

Dr Joynt replied that ISA is aware of the project pipeline financial requirements. As such, a project pipeline prioritising methodology was recently approved to ensure that resources are focused on high priority projects. It will also help ISA to prioritise different sectors and compare the different sectoral allocation of projects and the resources required for them.

ISA is constantly monitoring budget underspending and budget review reports from National Treasury to assist ISA in its assessment of governmental infrastructure budgets. The provisional findings place the 2021 underspending report at 15% which is an improvement from the 30% reported in the 2020 underspending report. However, this figure still needs to be audited and will be confirmed in the next budget review report.  

StatsSA has recalculated South Africa's GDP using a new formula which shows a slight value increase in GDP backdated to 2011. Going forward, a new formula will be applied for all rand values of the projects proposed by ISA and DPWI … [Dr Joynt lost internet connection].

Ms Masemola said that since 2020, DPWI and ISA had embarked on infrastructure talks with provincial governments to strengthen working relations between stakeholders in ensuring that key infrastructure projects are priortised, planned and implemented. Provincial governments have identified structures that will be able to bring together various district municipalities and relevant government departments to facilitate these developments, along with the support of ISA to help find the necessary funding and guide them through the procurement process that needs to be followed. This will assist ISA in being able to fully understand the infrastructure needs of each province as ISA currently has limited capacity to do so.

Engagements with Minerals Council South Africa indicated capacity challenges in implementing social development programmes at municipal levels. There is a work plan between these entities, provincial governments and ISA that will focus on escalating projects that can be delivered at a quicker pace such as the building of rural roads.
Dr Ramakgopa said a general rule of thumb is that 3% of infrastructure budgets are required for project preparation plans which can increase the prospects of success in sourcing financing from the debt capital markets. ISA is therefore proposing that R4.1 billion would be sufficient to ensure decent project preparation for selected projects and it is the amount that ISA is trying to raise.

ISA is currently housed by DPWI and plans are being made for it to be a state-owned entity. This process is being driven by the Minister and enabling legislation will be passed by Parliament. ISA’s current budget allocation is R18 million, therefore, limiting its ability to implement the identified projects. The technical arm of the PICC has formed into ISA and its budget is R87 million, bringing the total budget to R105 million. ISA is staffed by 42 employees which is not enough to source infrastructure investment as the ERRP outlines that R1 trillion of investment must be secured over the next four years. The Minister is conversation with the Minister of Finance for additional budget allocation to increase ISA staffing capacity.

ISA’s approach to funding is to package projects that can attract financing from debt capital markets such as commercial banks, development banks and multilateral development banks as the fiscus is currently under strain, especially with the prevalence of COVID-19. The Sustainable Infrastructure Development Symposium which took place last year to woo investors, attracted R340 billion to finance or support 50 projects of which 19 are currently underway worth R119 billion. As a condition of such funding, clear deliverables must be demonstrated and achieved such as return on investment, development impact, completing projects on time, and the percentage which these projects support the green economy.

DPWI will report back to the Committee about the latest underspending figures once the Auditor-General (AG) has released her audit findings. This is where DPWI obtains its figures as the AG is the sole authority in the country which can provide a detailed account of public financing in the three spheres of government.

On the bulk infrastructure proposition proposed by the Cabinet Lekgotla, there is a big pipeline of projects being supported by the private sector, especially in the housing sector. The private sector has raised money from the banks and has done its own project preparations and feasibility studies and it is ready to be implemented. The reason for the implementation delay is that the requirements of what constitutes bulk infrastructure such as water and sanitation, energy, and sufficient work force capacity are missing. Municipalities are responsible for ensuring that these requirements are included in these projects as failure to ensure this means projects cannot proceed. Most of municipalities are not able to do this due to unhealthy balance sheets and the budget allocations from Treasury are constantly dwindling.

The view of ISA is to create a special financing dispensation that will not follow DORA which unlocks these projects as they have development value which, in the case of the housing projects, they provide housing to low-income families and create employment opportunities and revenue streams to the municipalities through rates and taxes which makes them more financially stable. The Minister will speak to the Minister of Finance to give effect to this dispensation. To resolve any legal implications, there will be a budget allocation of this fund which will be administered by ISA. Once the projects have been assessed and deemed feasible, they will be funded. It is a special dispensation allowed within the current laws as guided by the Minister and Minister of Finance.

Project preparation will continue for projects that are currently not funded. There is a high likelihood that some of these projects will not receive funding from the private sector as they are deemed not self sustaining due to no guarantee of revenue streams. These social projects essentially fall onto government to implement. There are talks led by the Minister and Minister of Finance to create a - innovative instrument that will work closely with pension funds to support and fund these projects.

On the question that some provinces have not received investment due to the absence of networks such as roads, water and sanitation, energy and digital infrastructure, ISA currently has limited powers to address this. It does not have the mandate to conceive projects but rather supports project owners. The creation of ISA as a stand-alone entity will empower it to design and conceive projects. The respective spheres of government are currently responsible for ensuring the necessary infrastructure is implemented such as rural roads being the ambit of municipal government and national roads in rural areas being the ambit of national government. DPWI is aware of municipalities that currently do not have water which is why the IMC on Water and Sanitation has been created to address this and other infrastructure crises. This is a national emergency and the state must intervene.

On the lack of transparency in communities, the Minister has championed an initiative for social facilitation at community level. Projects are being delayed by poor engagements or reluctance of project owners which the Minister is trying to address. The aim is also to reduce the likelihood of construction mafias where communities are never consulted on projects but are suddenly told about these projects without key details furnished to them such as who is responsible for the project and the development implications. This will form part of ISA’s mandate as projects fail before they commence due to the lack of community engagement.

The central point, articulation and monitoring resides with the Minister to track procurement. For example, the money has been raised for the N2 bridge in the Eastern Cape but the tender process has taken over 12 months and when asked, SANRAL keeps saying it is still busy. One of the things that must change in the new dispensation is ISA must be allowed to intervene without usurping the responsibility and legal mandate of the project sponsors. One needs to account for these projects so although ISA raised the funding, you have this degree of resistance from the project owner. The Minister has spoken on how to address and track procurement in the future.

An example of the private sector being involved in infrastructure projects is in mining communities in the Northern Cape where mining companies are concerned that there will be a lack of water to continue their operations. They are now investing 52% of developmental capital in the Vaal Gamagara Water Project which will address the potential water crisis. The state will be responsible for investing 48% of the capital. The same is being done with the Lebalelo Water User Association Intervention Project in Limpopo. In both instances, mining companies must not be the only ones benefitting from the projects; communities must be involved so that they too can experience trickle down rewards from the projects that provide reticulation to communities

The work being done by ISA in the infrastructure space is to support the roll out of the District Development Model (DDM) of which infrastructure development plans forms a part. Communities will buy into DDM once they see development taking place in their areas.

DPWI will be able to assist planned projects however the mandate resides with departments to implement the projects. For example, energy projects will be under the ambit of DMRE and road projects under the Department of Transport; however, the central articulation for infrastructure development will be DPWI. One area that ISA would like to be involved in is ensuring accountability of projects that are lagging while not interfering with the mandate of the project owners. ISA currently is not empowered to intervene

On the concern about Region G of Johannesburg. ISA and the Minister do not have the legal mandate to intervene. It lies with the City of Johannesburg and Gauteng Provincial Government to address. Part of this new design of ISA is to be able to go into those spaces to intervene. We can see obvious failures but there is no legal instrument to empower ISA and the Minister to make that intervention. This is despite the Minister have the responsibility of oversight of infrastructure projects. There is a legislative push for ISA to be able to intervene in such instances and for the amendment of the Infrastructure Development Act to give ISA the necessary powers to intervene. Currently, until there is a formal request from the project owner for ISA to intervene, it simply cannot act on its own in addressing these concerns or ensuring the NIP is strictly followed.

Dr Ramakgopa noted that the presentation was sent to the Committee two weeks ago. He is not sure how it is then forwarded to Committee members but it was submitted well in advance.

Minister de Lille said that DPWI has learnt a lot through the IIP implementation and finding ways to ensure that infrastructure development has new urgency. There is lots of room for improvement to move government away from a silo mentality through new processes that have been established such as project preparation and to reduce underspending by various government levels. DPWI is also adhering to implementing the earmarked PICC SIPs and will provide feedback to the Committee in March 2022.  

The Chairperson thanked the Minister and her team and the Committee for the robust engagement on the implementation of the country’s infrastructure plan. Fundamental importance is placed on the establishment of frameworks that key institutions will implement to revive the economy, ensure sustainable job security, and increase the quality of life for all citizens in the country.

The Chairperson asked that the legal opinion on Regulation 116A of the National Road Traffic Act on the Authority of a Professional Driving Permit issued in a Foreign Country be considered in the next sitting. This was agreed to by the Committee.

Mr Brauteseth commended the Committee for referring the regulation back to the Department of Transport for further consideration and consultation.

The Committee considered and adopted the minutes for the 24 November 2021 meeting .

The meeting was adjourned.

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