Address by Minister Radebe on the occasion of Master Builders South Africa Congress 2016
Good morning, Programme Director
The President, Mr Neil Cloete
The incoming President, Mr Bonke Simelane
Executive Director, Mr Patrick Roy Mnisi
Board members, executives, delegates and guests
Allow me, to thank you sincerely for the invite and opportunity to deliver the keynote address at this very important Master Builders South Africa Congress. I am also pleased, indeed, to note that this is your 111th Congress. Congratulations on this stunning achievement and may you grow from strength to strength for the next 111 years as the leading representative body in the building industry in South Africa.
As Master Builders you must continue to live out your primary role in promoting the viewpoints and interests of your members and the industry, to promote the highest quality and standards, best business practice, to establish and maintain strategic relationships, as well as interact and engage with Government and other legislative bodies on national issues that affect the industry for the purpose of creating a sustainable and profitable business operating environment for the building industry in South Africa.
Colleagues, my presence here today is a direct signal of our commitment, as government and furthermore, speaks to the importance that we attach to your industry as a cog in a bigger wheel, that is the South African economy, and how what you do, on various sites, help us on delivering on our critical national objectives.
The theme for this congress is equally crucial and directly relevant - please do not underestimate its importance and significance. It is about all of us putting our shoulders to the wheel and together building the South African economy through infrastructure development. We need all hands on deck now, more than ever.
Let me restate a fact that you are all eminently aware of: the South African economy continues to show weaknesses and its performance is rather sluggish. We remain deeply concerned and are pulling out all the stops, at cabinet level to ensure a coherent, collective and compelling strategy to get us through this tough phase. I am encouraged by that singular focus on the economy. At the global level too, weak economic growth rates, market volatility and uncertainty are continually sniping at our collective efforts and adding additional stresses on our own growth imperatives.
Thus, a 0% GDP growth rate that we have seen predicted for 2016 impacts negatively on any outlook for the South African building sector, and the economy at large and this certainly impacts the promise of a better future for all, in the short term. We are aware of the challenges that await us. But, we remain a resilient, determined and committed nation. We have done it before - we turned every prediction that the world had of us on its head in the early part of our developing democracy. We have just again underlined our collective commitment to our young democracy: our local government elections were declared free and fair and we have been duly acknowledged for this significant outcome.
However, we are again at a tipping point of sorts – this moment calls on all of us as government, business, civil society, the youth and all the related stakeholders, of which Master Builders South Africa is one important industry, to pull together, harness our comparative advantage and ask what do we have to do to change the stack of cards that we have been dealt-not the deck we wished we had?
On the economy and an economic perspective
On an exceedingly positive note, it is worthwhile for all of us to note, to pause and to reflect that during 2015, the South African economy, for the first time ever crossed the ZAR4trillion GDP mark and total employment levels reached, also for the first time ever, 16 million jobs.
We have also breached the threshold and investing more than ZAR1billion per working day in infrastructure. This investment in infrastructure helped us as government to:
- Build 160 new schools
- Build about 100 000 new houses
- Connect 245 000 houses to electricity, equal to 1000 houses connected every day to the grid
- Bring 1700 megawatts of new electricity onto the national grid
- Lay 100km of large water pipelines that can convey billions of litres of water a week to communities and businesses
- Build 29 new clinics and one new hospital
- Complete three buildings of Mpumalanga University and new student accommodation for 4210 student country-wide
- We made similar progress with the manufacture of buses, taxis and trains; roads that were refurbished, new bus-lanes built and new wi-fi sites in urban and rural areas.
Thus, much as we lament the slow and sluggish growth both domestically and globally, we as government have continued to see the building and development of infrastructure as an important lever to ameliorate and accelerate economic growth. We will not walk away from this as an undergirding strategy for economic growth.
Infrastructure development, and by extension, the construction industry, as a pillar of economic growth, both in the short-medium to long term has a major pivotal role and a great responsibility to harness and deliver the results and outcomes we so desperately require both in South Africa and on the continent.
On Municipal Infrastructure Development
Infrastructure development, in the way I approach this subject matter, also includes municipal infrastructure development as it ties in with the broader infrastructure imperatives and is another crucial area of focus for government. Again, this will continue to be an area of focus.
In broad terms, it is the capital works required to provide municipal services and includes all the activities necessary to ensure that the infrastructure are delivered effectively, such as feasibility studies, project planning and capacity building to establish sound operational arrangements for the works.
The institutional framework for the sector includes all those government departments, structures, spheres of government, municipalities and their representatives that are directly involved in either policy making, co-ordination, planning, development, implementation, monitoring, reporting or auditing of municipal infrastructure. Amongst these stakeholders a number of structures have also been formed for policy making, planning, co-ordination, monitoring and reporting purposes. The purpose of having an institutional framework for municipal infrastructure is to ensure that the respective roles and responsibilities of the different spheres of government and various sector departments are clearly defined. It is also to ensure that the imperative of both co-operative government and sector collaboration is recognised and that overlapping mandates are minimised.
You must all be aware of the ‘Strategic Infrastructure Projects’ - the geographically-defined strategic projects that include massive integrated rail, road and water infrastructure in Limpopo province, and improvement in the movement of goods between Durban, Free State and Gauteng. The plan also includes boosting industrial and agricultural development and export capacity of the Eastern Cape, as well as expanding the province's economic linkages with KwaZulu-Natal and the Northern Cape. In North West province, the plan highlights the need for the roll-out of water, roads, rail and electricity infrastructure, with 10 priority roads earmarked for upgrade. Improvements in the iron ore rail line between Sishen and Saldanha Bay in the Western Cape is also expected to create a large number of jobs in the area. These projects are in progress, have been approved for implementation and government will choose the most cost effective ones that offer optimal long-term benefits.
It must be noted, that government is on record as noting that the country’s public sector capacity to implement major projects is presently inadequate, and that steps must be taken to strengthen planning and implementation capacity at all levels.
I submit, in my view this is another opportunity for the industry to unpack and share views with government?
On the National Development Plan (the NDP)
Allow me to paraphrase the NDP: South Africa has a relatively good, core network of national economic infrastructure. The challenge is to operate, maintain and grow it to meet the demands of our economy effectively and efficiently.
Government has adopted the NDP and uses the Medium Term Strategic Framework (MTSF) 2014-2019 as the comprehensive framework to mainstream it throughout all the organs of state. Turning NDP and infrastructure related recommendations into workable plans is a complex task and, as you will all be deeply aware, we have to assess available options, balance competing interests and carry decisions through to completion while coping with ever constrained budgets and serious capacity gaps. This is certainly an area where I think your industry should get involved in. The NDP is for all of South Africa, not just government. Engage with the NDP, analyse it and unpack it and then loop back to me and share your views with us? Importantly-what will your role be in implementing the NDP and getting us to the levels of economic growth and development that we wish to achieve?
On the Central Procurement Process
The NDP recommended that South Africa should opt for the establishment of an Office of the Chief Procurement Officer. Related to this, it was agreed that a uniform Supply Chain Management system for government was essential to optimise the efficiency of service delivery. There was no single consolidated comprehensive supplier database in and across government and consequently, information related to the compliance requirements was duplicated during procurement processes, the processing of payments and audit procedures to name but a few. This led to what accountants typically refer to as ‘’leakages’’.
The centralised procurement process was initiated to serve to reduce the duplication of effort and costs for both business and government while enabling an electronic procurement process platform. Thus, the Central Supplier Database (CSD) will have interfaces to the South African Revenue Service (SARS) to enable tax clearance status verification of suppliers throughout the Procure-to-Pay process and the Companies and Intellectual Property Commission (CIPC) for vetting of business registration and business ownership.
Suppliers who are currently registered on a supplier database of any organ of state were to be automatically transferred to the supplier database by 31 March 2016. New suppliers already have the option to make use of the self-registration portal of the CSD since 1 September 2015.
Importantly, the benefits for the private sector and the Master Builders South Africa will be a reduction of red tape and administrative effort when doing business with government. Compliance requirements will be easy to meet for suppliers that are in good standing on the various compliance requirements. The CSD is a consolidated list of all supplier information for national, provincial and local government. You will agree that the modernising of Supply Chain Management through technological innovation will enable government to reduce the administrative burden for both government and business and improve the monitoring of procurement patterns, contracts and prices.
On African Infrastructure Development Opportunities
Our commitment inside South Africa to the infrastructure development envelope dovetails our efforts outside South Africa, in the sub region (SADC) and the African continent more generally.
Over the past few years, and the 12 months, specifically, we have championed the Presidential Infrastructure Championing Initiative (PICI) which includes the North-South road, rail and related infrastructure Corridor. Significant progress continues to be made with regard to the construction of infrastructure projects, just generally speaking. We noted this because we know and track most of the road, railways, border posts, energy and port projects on the go and being implemented on the continent.
This was also the progress that we reported at the January 2016 AU Summit NEPAD Heads of State Government Orientation Committee Meetings, in Addis Ababa, Ethiopia. We will be going back there in January 2017 to report further progress. This PICI is championed by South Africa, and I lead the PICI as Minister in the Presidency: Planning, Monitoring and Evaluation at the Africa wide level.
As South Africa, we again affirmed the general progress as regards the eleven (11) PICI country infrastructure projects as well as submitting an updated North-South Corridor report of progress on 34 infrastructure projects. These are mostly in the SADC region. The progress was again endorsed and duly celebrated at the AU Summit at Heads of state level. This is an area of direct bearing and interest that I suggest this Master Builders South Africa Congress could step up to.
We are aware, for example, that there are more than 110 infrastructure projects currently on the go on the North-South Corridor alone-at various stages of development, implementation and project management. A recent study into infrastructure in Africa noted that Africa has become a megaproject hotspot – with 301 transport, energy, water and mining projects - denoting investment of $375 billion. We also have a book of 87 infrastructure projects and a list of 24 New Development Bank projects.
Dr Adesina, President of the African Development Bank noted recently that the African Development Bank has disbursed over $1 billion in 2015, on infrastructure alone. Similarly, the regional economic communities - SADC, COMESA and EAC have spent staggering amounts on infrastructure and continue to do so.
Honoured guests the greatest opportunity for South Africa must be Africa?
Clearly-there are construction opportunities that we need to consider and unpack more closely. So, for example-the question that must follow is this: given all the construction, infrastructure built and maintenance, given all the interest – are we as South Africa leading with our private sector into the sub region and the continent? Asked differently: is this PICI not an opportunity for us to help with the creation of employment, growth and development for South Africa?
Across the continent, investment in infrastructure continues to be enormously exciting. The building of roads, railways, ports, bridges and energy all continue unabatedly. To address this significant infrastructure gap requires many billions of US dollars. Estimates that we know about indicated that over $90 billion annually were required in Sub-Saharan Africa alone, a figure likely to have increased in the years that have passed since it first made headline news. Private-sector financiers have ploughed billions of US dollars into Africa-based infrastructure projects - close to $9 billion. Critically, however, I wish to submit that all our efforts should self - evidently be linked to our domestic economies-first, lead in serving as a catalyst for creating jobs for our domestic economies-first and be directed at harnessing and driving the regional integration and development agenda – linked to our master plan - the National Development Plan, Agenda 2063 and ultimately be bound to the achievement of the Sustainable Development Goals relating to infrastructure (SDG 9 and underpinned SDGs 6 and 7).
What is clear from the data is that South Africa and Africa remains firmly on the construction investment and infrastructure activity radar. But in the landscape of large-scale infrastructure development, there are challenges – construction projects faces deeply individual complexities and, essentially, one should not be traversing this space without the necessary know how, resources and expertise. This is where the captains of industry here at this Congress have such a crucial intersect and role to play.
As we started off this year, 2016-and following on a challenging year in 2015, the construction industry, in particular, felt two major and dramatic consequent impacts: one being the liquidity limitations as the global economy continued to contract and the second being the commodity crunch. Projects in sectors such as mining felt a tangible meltdown. A Blow out is perhaps a more apt description. This, in turn, put related construction financing deals through serious stresses. A further dynamic that came into play was the knock-on impact of export - versus import - driven infrastructure development, which if executed right could fast-track project execution.
Conclusion
We are indeed living through interesting times. I have given a context and shared some thoughts. I have also asked questions- admittedly, these are not simple questions to answer but what we do know is that in taking a long term view of infrastructure development in South Africa and Africa, we are better able to understand the deep complexities behind building a country and continent from the ground up. In gaining this grasp on the development landscape, we can better navigate the paths to success. We need to commit together-all of us as critical stakeholders.
What we also know, based on our relatively new experience, is that this infrastructure landscape is a litmus test for national and regional leadership. It is the new ‘’circle of influence’’ in which heavyweight political and economic support needs to come together, not only in talk but in true action to harness collaboration and broad stakeholder teamwork in realising some of our country and continent’s boldest dreams for the future.
There remains no doubt-we should accelerate our pace of growth and development. South Africa must think big, act big, and deliver big. We must never have low aspirations for South Africa!
Thanking you
