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Infrastructure expenditure in South Africa to Rise in Future: Ken Research

Posted on 07 February 2017 by KenResearch Manufacturing And Construction,

Ken research announced recent publication on, "Infrastructure Insight: South Africa". The report provides a detailed look into the infrastructure sector in South Africa, including analysis of the state of the current infrastructure, the regulatory and financing landscapes, and the major projects in the construction pipeline. The report covers all key infrastructure sectors: roads, railways, electricity and power, water and sewerage, communication, and airports and ports.

A concise analysis of the administrative, economic and political context for infrastructure in South Africa. An in-depth assessment of the current state of infrastructure in South Africa is done. A focus on main political and financial institutions involved in the infrastructure market, as well as the competitive and regulatory environment is studied. For each infrastructure sector, an explanation of the key drivers of growth in new investment and an analysis of the project pipeline, with a detailed look at the prospects for major projects and the companies that have secured contracts has been provided.

It is well known that currently tracking 96 strategic infrastructure construction projects in South Africa at all stages of development, from announcement to execution. These projects have a total investment value of USD 117.9 billion. Infrastructure expenditure in South Africa is forecasted to increase over the 2016-2020 period. The electricity and power sector accounts for the largest share of the project pipeline, with a total project value of USD 90.2 billion. This is followed by railway infrastructure projects with a pipeline of USD 11.1 billion. The pipeline for road infrastructure projects values USD 6.5 billion, and for water and sewerage infrastructure it stands at USD5.9 billion. For airports and other infrastructure, the total pipeline stands at USD 4.1 billion.

In the 2015-2016 World Economic Forum Global Competitiveness Report, South Africa ranked 59th out of 140 countries in terms of the overall quality of its infrastructure. The country was positioned ahead of other major African countries, with Nigeria ranked 133, Egypt 114 and Algeria 101.

In the 2016 Medium-Term Budget Statement (MTBS), Finance Minister Pravin Gordhan announced that the government would continue to invest in economic infrastructure in line with the National Development Plan. Over 2016-2019 the government is planning to spend ZAR987.4 billion (USD 71.6 billion) in constructing and modernizing infrastructure. Of the total, ZAR334 billion (USD 24.2 billion) will be invested in transport and logistics, ZAR243 billion (USD 17.6 billion) in energy, and ZAR137 billion (USD 9.9 billion) in water and sanitation. According to Timetric's Infrastructure Intelligence Center (IIC), the infrastructure construction market's value rose from ZAR152.5 billion (USD 11.1 billion) in 2010 to ZAR222.3 billion (USD 16.1 billion) in 2015, and is projected to reach ZAR335.3 billion (USD 24.3 billion) by 2020 in nominal value terms.

This is based on the assumption that a number of major infrastructure projects will proceed as planned, including the 5,000 MW Upington Solar Power Park project, the Gautrain Commuter Expansion, the Gauteng Freeway Improvement: Phase II Bulk Distribution System, the Port of Ngqura Manganese Export Terminal Expansion and the Johannesburg-Durban High-Speed Rail Link. However, there are policy and political uncertainties that will weigh on investor confidence and could result in projects being delayed.

This paper reports on research that investigated perceptions and prioritisation of key performance indicators (KPI) for infrastructure sustainability, from a cross section of construction industry stakeholders in South Africa. The results show that although there is general agreement on the indicators, there are noticeable differences in stakeholder ranking, which measures their prioritisation of the various indicators. These differences are closely linked to the level of development of the respective country and hence macro‐level priorities in formulating their sustainable development agenda. The most significant agreements are on indicators related to health and safety, while there are significant disagreements on some indicators related to environment, economy and project management and administration. The study provides empirical evidence of such underlying differences.

The paper discusses the implications and challenges in addressing sustainability and sustainable development in developed and developing countries. Recommendations are given on the application of these indicators for decision‐support and integrated sustainability appraisal in infrastructure project (SUSAIP). Infrastructure prioritisation is rising up the agenda for governments, developers and investors around the world. Now, more than ever, governments and societies need a long-term plan that focuses on responding to the needs of society rather than the influences of the political cycle.

While the need for new appraisal and prioritisation methodologies is critical, relatively limited research seems to have been conducted in this area. Few sources exist for those looking for leading practices and insights into developing their own assessment methodology. To close this gap and to help governments and project owners get more from their investments, we set out to research and assess current approaches to prioritisation and assessment in a variety of markets around the world.

In this report, we shine the spotlight onto the emerging market – South Africa, arguably, boasts the most mature frameworks for assessing and prioritising infrastructure investment.


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Ken Research
Ankur Gupta, Head Marketing & Communications