The Select Committee convened in a virtual meeting to receive briefings from Infrastructure South Africa (ISA) on progress made with the rollout of the country's infrastructure investment plan.
The ISA reported that there were 328 projects in the Technical Working Group pipeline (across sectors) and 56 projects were currently registered with the integrated reporting framework. The sector with the highest projects was the energy sector, followed by the human settlements and transport sectors.
The ISA said that the construction industry was not performing well, and that the growth had been 0.7% negative in the first quarter. It planned to construct a total of 96 rural bridges, with 18 bridges per province being built in Eastern Cape, KwaZulu-Natal, Mpumalanga and Limpopo, and 12 bridges per province in the Free State and North West. There was a need for the state to drive aggressive and conscious efforts to direct investments into the rural areas. There would be a gap of R4.8 trillion by the year 2034 to meet the gross fixed capital formation target if there was no increase or change in infrastructure investment
Members highlighted their concerns about the many implementation delays on specific projects, such as the Mzimvubu water project, the Vaal-Gamagara project, and the Hull Street social housing project. There was a concern as to why the Giyani Water project was not mentioned in the presentation. The Committee sought clarity on the progress in the first quarter, and whether the ISA had been able to build the 24 rural bridges targeted for this period.
The Committee was told that 11 local engineers would be working with a Chinese technical team to design and deliver small harbours. The ISA also responded that phase one of the Vaal-Gamagara project was 98% complete, although it was supposed to have been completed some time back.
The Chairperson welcomed the delegations from the Department of Public Works and Infrastructure (DPWI) and Infrastructure South Africa (ISA) to the meeting. He acknowledged the presence of Ms Patricia De Lille, Minister of Public Works and Infrastructure. He said the meeting was geared toward receiving a briefing on the progress made on the rollout of the infrastructure investment plan.
Minister De Lille was joined in the meeting by the Deputy Minister, Ms Noxolo Kiviet, and some Department directors, who would be leading the presentation to the Committee.
National Infrastructure management strategy
Prof Kgosientsho Ramokgopa, Head of Infrastructure South Africa (ISA), said the presentation would illustrate, amongst other things, the extent that rural areas were excluded from the pipeline of investments in the country and how that undermined the prospects of development in those parts of the country. Therefore, through the presentation, the Department hoped to make the point that there was a need for the state to drive an aggressive and conscious effort to direct investments into rural areas.
Through the Center of Excellence in the office, the Department had attempted to excavate some evidence to help shape policy choices and policy responses by developing a number of indices which would be shown in the presentation. It had completed the first leg of the National Infrastructure Plan (NIP) 2050, and had been focusing on foundational network industries. The second leg of the NIP was currently underway, and its main focus was on distributed infrastructure. The Department would share with the Committee the progress made so far through the presentation.
Dr Hubert Joynt, ISA Centre of Excellence, said that the construction industry was not performing well and that growth had been 0.7% negative in the first quarter. The decrease had been due to the underwhelming results reported for residential buildings and construction works.
Based on existing investment patterns, there would be a gap of R4.8 trillion by the year 2034 to meet the gross fixed capital formation (GFCF) target if there was no increase or change in infrastructure investment. As shown in the presentation, it was clear that the national, provincial, local, state-owned enterprises (SOEs), public entities (PEs) and public-private partnerships (PPPs) would have to contribute around R600 billion in terms of the existing spending towards infrastructure investment. That component would need to be increased to R1.6 trillion going forward. During 2021, gross fixed capital formation as a percentage of gross domestic product (GDP) was at 14.36%. The National Development Plan (NDP) 2030 target was 30%. GFCF had increased by 3.6% in the first quarter, according to Statistics SA.
Key economic takeaways
The construction industry remained constrained.
The development of infrastructure indices by ISA would assist in prioritising projects to address the urban/rural divide.
There were small signs of improvement/normalisation of the economy based on GFCF growth in 2022.
Substantial investment, including infrastructure investment, was required to meet the NDP targets
Mr Tshepo Chuene, ISA Head: Limpopo, presented the three focus areas of infrastructure pipeline development & management. The first area of focus was Coordination & Management of the National Strategic Integrated Project Portfolio (Infrastructure Development Act (IDA) 23 of 2014); the second was developing a comprehensive infrastructure pipeline of projects for investment, and the last one was portfolio management.
There were 328 projects in the technical working group (TWG) pipeline across sectors, and 56 projects were currently registered with the IIRC. The sector with the highest projects was the energy sector, followed by the human settlements sector and the transport sector. KwaZulu-Natal (KZN) had the highest number of projects in the technical working group, followed by Gauteng, the Western Cape and the Free State. All of the project plans that had been received had been assessed by the Strategic Integrated Project (SIP) steering committee and approved. The SIPs demarcated in green had approved project plans in Section 14 of the IDA, signed by the SIP coordinator and the SIP steering committee chairperson.
Square Kilometre Array (SKA) and Meerkat strategic infrastructure project
Construction of the MeerKAT facility (64-dish array with a virtual diameter of eight km) had been completed and the instrument had been commissioned. Civil work for MeerKAT Plus (MK+) had commenced, and was partially funded by the Max Planck Gesellschaft in Germany. MK+ would result in the MeerKAT expanding from a 64-dish array to an 84-dish array, with a virtual diameter of 17km.
SKA Phase 1 was currently in a procurement phase managed by SKAO international. Site handover from the construction/commission team to the operation team would occur in July 2029, with Array Release 1 (8-dish array) being completed by the first quarter of 2025, and Array Release 4 (133-dish array) being completed in the second quarter of 2027. Final commissioning and integration would take place till the site handover. South Africa's contribution to the broader project currently had a shortfall of R3.2 billion. and a request for funding support had been submitted to the budget facility for infrastructure (BFI) for funding.
SIP 25: Rural bridges -- Welisizwe programme
The Department planned to build a total of 96 rural bridges. 18 bridges per province would be built in the Eastern Cape, KwaZulu-Natal, Mpumalanga and Limpopo, while 12 bridges per province would be built in the Free State and North West. The skills available within the South African National Defence Force (SANDF) constituted the 24 teams that would implement the 24 bridges concurrently. Artisans from the DPWI would join the SANDF teams to augment the available capacity, and these teams would be deployed to provinces to implement 24 bridges per quarter. The budget facility for infrastructure (BFI) submission for additional funding support had been made to National Treasury, and one bridge handed over, with an additional two bridges to be handed over within two months.
Ms Mameetse Masemola, Infrastructure Investment Planning & Oversight, ISA, took the Committee through the National Infrastructure Plan 2050 Phase II. The NIP Phase II aimed to offer enough direction to strengthen prioritisation in the short and medium term in terms of institutional strengthening and project pipelines. It also aimed to join other major processes, such as the District Development Model (DDM), the National Spatial Development Framework (NSDF), Operation Vulindlela and the SOE Council. The Department had consulted with various stakeholders to co-create and co-develop the draft NIP 2050 Phase 2, and would be presenting the draft plan to the economic cluster of DGs.
(See presentation for further details)
Mr T Brauteseth (DA, KZN) thanked the Department for the presentation, and applauded ISA for their work. He noted that ISA did not actually build anything -- they did not have the budget to build anything -- but effectively just facilitated the building and funding of infrastructure. They also seemed to assist officials in the Department who frankly should be able to plan infrastructure projects themselves and get the necessary funding.
Last week, the Committee had an engagement with the Department of Planning, Monitoring and Evaluation (DPME), and it seemed that the job of ISA and the DPME was similar, in that it was effectively a supervisory umbrella body. Should ISA not sit under the DPME, as their job was more supervisory, facilitating, and intervening when needed?
He had interacted with Mr David Mahlobo, Deputy Minister of Water and Sanitation, in Johannesburg on 01 July 2022, who had said that the water and sanitation infrastructure in Durban needed to be revamped completely, that the job would cost around R7.8 billion, and the Department did not have that kind of money. It would turn to ISA to try and arrange that. Did Departments approach ISA from time to time for such assistance, and did ISA assist with that funding? Had the Deputy Minister approached ISA? What role did ISA play in ensuring that funds obtained were spent correctly and that corruption was kept to a minimum?
Ms S Boshoff (DA, Mpumalanga), said that coming from a rural area in Mpumalanga, she sees the suffering in rural areas that Dr Joynt had been talking about. The longer it took to implement projects in rural areas, the further the degradation went, so what was the timeframe for implementing the projects that Dr Joynt had mentioned? What exactly was going to be implemented? Could more clarity be given on the meaning of the rural and urban divide -- was it related to finances, or projects to be implemented in rural areas?
Mr M Rayi (ANC, Eastern Cape) asked Professor Ramokgopa whether there were any timeframes for completing the Mzimvubu Water Project, as 36% progress had been made so far -- given that the project had been there since 1967. On the small harbours in preparation, in particular the Port St Johns harbour in the Eastern Cape, there were high expectations that there would be a business case for that harbour. What was the update from the Department on that?
Were the 96 bridges mentioned in the financial budget for 2020-2023, given that there had been damage to bridges in KZN and the Eastern Cape in April? Were the damaged bridges included in those 96 bridges, and was there additional funding for them?
The timeframes presented by the Department on the NIP 2050 were worrying, as some of the things mentioned should have been done already and were still going to be done. Could the Department provide clarity on the timeframes presented for the NIP 2050?
According to the presentation, 24 rural bridges should be built per quarter, and the first quarter has been passed already. The presentation did not indicate the progress in terms of quarter one, and whether it had been able to build those 24 rural bridges.
Ms B Mathevula (EFF, Limpopo) said that she was hoping that the Department would mention the Giyani water project in its presentation, as this had taken too long to complete. What kind of strategy was the Department using to oversee projects, especially in Limpopo, where many projects end up being abandoned by contractors and often take long to complete?
There was infrastructure in rural communities that belonged to municipalities that were not being used for the benefit of the communities, but was being used by certain people to make money. What interventions were in place to address a situation where infrastructure belonging to the municipality had been hijacked?
The Chairperson thanked and appreciated the presentation from the Department. He asked the Department to what extent the approach had been factored down to planning at the level of the provincial and local governments. What measures were being put in place to ensure that the NDP targets were met?
To what extent did the first stage of the NIP guide and influence the second phase of the NIP? At what point did the Department intend to engage with the Committee regarding its progress on the presented NIP phase two, so that as the Committee engaged with the various sectoral departments on their plans, they were not left behind? How far was the Department in completing the Vaal-Gamagara project and were there any hiccups that could probably delay it? Could the Department give an update on the Hull Street social housing project, and why it was taking so long to complete? Across districts and metros, there would be differentiation in terms of infrastructural backlogs, so was there a fair amount of implementation across the different districts and municipalities to achieve the set targets of building those 96 bridges?
Dr Joynt responded that ISA dealt with all levels of projects, from local to national, so the DDM was part and parcel of its focus. It was also important to note that ISA currently deals with major projects, such as those which exceeded R1 billion. As a result, some of the smaller local government projects would not be within the scope of ISA's involvement, and would not necessarily be recorded by ISA. The Department was currently busy with the construction industry recovery plan, which was also looking at a specific approach and how to address the issues of the construction industry.
Prof Ramokgopa said he was happy to report that on the Mzimvubu Water Project, the Department had gone out to the debt capital markets three months ago, and was currently at the contract negotiation stage. There had also been a discussion with National Treasury due to the magnitude of the investment and the fact that the money was from the debt capital markets. The current phase was the construction of the two big dams, and hopefully, by end of September, contract negotiations would be concluded, there could be an announcement of a contract that was in place, and the service provider could start with the construction.
On the small harbours, the Department was working with the Chinese government through the Chinese Embassy, and part of the package of the agreements that had been reached with the Chinese government was to provide grant facilities for the Department to develop the small harbours. There had been considerable delays to this project due to COVID-19, but three weeks ago, the Department hosted a technical delegation from China which consisted of engineering experts who had worked on some of the major harbours around the world, to ensure that they contributed meaningfully to the economic development of the spaces where these harbours were found. 11 local engineers would be working with the Chinese technical team to design and deliver the small harbours. The Minister and the Deputy Minister had made a number of visits to many of these harbours, and some of them were already in development. He confirmed that Port St Johns was one of those harbours identified as a business case for the small harbours project.
The presented timelines referred to NIP phase two, as NIP phase one had been done and approved, so the timelines between these two phases should not be confused.
Mr Chuene responded that phase one of the Vaal-Gamagara project was 98% complete. It was supposed to have been completed some time back, but there were challenges due to the lockdown and the discussions on approving variation orders. The Hull Street social housing project was currently still in the procurement stage, and there had been requests for an extension of time, as it had been approved for funding. However, there had been no drawdown, and there had been motivations to extend the drawdowns to September 2022, for the financial facility to be available to start construction.
Mr Rayi asked for a response to his question about the target of 24 rural bridges being built each quarter, as that had not been responded to.
The Chairperson said that the issue of student accommodation was concerning, and the demand and supply mismatch had the potential to increase student accommodation costs. Was there any interaction between the DPWI and the Department of Higher Education (DHE), particularly in respect of increasing the role of the DHE in increasing the budget allocation, to mitigate the challenges of student accommodation?
Minister De Lille said the DPWI had 24 teams working on bridges across the country, and the delays in the allocation of the funding from the budget facility for infrastructure and funding for the bridges had recently been unlocked by National Treasury. From the next month, the Department will be able to report on the rollout of all the bridges across the country. Due to the floods, there was a need for a further 18 bridges, and KZN had also made funding for the extra bridges available in the province. In the Department's next report to the Committee, it will be able to give a more detailed breakdown of the progress made. The Department was doing everything in its power to meet the deadline of building the 96 bridges in rural areas before the next State of the Nation Address (SONA).
The Infrastructure Fund had contributed R3.5 billion towards student accommodation, and was working with the Development Bank of Southern Africa (DBSA) on that programme.
Prof Ramokgopa added that the student accommodation programme had been running for a considerable time and was currently entering phase two. The Department was confident about the delivery of this programme and the fact that it would not overburden the fiscus and end up transferring the burden to the students.
Adoption of outstanding minutes
The minutes of 03 August were were adopted.
The meeting was adjourned.
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