SA Infrastructure Investment Plan; with Minister of Public Works

Meeting report

Chairperson's introductory remarks
The Chairperson acknowledged the presence of the Minister to brief the meeting about the shift and relocation of the Infrastructure Unit from the Ministry of Economic Development. He handed over to the Minister to talk about the important role infrastructure would play in the recovery of the economy given the devastation of Covid-19.

Minister's overview
Minister Patricia de Lille pointed out that Dr Kgosientso Ramokgopa would be making the presentation. She was looking forward to input from Members that would enhance the implementation of the plan. After the country was hit by Covid-19, it became clear that things would never be the same again. In a 7 April Cabinet meeting, President Ramaphosa identified that infrastructure can be the flywheel of the economy. Before Covid-19 the economy was already struggling, and now the plan has become urgent.

The Ministry started working on the plan five months prior and they consulted with national government departments, provincial governments, premiers, and local governments, to find out what they are planning in their systems for infrastructure. About 276 infrastructure projects were collected, and the plan was to have a new methodology. The Ministry developed a new methodology of screening and evaluating all infrastructure projects. Thereafter, the Ministry identified 55 projects that were sensible, and part of past feasibility studies. The second phase of the rollout of the infrastructure plan is currently underway.

There was also an identification of social infrastructure, especially the backlog, and they came up with 12 projects that will lead to employment projects, like rural bridges, roads, cleaning of cities, town and townships. These are labour intensive projects that could be implemented to help people to have employment opportunities.

 On 27 May 2020, the plan was presented to Cabinet, including the new methodology of screening and evaluating projects, with the 55 projects and 12 special projects. This was approved by Cabinet. Thereafter, a symposium was convened by the President on 23 June. This was done because it became clear that there were not enough resources in the fiscus to fund the backlog of infrastructure projects, so there was a need to look for other sources from the private sector and financial institutions to assist in investing. The President presented the plan to over 600 local and international financial institutions. Pitching sessions were also done with individual financial institutions. Dr Ramokgopa would give more details of this during his presentation.

By going outside of the fiscus to look for funding for the infrastructure plan, commitments of over R403 billion were found. Once it was known that money could be sourced, on 24 July, 50 out of the 55 projects and the 12 social projects were gazetted. In terms of the Infrastructure Development Act (Schedule 2), when a project is gazetted, it then qualifies for the fast-tracking mechanism within the Infrastructure Development Act. 

In the first phase, the net worth of infrastructure, including human and social infrastructure is not just about new building, but also repairs and maintenance of existing infrastructure. The Ministry also looked at how to make use of redundant government owned buildings that can now be repurposed for other purposes, such as creating student accommodation. Another design in the plan is for maintenance and repairs of existing infrastructure.

For accountable implementation, the President set clear delivery targets in terms of value for money, so that there is transparency in performance, implementation of the plan, and accountability of professionals, contractors and government. The Ministry realises the importance of partnership with private sector since government cannot do this work alone. The Ministry has established monitoring, review and insights intelligence. 

Key to the plan is transformation and spatial adjustment to deal with spatial planning and integrating cities. Skills transfer, empowerment and job creation are also part of the plan. It is not just about the contracted economy but how the nation can be upscaled in the built environment. In keeping up with new trends, there's a need to keep up with new methodology and incorporate the green economy. The Infrastructure Plan needs to be overlaid with the impact of climate change, so that building methodology takes into consideration new technology rather than the old bricks and mortar approach. 

The Minister said she would give an operational update of work progress so far at the end of the presentation. In October a report will be given to Cabinet. The Ministry commits to giving updates to the Committee on a quarterly basis. 

South Africa’s Infrastructure Investment Plan: update
Dr Kgosientso Ramokgopa, Head of Investment and Infrastructure in the Presidency, said the economic reality showed that South Africa is far from NDP target for public sector infrastructure investment. Investment by general government (GG) is down 0.8% on average in real terms between 2014 and 2019. State owned enterprises (SOEs) are down by 4.9% on average. There is massive underspending in infrastructure by all spheres of government and SOEs. The construction industry has been the most severely impacted on by the downgrade in the economy and COVID-19. The highest job losses have been in the construction sector

At the Cabinet meeting of 2 April 2020 President Ramaphosa gave clear direction that the country is facing a recession of enormous proportions, and COVID-19 has placed South Africa in an even worse position. Closing the economy for a five-week period would have dramatic impact on the country and the world. "We are essentially in a war situation". The President stated that we should identify the sector that can be the flywheel to get us out of this hole and that flywheel is infrastructure investment and implementation, through an immediate and purpose-driven Recovery Plan that will not only kick-start the economy but will also stimulate the construction sector which has been hit the hardest.

SA’s Infrastructure Investment Plan will lead to major job creation and at the same time address the essential service needs of communities in both our rural and urban areas, as infrastructure investment will focus on:
- Network, Agricultural, Human Settlements and Social Infrastructure;
- Building new and upgrading existing infrastructure;
- Repurposing redundant infrastructure; and
- Expediting the maintenance of neglected infrastructure.

Implementation of the Plan
- Transparency in its performance
- Accountability of professionals and contractors as well as government – if it can be done for private sector development, it can be done for public sector infrastructure
- Monitoring, review, insights and infrastructure intelligence
- Transformation and spatial justice will no longer be rhetoric
- Skills transfer, empowerment and job creation are at the forefront of the plan – it is not just part of
the construction process but how we upskill our nation
- Use new technology and the green economy.

Key Focus Areas
- Building a robust and credible infrastructure pipeline
- Infrastructure Financing
- Development of the National Infrastructure Plan 2045
- Rural Development innovative activities
- Restructuring Expanded Public Works Programme (EPWP) to include mainstreaming, women’s maintenance teams and social compacts
- Monitoring, Evaluation, Insights and Intelligence.

Special Programmes gazetted as Strategic Integrated Projects (SIPs)
Rural Bridges ‘Welisizwe’ Programme (first deployment: Eastern Cape, KZN and Free State)
Rural Roads Upgrade (Phase 1: Limpopo, Mpumalanga, Eastern Cape, KZN, North West)
Upgrading / Repair of Township Roads in Municipalities
Photovoltaic (PV) and Water Savings on Government Buildings Programme
Removal of Alien Vegetation & Innovative Building Materials
Solar Water Initiatives
Comprehensive Urban Management Programme
National Upgrading Support Programme
Student Accommodation
Salvokop Precinct
Digitising of Government Information
SA Connect Phase 1B Programme.

Next Steps in the Implementation of Infrastructure Investment Plan
The Minister wound up with an update of what has been done over the past two months:
- The Infrastructure Fund announced by the President in 2018 is now operational. This is one of the achievements.
- The development of the National Infrastructure Plan is work in progress
- For oversight and monitoring of SIP implementation, a SIP Coordinating Committee has been established
- Development of robust and credible infrastructure pipeline. Since Phase 1 is complete with 62 SIPs, the Ministry is now looking into Phase 2. 
- Investor road shows to mobilise financing for infrastructure projects are ongoing. The response is encouraging.
- An advertisement was put out for a Technical Advisory Committee the previous week. This Committee will help with the implementation of the plan. Over 900 applications had been received.
- A Social Facilitation Methodology was developed to ensure there is input from communities who are the beneficiaries. She asked Members of Parliament to join in the social facilitation with communities to give them information and ensure there are local contractors and local people benefiting. This has been introduced to ensure all South Africans own the plan. 
- Establishment of Infrastructure South Africa is work in progress – the establishment of Infrastructure SA is currently with the Department of Public Service and Administration (DPSA) under Minister Mchunu. It is in the final stages were DPSA will help to establish the structure.
- Process for Green Infrastructure Bonds – is work in progress with the Ministry in the process of seeking green infrastructure bonds.
- A quarterly report will be presented to Cabinet in October.

Minister de Lille said corruption is typical at present and has become institutionalised in the country. Systems need to be put in place to prevent and check up on corruption because investors are sensitive to corrupt allegations. In all major infrastructure projects now an outside company will monitor every step of the tender and procurement processes, to ensure that due process is followed, and contracts are allocated to deserving companies. This is one of the measures to deal with corruption.

Discussion
Mr T Brauteseth (DA, KZN) appreciated the presentation but was concerned that it was outdated since page 8 referred 20 April 2020 and the five-week period of Covid-19. Why was there not an updated presentation which should have included the updates that the Minister gave at the end? It is difficult to deal with a presentation that is not up to date.

One hour was spent on the presentation, leaving two hours for members to engage an issue which is complex. Portfolio Committee Members were attending a workshop and were not present in this meeting, but it is important for both NCOP and NA Committees to engage in a joint extensive workshop since the plan is complex and cannot be done in three hours.

There is still lack of detail on how Infrastructure SA will be set up and its operation. Who will be recruited to run that entity? It is important to know who those people are because this also relates to corruption.

There is corruption is in every department. What level of assurance is there that when going into this multi-trillion rand plan there will not be massive amounts of corruption going on?

On the Technical Advisory Committee (TAC), he wondered if the Portfolio Committee had been advised about it, but the Select Committee had not been updated. There is need to know the specifications for people to apply to sit on the TAC. The parliamentary committees should be involved in shortlisting to ensure the right people are chosen. What is needed in the Technical Advisory Committee are engineers and not political officers.

Mr Brauteseth asked where the money would come from for the work. One of the biggest problems for investment in the country is policy uncertainty. There is no policy certainty on land expropriation compensation, therefore investors have no confidence that their investments will not be nationalised later. It is essential to get policy certainty, otherwise investors would turn away. The construction sector has declined since no one wants to build until they have certainty on their investment.

Load shedding needs to be sorted out once and for all, because reliable electricity supply is one of the engines driving the Infrastructure Investment Plan.

Mr M Dangor (ANC, Gauteng) said there is a problem with the assumption that rural-urban migration would stop, since it happens worldwide. The planning must consider that money will have to be spent in both urban and rural areas since people will migrate to where there are jobs and factories. On the cost of borrowing money, South Africa is its own worst enemy because of the negative sentiments put out to people who want to invest. There is need to look at funding from different sources, such as sovereign wealth funds from the Gulf countries as they have made several investments in other African countries.

Ms S Boshoff (DA, Mpumalanga) agreed that the presentation contained old information.

Underspending is a big problem amounting to R147 billion over five years, which is about R30 billion per annum. How will this be addressed as underspending brings job losses? If the money had been spent properly, many jobs could have been created. How will funds be disbursed to local municipalities and provinces? What monitoring mechanism is in place?

From the presentation, there appear to be loopholes in supply chain management. What measures will be put in place to eradicate it any possible corruption? The construction industry is one of the most important but also one of the most corrupt. This must be stopped because taxpayers' money is being wasted. What is the timeline of the plan presented?

On the external tender and procurement committee appointed, how will it be vetted? Who is the external company that will do this? Who decides on the external company?

Mr T Apleni (EFF, Eastern Cape) said infrastructure has serious problems. Much of the infrastructure was designed for only a few people and that is why it is not coping. There are water and sewage leakages in the townships. The Investment Plan is a good step.

He raised a concern about the 30% set aside for local black business contracts in huge projects, while big businesses that are mostly owned by white people get a huge chunk. This can be seen as disadvantaging black businesses from growing.

Can there be phasing in of state capacity? In the past, big machines which work on the roads where owned by the Department of Public Works. But now they are owned by private companies. The quality of roads is not good and there are huge problems. Can government phase in state capacity to do the work that is being given to tender entrepreneurs? The Department employs many people, but no work is done. There are potholes in the roads. The state should be able to do some of that work that is being given to private companies.

It is important to look at youth and women in rural projects so that they can benefit from them.

The Chairperson asked when the amendment of the Infrastructure Development Act will happen since the Act remains in the Department of Economic Development.

As pointed out by the Minister, the National Development Plan was clear that to meet the developmental agenda, there is need to boost infrastructure investment by 30% of GDP by 2030. This work is committed to that cause. Being mindful of previous targets, between 1998 to 2019, the Government invested R3.2 trillion into infrastructure spending. It is critical to appreciate that there is a history in dealing with the matter. Now government is anticipating spending R215 billion on infrastructure. It is important to observe the warning signs on general adopting across all the three spheres. There needs to be clarity and commitment by leadership on what can be done to ensure that skills and expertise are used in all three sprees to ensure underspending is confronted.

He asked about the point in the presentation about the "window of coordination" on infrastructure. While appreciating that it is a process and the Minister noted the infrastructure entity is still being established by DPSA, with the transfer of functions from the Department of Economic Development, what happen to the work they have done in the last five years? The expectation is that the SIPs running in the Fourth and Fifth Administrations will continue to run. He asked about the progress in ensuring a seamless transition in the transfer of function as the President in the State of the Nation Address put emphasis on ensuring that infrastructure is used to boost economic growth. He asked if there are funds following the functions as this is critical to ensure there is no disruption of institutional capacity during the transition. There needed to be a smooth coordination in the transfer of function to Dr Ramakgopa.

Response
Minister de Lille affirmed the points raised by the Chairperson as important. At the start of the Sixth Administration, government was reconfigured with Infrastructure being added to the Department of Public Works. The added infrastructure mandate was set up in terms of the Infrastructure Development Act and gazetted by President in August 2019. In the same gazette the President transferred the Presidential Infrastructure Coordinating Commission (PICC) to DPWI. She said what was outstanding are the regulations since the Act was not promulgated in 2014; that is still a work in progress. They had to bring in an outside service provider through the Policy Research And Regulation Unit within DPWI which is still a work in progress.

The Minister replied about Strategic Infrastructure Projects being carried out over multiple financial years. The projects will be broken down and monitored via the Annual Performance Plan and the five-year Medium Term Strategic Framework (MSTF). There are then a number of existing structures. The Infrastructure Development Act provides the PICC chaired by the President and representative from the three spheres such as ministers, deputy ministers, district and metro mayors. This Commission had its first meeting about a month ago. There is also another structure which will take up consultation. There is another structure, President's Coordinating Council, where the President consults with premiers, mayors, and others and performance and coordination is reported on within that structure. The fourth and final structure she mentioned is the MINMEC meetings where the national minister meets on a quarterly basis with all the MECs for Public Works and Infrastructure.

Minister de Lille stated that what is important for this plan to succeed is the cooperation between the three spheres of government about underspending. Based on their research, one clear reason for major underspending in all the three spheres of government is that there has never been enough emphasis on project preparations. If preparations are not done properly, stumbling blocks that arise become tougher to identify. The Portfolio Committee on Public Works and Infrastructure has imbibed the Infrastructure Development Act to ensure DPWI works within the Act's framework.

Dr Ramakgopa addressed the point he had made earlier on freeing the fiscus from having to fund the project as it is money invested from the private sector and not the national purse. The R340 billion build project is all sponsored by the private sector; There was project preparation packaging, followed by pitching sessions via the symposium where the private sector pledged their money to the project.

Dr Ramakgopa stated that this is no pie in the sky project, as evidenced by a project being launched in September which is the biggest post-apartheid settlement in the country – a 45,000 unit development in Mooikloof, the second-most sought after address in Tshwane. The money is raised by private sector players from all the four banks and all that was needed was to unlock the bulk with the City of Tshwane and that money has now been made available. when the project is being launched, 2,000 mega-watts emergency power project went out last week and commitment from the private sector to fund it is already in place. 90% of the housing projected that have been listed already have the money available and are currently proceeding to subsequent phases as they are ongoing projects.

On the SANRAL projects, he replied that SANRAL did the technical designs for the national roads, outside the ones that require debt review profiling (as some need redesign and new interchanges). SANRAL then went out to find out the prices and working with PICC, went to the debt capital market and got the money from the Multilateral Development Banks (MDBs). All that is left is for PICC to get credit enhancing instruments for SANRAL which is a sovereign guarantee and then TTA for the bulk-order infrastructure which raises borrowing limits.

Dr Ramakgopa replied that they are going through the processes of government and the discipline of the fiscal framework. National Treasury was briefed and they are happy and are on the same wavelength. Once the Minister agrees, they will be given the guarantee.

What SANRAL will do is to go back to the contractor due to the time span from the point of issuing out the tender and their appointment, to establishing the contractor is of crystal value. There is nothing ‘pie in the sky’ here, these things are happening. And the point he made earlier on is not rhetoric, it is something that is happening on the ground.

On the question of who makes up a Technical Advisory Committee? Must it just be engineers? Nothing could be further from the truth. To establish a Technical Advisory Committee, professionals are sought for identifying areas of intervention - the green economy, project financing, social facilitation and more. Engineers are not the only ones needed in building infrastructure, and he felt that this is a theory that has led to the current state. He emphasized the need for people with a finance background to help package a project, people with social facilitation skills when a project is meant to land in a community to socialise the project. There are multiple projects across the country that have been stopped because communities were not involved, raising the need to exercise social engagement with the community. This advisory panel is not about procurement. When a skill is needed on the green economy, all these skills cannot be outsourced, someone is needed on the panel who can specifically work with us on the green economy. He asked for help in packaging this project and in social facilitation.

On the urban/rural issue, he replied that looking at urbanization in the global north, urbanization was on the back of massive industrialization. People were moving from rural areas to urban centers in modern developed countries going to employment. There was an attraction into those spaces. If we look at the global south of which South Africa is a part, we see that the movement from rural to urban is not accompanied by people finding jobs. That is why we see a proliferation of informal settlements. People are coming to urban centres because of push factors in rural areas. They are looking for new opportunities as they come in into these centres. The rate of urbanization can thus be toned down by bringing opportunities closer to where people are. The best way of doing it is to ensure the value addition around primary commodities and primary production happens closer to centres of economic production.

We need to ensure that urban spaces become thriving economic spaces in their own way. The kind of infrastructure available and all other social considerations such as schooling might be different to rural areas. The level of density, movement and commuting in urban centres cannot be replicated in rural areas. The state is an active participant in the economy , it must drive the economy in the direction of how the governing party sees the future going forward.

He agreed with Mr Apleni that part of the work being done, as advised by Cabinet, is that there must be qualitative transformation of both ownership and production patterns. A small 30% is not enough. It must be by design; it must be ambitious. We are arguing that it could be substantially more than 50%. They want social actors to benefit from this – cooperatives, women-owned and youth-owned businesses. They have also been working with the Departments of Small Business Development and of Women and Youth to ensure that all is well coordinated.

On the single window, the Minister already responded to that. All our colleagues who are engineers at the PICC have been integrated in this new way of doing things. Our colleagues who are in the National Treasury budget facility for infrastructure who are largely accountants and economists have been integrated in this. Although the legal form is still going through these processes, through our chair we have been able to coordinate this, and once its signed off legally, we will continue in the manner we have been able to do this work. It will be more deliberate and have greater levels of legitimacy because it would have received the sign off from the responsible minister. This is a branch that will be created in the DPWI.

Parallel to that, we are working on the legal form of Infrastructure SA. This is a process that will require a bit more time, once we have the legal documentation , we will migrate into Infrastructure South Africa, which is outside the DPWI. It is not a branch within DPWI , but it has some degree of autonomy to ensure that we discharge the infrastructure build programme in the country, so that we able to pursue our responsibilities in the most efficient fashion. We would like to attract the most sought-after skills. We need to ensure that we build the capacity on two fronts – technical skills (engineering, built environment) and financial skills. We also want to build social skills – one of the additional dimensions we are bringing into this body is the need for us to have an understanding and interpretation. For example, after the introduction of an asset, what were the social conditions before and after its introduction. That is why we are looking for technocrats in the areas of economy, finance and social engineering in the Technical Advisory Committee.

Minister de Lille wanted to give assurance that no warm bodies have been lost, as Dr Ramakgopa explained that it is an organic get together of warm bodies - whether it is the PICC technical task team, or the department facility or those within DPWI. She was in Pretoria on Friday and had the opportunity to meet some of the warm bodies and was very impressed. Most of them were young and highly qualified individuals. More than half of the teams she met were women. It is just so good to see how everybody has come together to mobilise and rally behind the plan. We also must respect people's existing conditions of employment, their existing performance agreements and standards. We have a transitional mechanism that we have established - where people can raise those issues. However, everything has been going very smoothly and everybody is very excited about the plan and there is a new energy that has emerged.

She replied about the Technical Advisory Committee that they have placed adverts in newspapers and on social media which can certainly be provided to the Committee as well.

On urbanisation, forecasts show that by 2050 more than 70% of the world’s people will live in cities. That is why the Infrastructure Investment Plan considers urbanisation in all its factors without ignoring the rural areas.

She replied on due diligence saying that the external company was already appointed last year by DPWI. Both the internal and external auditors of DPWI have briefed this Committee to look at the procurement around all these projects. On the 30% threshold for procurement, she replied that 30% is in the 2017 Treasury regulations. The new Public Procurement Bill however will have implications on these percentages and Members of Parliament will be given an opportunity to give their input on this.

On the roads across the country, roads are divided up for maintenance, taking into account that some roads are municipal, others provincial and others national roads. The different spheres of government are responsible for these different roads in the communities. On potholes, they plan to bring all three spheres of government together to see how road maintenance can be handled.

Minister de Lille said that lack of skills and capacity in government has become an excuse for inefficiency. The skills are available in the country but the problem is that they do not always recognise those skills. They are putting together a database on unemployed professionals, both young and retired professionals. Government has developed empowerment programmes and the idea is to utilise this database that they can draw from in the rollout of the infrastructure plan.

The Chairperson acknowledged that there is now clarity of thought about where they are going with infrastructure development as a critical component in igniting the economy. What was important is that all hands are on deck in the articulated infrastructure development plant. The state-owned entities are integral and appreciate the steady decline in infrastructure spending, which needs team commitment to change. A methodology has been conceptualized and has led to the instability of infrastructure in South Africa, a new institution which has led to the Sustainable Infrastructure Development Symposium methodology. What is more critical however is that Infrastructure SA (ISA) takes over the technical functions of both the PICC and National Treasury’s Budget Facility for Infrastructure in the form of project preparations, packaging and promotion to create a comprehensive project. This has led to the projects under the Strategic Integrated Projects. He appreciated that the projects have already been gazetted to drive the programme. He acknowledged that it is not going to be easy but they are on the right track and are mindful of the Covid-19 impact on the programme might be significant and devastating. He is nevertheless inspired by the passion displayed. He expressed gratitude on behalf of the Committee.

The Minister thanked the Committee for their input. The project they are taking on is a very ambitious one and a first for the country, in which they will all learn together. They are open to advice and made mentioned of a link for input for Members and the general public. She encouraged Members to circulate that link so that they receive people’s input. They will give updates on a quarterly basis. They will not be operating outside the annual budget process or her own performance agreement that the President had set for the Minister. DPSA is in the final stages in its mandate to establish the ISA structure in government and she will certainly write to the Committee Chairperson once she receives a progress report on that.

A DPWI official let Members know that they are obligated to conduct public participation. They sourced quotations in all official languages and the amount per Bill came to R200 000. They had consulted with the legal advisors to check whether it is necessary to spend R200 000 on Bills which are more technical. The legal advisors proposed that it would be better to advertise the Bills in only two local newspapers.

The Chairperson felt that the issue was administrative but nonetheless important to bring to the attention of the Members on the implications of advertising the Bills in all community newspapers. He asked if Members had further input on this.

Mr Brauteseth stated that the Bills are of national importance and should be addressed to national newspapers and not all community papers. He proposed the route of using national newspapers.

The Chairperson appreciated the presentation and thanked the media and other guests present and said he hoped there would be constant updating from the team.