Infrastructure investing within the wider alternative investments ecosystem

Alternative investments include private assets such as Private Equity, Private Credit, Infrastructure Investing, Private Real Estate and Hedge Funds. They are generally complex, and less liquid compared to listed assets. As a result, they typically require a longer-term investment horizon to be able to yield the envisaged social and financial returns. The purpose of this article is to highlight one subset of alternative investments – Infrastructure Investing.

Definition of Infrastructure

“The basic physical structures and systems (e.g., buildings, roads, power supplies, water supplies and communication networks) for the provision of utilities or services and constructed for public use or enjoyment.” – from ASISA Infrastructure Taxonomy

Why Infrastructure Investment is needed

Infrastructure forms the backbone of every economy, enabling economic and social development.” – from The Principles for Responsible Investment (PRI)

Since Infrastructure Development is an integral part of economic growth and development, there’s been a growing body of research on its impact. This research has consistently shown its ability to unlock economic growth, especially in communities that have historically operated without adequate access to basic amenities. Many of these amenities are essential for the efficient production of goods and services, transport and trade – all of which spur economic growth, which in turn helps to reduce poverty.

Infrastructure in South Africa

Within the South African context, the government has historically held the key responsibility for infrastructure development, with infrastructure generally seen as a ‘public good’. Current research shows a significant and widening infrastructure deficit. Recent reports indicate that Gross Fixed Capital Formation as a percentage of GDP hovers around 18%, which is not only materially lower than our emerging market peers, but also significantly below the national target of 30%. Pursuantly, the scale of investment needed to solve our infrastructure deficit dictates that we can no longer rely only on the government to drive this investment class. This is exacerbated by the deteriorating national fiscal position. The private sector should play a much more prominent role in this regard – a role as significant as we continue to see in the successful rollout of REIPPP.

Why Infrastructure Investing is suitable for the retirement industry

It’s an investment in tangible assets that make a positive social and environmental impact without compromising returns.

From a portfolio construction perspective, research shows that infrastructure investments exhibit a low correlation with traditional/vanilla assets such as equities markets and therefore have an innate portfolio diversification benefit.

They are inflation-linked, long-term assets with a lower cash-flow risk compared to traditional investments.

Prescient’s history in the infrastructure space

As a fiduciary asset manager, the products we invest in are an indication of our beliefs, attitude and overall philosophy in terms of sustainability. We create and develop products that are channelled towards advancing various responsible investment and/or ESG-related goals.

One of our ESG-centric products is the Prescient Clean Energy and Infrastructure Debt Fund, which primarily invests in various clean energy projects across the country. It allows us to contribute to the advancement of numerous developmental and sustainable goals while delivering attractive returns. The projects we invest in are aligned with the United Nation’s Sustainable Development Goals, in particular SDG 7 (Ensure access to affordable, reliable, sustainable and modern energy for all) and the Paris Agreement. The Fund was launched in 2015 and has supported 17 clean-energy and infrastructure projects, most of which are operational.

The Fund’s performance has shown that we can make a meaningful difference in the local context without compromising client returns.

Next steps for Prescient

Consistent with our view that infrastructure development is critical in reinvigorating economic development in South Africa, we are in the process of launching our second Clean Energy and Infrastructure Debt Fund, which seeks to support renewable energy and infrastructure projects, primarily through debt funding.

In addition to offering clients access to real assets which aren’t generally available in the market, the Fund will continue to make a meaningful contribution to economic and social development in South Africa, including – but not limited to – the following areas:

  • Improved infrastructure, including access to basic services, water, housing and healthcare.
  • Sustainable energy development.
  • Job creation.
  • Local content and local ownership at project level.

Given the positive ESG screening the Fund will use, along with the expected meaningful impact of the underlying infrastructure projects we’ll be looking to invest in, we believe it to be a Socially Responsible Investment Vehicle.

Specifics of Fund 2:

  • Launch date: 6 September 2021.
  • Open-ended in nature and initially targeting a fund size of R2 billion. To date, we’ve received hard commitments from investors in our existing fund to the tune of R700 million.

Conclusion:

Investment in infrastructure has an incredible ability to unlock economic growth which, in certain cases, can be localised to communities in which projects operate. This not only helps to create jobs, but also to drive SMME development (local content procurement) and an inclusive economy through local ownership.

Prescient Investment Management has a proven track record in the credit/fixed income space and the CEIDF investment team has significant experience across unlisted, project and infrastructure finance areas of expertise. Our blend of a systematic and fundamental investment approach allows us to make appropriate and objective investment decisions, which have enabled us to deliver the returns shown above.

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Minister Patricia De Lille: Public Works And Infrastructure Dept Budget Vote 2021/22

25 May 2021

Our Seventh key priority for the Sixth Administration is a commitment to a better Africa and World.

I believe investing in South Africa’s infrastructure will bring us closer to our continent as we link to our neighbours with new ports of entry, bridges and roads – increasing trade and deepening our links.

But let me report on how the excavators are breaking ground.

Honourable President Cyril Ramaphosa told Parliament in his 2021 State of the Nation Address: “we stand here not to make promises but to report progress in implementing the recovery plan and the priority actions we must take to restore growth and create jobs”.  

I am here to give an honest and frank account of what we have delivered, the problems we face and what we still need to do.

Let me start with infrastructure 

Infrastructure

A year ago this week, on 27 May 2020, the Cabinet approved South Africa’s Infrastructure Investment Plan.

This plan forms a fundamental part of South Africa’s Economic Reconstruction and Recovery Plan.

In the development of the Infrastructure Investment Plan, the Department of Public Works and Infrastructure (DPWI) worked with the Presidency’s Infrastructure and Investment Office to set South Africa on a new path to plan, secure, invest and implement bankable infrastructure projects. 

We are using the Sustainable Infrastructure Development System (SIDS) methodology to assess all infrastructure projects to ensure that they are bankable. 

As a result, infrastructure South Africa (ISA) was created as the single entry point for all infrastructure.

The government’s Infrastructure Investment Plan is implementation driven with immediate, medium and long term action plans.

A total of 50 projects and 12 special projects were identified and gazetted as Strategic Integrated Projects (SIPs) in July 2020.

An infrastructure investment project pipeline in the energy, water, transport, human settlements and telecommunications sectors were identified.

ISA also assessed all the historical infrastructure projects (SIPs 1 to 18) from the Fifth Administration, reviewing their current status in the project life cycle. 

It found:

  • There are 46 projects completed with a portfolio value of  R162 billion
  • 81 projects are at different stages of construction with a portfolio value of  R800 billion
  • There are 22 projects with a portfolio value of R73.1 billion in procurement, and 31 projects with a portfolio value of R215.1 billion at the feasibility stage.
  • 84 projects and programmes on hold with that will be sent back to their project owners advising them that should they wish to resubmit their infrastructure projects following the SIDS methodology.

This report was provided to the Presidential Infrastructure Coordinating Commission Council (PICC) on the 22nd of April. 

ISA visited the three spheres of government as well as State-owned enterprises, visiting every province unblocking catalytic infrastructure projects, including private sector-led projects.

Honourable house chair, when people think of infrastructure, they think of big, “cold” projects, and there is often a disconnect about the importance of infrastructure and its impact on communities. 

Infrastructure is about people having water to drink, having decent roads, and having a bridge to cross to school or work. It helps them connect to the internet so you can find more opportunities and access critical government services like clinics, police station or court. 

Infrastructure is about changing people’s lives for the better. 

In putting people first, DPWI developed a Social Facilitation Methodology and Framework for infrastructure this past year to bring communities closer to every single infrastructure projects. 

This framework was approved by Cabinet earlier this month. 

Social facilitation puts the community at the centre of an infrastructure project. From the outset of the planning process, the implementation, and finally operating and maintaining. 

Honourable house chairperson and Members,

DPWI is developing the National Infrastructure Plan 2045 (NIP 2045). 

This plan will spell out the government’s intentions to build, manage and maintain infrastructure within a unified vision that enables South Africa to grow,  address our inequality and capture our strengths as a nation, within the region and internationally, for the next 24 years.

The NIP2045 will provide investors of a clear picture of our future infrastructure plans.

Sector experts, from business, organised labour, think tanks, State-Owned Entities are all part of drafting the NIP 2045. The draft plan will be presented to Cabinet in June 2021 and soon after gazetted for broader public comment.

Infrastructure fund

Government established the Infrastructure Fund and committed R100billion over a 10 year period. 

To encourage private sector investment in infrastructure, we have established the Infrastructure Investment Committee (IIC) chaired by myself and consisting of members from the public and private sector.

The aim is for the Committee to encourage crowd-in funding from sources alternative to the fiscus.

Some of the projects approved by the committee include:

For the Student Housing Infrastructure Programme, we have allocated around R3.4billion from the Infrastructure Fund 

For the SA Connect Phase 2, we have allocated R20billion

Phase 2A of the Mokolo Crocodile River (West) Augmentation Project in Limpopo, we have approved a R3billion contribution as start-up funding from the Infrastructure Fund 

For the One Stop Border Posts with Zimbabwe, Mozambique, Lesotho, eSwatini and Botswana, we have allocated around R1.5 billion will be allocated from the Infrastructure fund. This will be a public, private partnership.

It is important to note again that these funds from the Infrastructure Fund will be allocated over the next few financial years. 

Honourable chairperson, in seeking solutions to provide more secure border infrastructure, DPWI advertised a request for proposals for borderline infrastructure for the country to deal with fixing the porous border fencing around the country. 

The requests for information closed on 26 April 2021 and this process is aimed at providing borderline solutions for the whole country.

DPWI received 16 bids and the department is currently evaluating the proposals and this is expected to be completed on 15 June 2021.

Thereafter, the various options will be discussed with the Department of Defence to finalise the specifications before going out for tender.

We are exploring using the Built-Operate and Transfer model for this project. 

It is clear ISA, and the Department are playing a pivotal role in unlocking investment in infrastructure. This places us at the forefront of infrastructure delivery.

I now turn to the Budget Vote 13. 

Budget

The Departmental budget allocation over the medium term (three financial years or the Medium -Term Expenditure Framework – MTEF period) is R25.5 billion, and the funding will be spent to meet the 7 Priorities of government an in specific to:

Accelerated infrastructure investment for economic growth   Transform our economy the built environment and enable job creation  Proactively ensure spatial transformation and redress through leveraging state assets And provide a dignified experience for our client departments, the civil servant working in a government building, be it a police officer or nurse and ultimately to every South African that visits a government building.

The Department’s budget allocation for this financial year is R8.3 billion. 

The departmental budget for transfers and subsidies with the inclusion of transfer payments to the Property Management Trading Entity (PMTE) and EPWP is equivalent to R7.3 billion of the total allocation for 2021/22. 

For the 2021/22 financial year, the Department will be disbursing allocations to eligible public bodies in the EPWP for the following sectors: 

R1.18 billion in the 2021/22 financial year in the Infrastructure, Environment & Culture and the Social sectors through the integrated grant incentives for Provinces and Municipalities, with an estimated total number  of 81 850 work opportunities

R1 billion in the 2021/22 financial year for the Non-state Sector Programme, with an estimated  total of  52 189 work opportunities

R414 million in the Social Sector in the 2021/22 financial year for Provinces, with an estimated total of 16 243 work opportunities. 

For the financial year which ended on 31 March 2021, the EPWP has transferred 99.9 per cent of the budget, with R1.8 million being withheld due to non-compliance by provinces.

For the financial year which ended on 31 March 2021, the following demographic targets were achieved in EPWP opportunities:   A total of  69% of EPWP opportunities went to women  42% of opportunities went to youth

And 1% for Persons with Disabilities.

House chairperson, both the Auditor-General of South Africa and Members of the Portfolio Committee in Parliament have raised concerns about the reporting by provinces and municipalities of EPWP.

In 2020/21, the Department conducted a social audit pilot study in the City of Ekurhuleni Metro, Steve Tshwete Local Municipality and Nkangala District Municipality to assess the impact of the EPWP Programme in communities.

Prestige

Under the Prestige programmes for Government functions, state visits and funerals, will reduce from R94 million in 2021/22 to R83 million in 2023/24. 

The Department is continuing to implement austerity measures, mainly for the state functions, hence the decreasing budget over the medium term for this Programme. 

Property Management Trading Entity (PMTE)

The budget allocation for PMTE is R4.2 billion for the 2021/22 financial year. 

The PMTE will also focus on refurbishing and maintaining government buildings in its portfolio and developing 12 small fishing harbours. 

Under the PMTE allocation, an amount of R 945.7 million is allocated to DPWI specific infrastructure projects and is used for: R256 million for used for Land Ports of Entry,  

R116 millions for Dolomite Risk Management where Government buildings that are at risk to collapse because of a dolomite sinkhole and doline problem especially in Gauteng, Mpumalanga, Limpopo, North West, Northern Cape and the northern part of the Free State provinces. 

R23 million is set aside for the retrofitting of facilities that have not catered for people with disabilities,

R20million is projected spend for this financial year for refurbishment to parliamentary villages to ensure that they are compliant 

R35million projected spend in this financial year for refurbishment of the Parliamentary precinct in buildings such as the NCOP, the Marks Buildings, 100 Plein Street and security infrastructure. 

R131.7million on other infrastructure projects such as the Port Elizabeth Eben Donges building: building alterations and refurbishments including Air conditioning and Mechanical installations, the upgrading of 10 Water treatment plants and the upgrading the DPWI regional office in Durban. 

R199 million is for precinct development in cities to support efficient and integrated government planning by grouping Departments that provide similar services. 

Salvokop

As part of integrated planning and development, the Department has completed the Township Establishment to develop Salvokop Precinct mixed-use precinct in Tshwane.

This includes the national offices for 4 government departments, namely; the Department of Correctional Services, the Department of Higher Education and Training, the Department of Social Development and agencies – SASSA and the National Development Agency (NDA) as well as the Department of Home Affairs.

The process for the appointment of a contractor to install bulk and internal services at Salvokop is currently being finalised that will facilitate development Phase 1 constituting 350 000m2 of development of four Government Head Offices.

Four Public-Private Partnerships have been registered and are currently in feasibility and budget approval stages with National Treasury.

PV and water savings on government buildings

DPWI as the landlord for all government buildings consumes a significant amount of electricity and water. An estimated 4021 Gigawatt hours and 39 million kilolitres of water each year. 

This equates to on average R2.4 billion expenditure each year on electricity and on average R1.8 billion each year expenditure on water.

The Department’s PV and Water Savings on the Government Buildings Programme aims to reduce energy consumption by between 22 to 45% over the life of the Programme and reduce water consumption by between 30 to 55%, which will equate to an estimated saving of up to R500billion over 30 years for government.

Further this Programme will reduce carbon emissions by 54.5 mega tonnes.

The Programme was gazetted as a SIP on 24 July 2020, which has enabled it to follow an expedited path.

The Programme has received Treasury Approval 1 for Phase 1 and it has been registered to be implemented in collaboration with the private sector on a full Design, Finance, Build, Operate, Transfer (DFBOT) basis, allowing the Programme to proceed to Phase 2.

Phase 2 entails the implementation and procurement of the Programme. 

The initial parts of this process involve the packaging of projects to be issued as required, including developing financial, technical, and legal components of procurement documents.

The Project Team and Transaction Advisor, together with the Chief Financial Officer have worked with National Treasury on the structuring and governance of the various utilities budgets and are in full agreement on the way forward. 

This will mean that this SIP will be able to go to market in the next few months.

Land reform

House chairperson, the DPWI plays an active role in the Inter-Ministerial Committee (IMC) on Land Reform to fast track land reform.

Just this weekend, I joined the President and Ministers from the Land Reform IMC as we handed over 31 title deeds to black farmers outside Groblersdal in Limpopo.

I want to thank the two members of the portfolio committee who joined us at the hand over event, honourable Samantha Graham-Mare and Honourable Timothy Victor Mashele. 

The Department’s Real Estate Investment Services that champions the work of land reform has been allocated R220 million for this financial year. This branch spent 98% of their budget in the previous financial year.

In the past year: 

  • 2 574 hectares were released for Restitution Programme to the Department of Agriculture, Land Reform and Rural Development (DALRRD) to finalise land transfers to claimants.
  • 52 parcels of land totalling more than 3 000 hectares were released for human settlements. 
  • 125 Parcels agricultural land for land redistribution measuring 25 500 hectares and covering all nine provinces.

Further, in support of infrastructure development, 15 hectares or 11 land parcels were approved for registration of roads, water, electricity and gas pipeline servitudes.

In the 2021/22 financial year, the Department plans to release; 21 132 hectares for land restitution,   10 951 hectares for Human Settlements  and 180 hectares for other socio-economic purposes.

The Department also has an extensive Property portfolio comprising 29 041 land parcels and 81 573 buildings – a total of 9 736 are vacant parcels of land ready to support the spatial transformation of our cities and towns.

The Real Estate Registry and Information Services is responsible for the Department’s Immovable Asset Register, and it will receive R62 million in the current financial year. 

National Treasury is currently assisting DPWI to draw up the specifications to digitise the immovable asset register.

We are planning a conduct a proof of concept to transfer the immovable asset register onto a block chain platform to enhance transparency and the credibility of the asset register.

The Immovable Asset Register (IAR) is the core tool that DPWI can use to sweat the assets of the state, drive investment in infrastructure and bring about social and spatial justice. 

House chairperson for this financial year, the allocation for the Real Estate Management Services Branch is R11.2 billion that will be spent on Leases, Property Rates and Municipal Services. 

GBVF 

Through its Real Estate Management, the department has identified 83 properties in the past year to be allocated for use as shelters for victims of gender-based violence.

Together with the Department of Social Development, we inspected 83 properties, and 30 properties were selected to be used by the Department of Social Development as shelters or support centres for people affected by GBVF.

During the previous financial year, 12 properties were allocated to Social Development; six were in the Western Cape and six in the Gauteng Province.

In this financial year, the Department will prepare and release more properties across the country for Social Development to utilise in the fight against GBVF.

As DPWI, we have requested provinces and municipalities who also own buildings to also release some of their own buildings for GBV purposes and not only wait for DPWI to do so. 

The Department’s Facilities Management Branch will be doing repair and maintenance (preventative and reactive) on state-owned buildings received an allocation of R3.9 billion for the current year to maintain the entity’s portfolio of properties. 

The Department has enhanced its strategy in reducing reactive maintenance by putting in place preventative contracts through Total Facilities Management and Term Contracts. 

The Department has awarded 76% of these contracts to previously disadvantaged groups, further disaggregated to 37% to women and 17% to youth. 

Construction property management

The Departments Construction Project Management Branch received an allocation of R5 billion for the current year. The CPM branch only managed to spend 69% of their allocated budget in the prior year. 

The reasons for the underspending are mainly due to poor management contract management, poor cash-flows from the contractors that led to inadequate material supplies on sites and negatively impacted the delivery of milestones. 

In addition, the Covid-19 pandemic required the temporary closure of sites that hurt site productivity, including the mandatory reduction of the workforce to accommodate social distancing. 

These led to under-performance on the infrastructure budget where projects were not executed as planned and spending did not occur as projected.

In mitigation, the Department has established a panel of contractors that will be utilised in an instance where a contractor has been terminated due to poor performance or any other justifiable reason. 

This will save money as a significant amount is usually spent on assisting a non-performing contractor or appointing a replacement contractor. There will therefore be less impact on construction periods and expenditure on projects. 

Measures have also put in place to monitor the Procurement Plan to ensure that projects are firstly packaged correctly and ready for the procurement process and secondly that they are awarded timeously and lastly to ensure that the budget is allocated to those projects that can be delivered.

Supply chain management

In terms of the 30% sub-contracting requirement, during the past financial year, the Department awarded 15 tenders above R30million worth R836 million and sub-contracted 30% to designated groups to the value of R251 million.

The Department is also exploring a proof of concept for the use of Block chain technology within SCM.  A proof of concept has been registered with National Treasury.  

The Department piloted the implementation of the opening of its bid adjudication processes for public observation in the past financial year. 

Every tender advertisement also includes notification of public observation in the bid adjudication process.  

As DPWI improves its Supply Chain Management, it is critical to pay our service providers within 30 days as the law requires.

Delayed payment can often lead to bankruptcy of entrepreneurs, especially SMMEs trying to break their way into the built environment or construction industry.

As of end-March 2021, 92% of invoices received by PMTE were processed within 30 days of receipt, while 96% of invoices in the Department’s Main Account were processed within 30 days.

This demonstrates the commendable work that the Department is doing. 

In instances where officials have been found to have transgressed the requirements to pay service providers and suppliers on time, disciplinary actions are recommended against such officials.

In the financial year ended 31 March 2021, the Department’s Main Account made 281 referrals to Labour Relations for consequence management against officials.

In PMTE, consequence management was recommended against 143 officials.

Corruption

As the honourable President Ramaphosa said in his 2021 SONA: “Corruption is one of the greatest impediments to the country’s growth and development.”

Corruption steals from the poor. 

Yesterday, together with the Head of the Special Investigating Unit, Advocate Andy Mothibi and civil society members we launched the newly established Infrastructure Built Anti-Corruption Forum. 

This forum made up of representatives from the public sector, government entities, civil society and law enforcement agencies such as the Hawks and the National Prosecuting Authority and aims to collaborate on and coordinate anti-corruption initiatives in the infrastructure built environment.

The aim is to address vulnerabilities through forensic investigation, criminal prosecution, recovering losses, proactively preventing future losses in the sector.

Since 2010 to date, the Special Investigations Unit (SIU) had investigated 6 796 matters in terms of four Presidential Proclamations. 6 468 matters were finalised, and 328 cases are pending. 

In addition, the SIU is seeking to recover R1.4 billion in losses suffered by the Department as a consequence of a series of irregularities relating to transactions entered into by the Department with service providers. 

To date, R129 million has been recovered from landlords who overcharged the department for rentals.

In addition, the SIU has referred 197 criminal referrals relating to misrepresentation and fraud to law enforcement agencies for prosecution.

House chairperson, the Nkandla matter is also still before the Pietermaritzburg High Court.

In the civil matter, the parties have applied for a new trial date. They are anticipating that the case will be heard in August 2021. 

The criminal cases are managed by the SIU, which has referred to four matters for criminal prosecution. 

Policy

I want to provide Parliament with an update on the Department’s policy priorities during this financial year. 

The Expropriation Bill was introduced in Parliament in October 2020, and the Parliamentary processes are currently underway, including public hearings and oral presentations in all provinces.

The Department plans to introduce the Public Works General Laws Amendment and Repeal Bill to Parliament in the 2021/22 financial year. 

In addition, we are currently developing the Construction Industry Development Board (CIDB) Act Amendment Bill, and this legislation will be introduced to Parliament during this financial year. The draft Public Works Bill will be gazetted for public comment during this financial year. 

DPWI will also publish regulations for both the Infrastructure Development Act (IDA) and the Government Immovable Asset Management Act (GIAMA) this financial year.

Rural bridges

House chairperson, one of the key projects making a lifesaving and significant impact for our most vulnerable communities in rural communities, especially in the Eastern Cape, KwaZulu Natal is the Welisizwe Bridges Project. 

Three other provinces: Limpopo, Free State and North West, have expressed a keen interest in the implementation of the Programme.  

Working together with the Eastern Cape Department of Transport and Department of Defence, 10 Bridges were completed in the Eastern Cape and a further 20 bridges are scheduled for installation in this financial year.

In KwaZulu-Natal, working together with the KZN Department of Transport and Department of Defence, 8 Bridges were installed during this past financial year, with a further 6 to be completed by the end of this month. In addition 20 further bridges are scheduled for installation in this financial year.

Small harbours

The Department contributes to Operation Phakisa: Oceans Economy through the Small Harbours and State Coastal Property Development programme. 

The Department has spent R500 Million to repair and maintain the Proclaimed Fishing Harbours in the Western Cape.

Thus far, the entire Programme has created 672 jobs and empowered local SMME companies to a value of over R61 million.

The Programme is expected to reach culmination by March 2022, bringing the existing harbours to an 80% operational efficiency.

In the quest for the development of new harbours, the Department is finalising the in-kind grant from the Chinese government to conduct feasibility studies along the coastlines of the Northern Cape, Eastern Cape and KwaZulu Natal.

House chairperson, members from the above it is clear that there is a lot of work for DPWI to do especially in the delivery of infrastructure that will improve the lives of all South Africans especially the most vulnerable. 

The Deputy Minister and I are determined to lead and drive a greater level of urgency in DPWI to ensure that we deliver to the people of our country and expedite the implementation of the Infrastructure Investment Plan so as to create the conditions conducive for investment by the private sector which can in turn create more jobs for our people.

Thank You.

Courtesy: www.gov.za

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SA could cut planned infrastructure budget by addressing billions of litres of wasted water

Water waste, leaks, and the use of drinking water for manufacturing is resulting in billions of litres of potable water going to waste, which – if addressed – could reduce the water infrastructure spend that is necessary.

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AECOM ready to help get R100bn Infrastructure Fund off the ground

AECOM, the global leader in integrated infrastructure, is poised to play a role in potential projects that have significant support from the R100-billion Infrastructure Fund announced by President Cyril Ramaphosa in his State of the Nation Address on 11 February. This is according to Africa MD Darrin Green, who comments that there are opportunities in student housing, digitalisation and water infrastructure – all areas where AECOM has extensive experience and expertise.

President Ramaphosa stated that the Infrastructure Fund will blend resources from the fiscus with financing from the private sector and development institutions. Such partnering between government and the private sector is essential to get these projects off the ground and achieve results. Green notes that the government has also committed R791-billion worth of funding towards infrastructure in the 2021 Medium-Term Expenditure Framework (MTEF). Here efficient procurement is key in terms of the government’s capacity to bring projects to market in a timely fashion.

“We are all aware of the need for sound procurement principles, but real innovative thinking needs to happen so that procurement can be dramatically accelerated to have the necessary impact on the economy – and quickly.”

AECOM Africa MD Darrin Green

He adds that the consulting engineering and construction sector has been in serious difficulty and shrinking for some time, certainly prior to the Covid-19 pandemic, and is steadily losing skills and capacity to support the infrastructure drive. “The emphasis needs to be on fast-track procurement and delivery,” urges Green.

The biggest opportunities in terms of infrastructure in Africa at the moment are: energy (particularly renewables such as hydro, wind and solar power), Environment, Social and Governance (ESG), digital-related infrastructure such as data centres, and basic infrastructure, especially in terms of water management, reuse and sustainability. Capacity and skills remain a challenge, while funding is always a constraint, especially where budgets are being redirected.

Looking ahead, Green predicts that 2021 is likely to be a year of consolidation and adaptation for AECOM. “The vaccine rollout will play a major role in both South Africa and the rest of Africa in terms of bringing back economic activity and confidence. The consulting engineering industry is key to economic recovery, being second in the supply chain after government and client procurement.”

On the international front, AECOM recently announced its ‘Think and Act Globally’ strategy to extend its industry-leading, global expertise to each of its projects around the world, transforming the way it delivers work through technology and digital platforms, and enhance its position as a leading ESG company.

Green highlights that this strategy is having a major impact in providing access to in-house subject matter experts around the world. “We now have prioritised time to talk with our global counterparts and share our expertise, opening up our knowledge networks exponentially. Also, as our digital communication tools utilisation becomes mainstream, accessing this network remotely has never been simpler, allowing innovative new client solutions to be shared quickly and efficiently.”

Here the focus is increasingly on digitalisation and innovation. “We certainly see these trends accelerating, and perhaps more so in Africa, where innovation and digital technology can leapfrog and bridge the relative absence of hard infrastructure,” notes Green. AECOM is spearheading all aspects of digital design tools, including virtual environmental stakeholder digital rooms and virtual whiteboarding tools for client planning sessions in the client interaction and project stakeholder realm. The use of remote sensing, drones and digital tools on-site for streamlining inspection requests, test results and approvals is also becoming more prominent, as with the pilot site at the Polihali Western Access Roads project in Lesotho.

Responding to the ongoing challenge posed by Covid-19 and the altered working landscape, Green stresses the importance of collaboration in meeting clients’ requirements in this difficult time. Face-to-face meetings, for example, have evolved into more complex remote experiences. However, technology tools and platforms are catching up. “The key is flexibility and using digital and physical tools to enhance the client experience in a tangible way through to the delivery of the project. Clients are now more digitally aware; we can provide digital twins for projects once the modelling is complete and work together to have efficient data at our fingertips,” elaborates Green.

“It is important to note that we can leverage AECOM’s world-leading skills for our clients. We can assist in more areas than one might realise – from digital engagement tools to ESG advisory to hard infrastructure and project management and controls. We strive for the flawless delivery of our projects. Considering all environmental impacts is crucial; at the core of what we do is our belief in building sustainable legacies. Sharing our significant internal data and solutions certainly allows us to build on our innovative experiences so that we keep improving and staying ahead of the pack,” concludes Green.

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Increased infrastructure activity needed to boost economy

The decline in manufacturing production, at a time when increased industrial activity is important to revive the ailing economy, is very concerning, the Steel and Engineering Industries Federation of Southern Africa (SEIFSA) said today.

SEIFSA Chief Economist Chifipa Mhango said the decline once again highlights the negative impact Covid-19-induced lockdown regulations had on the manufacturing industry and the economy in general, and that this situation needs to reversed urgently. According to figures released by Statistics South Africa (StatsSA), total manufacturing production declined by 3,4% year on year in January, with a slight 0,5% month-on-month increase from December 2020. Total manufacturing sales increased by 1,4% year on year in January 2021 and by 0,9% from December 2020.

However, Mhango welcomed the 5,3% year-on-year increase in January 2021 in the performance of the Metals and Engineering (M&E) sector, which accounts for 29% of manufacturing production. Total sales across the sector’s 13 sub-industries increased by 10,6% to reach R68,3-billion. He said this performance would need to be sustained through the speedy implementation of the Government’s infrastructure plans if the sector and the economy as a whole are to recover.

StatsSA figures also showed that total capacity utilisation in the manufacturing sector was 72,3%, down from 81% in 2019. In the M&E sector, average total capacity utilisation for 2020 was only 68%, again demonstrating how Covid-19 has inhibited production within the sector.

Mhango noted that with the economy has contracted by 7% in 2020, it is imperative that the Government intensifies its efforts to revive the ailing economy and focuses on the implementation of its recovery plans. He said while the Government’s policies were attractive on paper, more needed to be done to speed up the implementation of critical interventions such as the Steel Master Plan in order to benefit both the upstream and downstream of the M&E sector.

Mhango said the current state of the M&E sector remains dire, with declining levels of employment and investment, as well as a weak trading position with the rest of the world. He said with the country’s unemployment rate now at 32,5%, it is important to ensure that the industrial base is not eroded any further. “Fixed investment is key to reviving the sector. To grow the country’s industrial base, the fixed investment share of GDP needs to move to levels above 40%, from the current level where it is below 20%,” he said.

Mhango said while the Government’s commitment to spend R791,2-billion in the next three years on various infrastructure projects is commendable, the slow rate of implementation and the mismanagement of funds have derailed progress towards achieving a higher ratio of fixed investment to GDP.

“The M&E sector is heavily reliant on demand from key Government infrastructure projects to boost its production and sales, especially for products such as steel and other related downstream products such as roofing material. The lack of progress towards the implementation of these projects will only serve as a hinderance to reviving the South African
economy,” Mhango said.

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Gautrain is safe and efficient

The South African green economy vision has identified nine green economy programmes, with sustainable transport infrastructure being one of them.

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SA’s transport sector in the age of Covid: A roadmap to economic recovery

The South African transport sector entered the age of Covid already beset by several major challenges. Ageing infrastructure; a lack of impartial regulatory bodies; an unfriendly environment for private sector collaboration; over-reliance on roads for both public transport and freight; and a skewered subsidy model are a few of the structural obstacles that were present.

Covid-19 has both highlighted and exacerbated these hurdles and must force the industry out of complacency.  The challenges it faces must be viewed as opportunities with the problem areas providing a guide as to the solutions that can be delivered with maximum impact, where they’re most needed.

A study conducted in partnership by Business for SA and global management consultancy firm, Kearney found that the already beleaguered transport industry has been further imperiled in 2020, and in the absence of any interventions, would likely plunge into an L-shaped curve, in terms of both GDP generated and employment levels, from which it would take at least five years to emerge.

However, Sujeet Morar, Principal at global management consultancy Kearney, believes that the challenges are not insurmountable and that there are solutions in the form of interventions that have the potential to deliver up to R223 billion and create up to 168 000 formal sector jobs, figures which far exceed the potential losses incurred by the Covid-19 pandemic. But for these to be effective government will have to act swiftly, delegating efficient, accountable teams, and galvanizing private-public collaboration.

Pre-Covid studies had positioned transport among the high impact, high potential growth sectors that have been earmarked for priority interventions (along with sectors like financing, petroleum-products, metals, and construction). All of these have the potential to induce cascading benefits that ripple throughout the broader economy, but perhaps none more so than transport.

“Inasmuch as it enables the movement of people and goods, the transport industry is a necessary facilitator and catalyst of every other industry at the macro-economic level. It is a crucial determinant of development metrics like GDP, and also prefigures a nation’s overall competitiveness in the global economic arena. Just as other industries rely on transport, transport itself is reliant on a functional, well-maintained infrastructure of roads, railways and ports; both air and sea”, explains Morar.

The role of transport in an economy is double-edged: it at once serves the demand of other sectors, and drives national and industrial competitiveness at the regional, national and global levels, through enhanced process efficiencies and cost improvements.

Within the land-based road- and rail- subsectors, the freight industry is the primary contributor to income, approximately 55% of which is derived from 3 key industries – mining, manufacture, and agriculture.

“Re-energising transport starts with sound governance. We advocate for a Single Transport Economic Regulator (STER), as well as a standalone ports authority and an independent rail regulator. Such structures would provide transparency, impartial oversight, and enhanced competition. In addition to this, we recommend a strong government-enabled model for collaborative networking amongst SMME’s, private companies, and academies or associations”, Morar elaborates.

A seismic shift in economic history, the covid-19 pandemic and its after-effects are ushering in a veritable fourth industrial revolution for the SA transport sector. “We anticipate many more Private-Public Partnerships (PPPs) including collaborations with logistics partners to overcome traditional obstacles, and start to forge more cost-effective, multi-modal transport solutions”, says Morar.

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Low hanging fruit can move SA circular economy efforts forward

Circular economy progress needs more collaboration, decentralised infrastructure.

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VIDEO | 7 Principles for building better cities

TED TALK | PETER CALTHORPE

More than half of the world’s population lives in cities. Another 2.5 billion people are projected to move to urban areas by 2050. The way we build new cities will be at the heart of what matters: climate change, economic vitality, well-being, and connectedness. Peter Calthorpe is planning the cities of the future and advocating for community design that’s focused on human interaction. He shares seven universal principles for solving sprawl and building smarter, more sustainable cities.

This talk was presented at an official TED conference.

ABOUT THE SPEAKER: PETER CALTHORPE

Urban designer

Peter Calthorpe has spread the vision of New Urbanism, a framework for creating sustainable, human-scaled places.

Why you should listen

Peter Calthorpe’s 30-year design practice is informed by the idea that successful places must be diverse in uses and users, scaled to human interaction, and environmentally sustainable.

In the early 1990s, Calthorpe developed the concept of Transit Oriented Development (described in his book The Next American Metropolis: Ecology, Community and the American Dream). This idea is now the foundation of many regional policies and city plans around the world. His 2010 book is Urbanism in the Age of Climate Change. Calthorpe Associates’ work has demonstrated that community design with a focus on sustainability and scale can be adapted throughout the globe. His current work is focused on developing standards of Low Carbon Cities in Beijing, Chongqing, Kunming, Zhuhai, Jinan and other major cities.

“The titles of Peter Calthorpe’s books trace the recent history of urban design in its most vital and prescient manifestations, starting in 1986 with Sustainable Communities followed by The Regional City: Planning for the End of Sprawl and most recently Urbanism in the Age of Climate Change.” — Metropolis

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Pathways to transformation: The Covid-19 pandemic crisis and emerging lessons for repurposing our cities

Covid-19 has impacted on contemporary society in ways that would not have been contemplated even six months ago. No-one would have considered locking down half the world’s population as remotely feasible in January of this year. Unsurprisingly, much has, and continues to be, written about the current Covid-19 pandemic and its impacts on our lives.

By Llewellyn van Wyk, Infrastructure Policy and Development Analyst, New Zealand

Many of these contributors and writers have also argued that Covid-19 provides a critical moment for societal transformation – an opportunity, as it were, to replace the dysfunctional economic, social, and environmental systems that have accumulated over decades. This collective writing is contributing to the building of a new body of knowledge on how pandemic crisis impacts on our lives, and how governments and people did and can respond to its challenges. The value of these lessons should not be underestimated: never have we had a single pandemic crisis impact on so many people almost simultaneously at this scale. As Jacinda Ardern, the Prime Minister of New Zealand keeps on reminding us, “there is no playbook for this.”

It just may be that after Covid-19, if there is an after (more on this anon), it may well be possible to construct such a playbook.

BACKGROUND

The opportunity to contribute to such a playbook dawned on me as my mailbox began filling with contributions from writers and thinkers from around the globe. Perhaps among the collective contributions, some lessons could be gleaned that would offer pathways to transformation. It may be argued that trying to create potential lessons from an event that has yet to run its course is premature at best, foolish at worst. After all, a post-Covid-19 could look quite different from what is being currently widely speculated.

Notwithstanding this risk, there seems to me to be a unique opportunity to distill lessons from the many commentaries on the subject especially while passions are still so high. No doubt the learned studies will follow, and these two views – a before and after, spontaneous and considered if you like – will, in and of itself, be enlightening.

Thus, I began a process of curation hoping that these curated insights could help leaders in the public, private, and social sectors overcome the crisis—and remake the future. This has allowed me to draw on some of the wealth of material produced since the outbreak of Covid-19, utilising some of the 300+ articles that came into my inbox. This curated collection represents some of the best I have read; no doubt, there are other excellent contributions that I have probably missed.

What follows is a collection of think-pieces – missives written in the heat of battle from the frontlines – from a wide array of contributors over a period of four months. As to be expected, there is a personal bias in the recording since what enters my email inbox is predominantly invited and firmly grounded in progressive thinking and delimited to placemaking. Given the delimitations of the data collection method (both source and topic bias), I have systematically collected and collated all contributions as they appear daily. From these puzzle pieces, a general picture has emerged as one would expect from the adoption of a grounded theory approach in research. Not surprisingly, many overlaps emerged as well, and they are most likely attributable perhaps to a growing collective awareness and shared philosophies.

PRELIMINARY FINDINGS

What struck me, in the beginning, was the uncertainty surrounding the nature and by implication, the solutions needed to manage the crisis. This reminded me of a scene in the 2011 movie Margin Call. There is a scene in the movie where, at a senior partners meeting called at 4 AM to discuss the potential financial collapse of the company, the CEO, John Tuld (played by Jeremy Irons), following a briefing by a young risk analyst to Tuld on the nature of the problem, replies: “So, what you are telling me is that the music is about to stop, and we are going to be left holding the biggest bag of odorous excrement ever assembled in the history of…..capitalism.” The movie is of course fictitious, although based on the events of the financial crisis of 2007-08 and indirectly referencing the actions of Goldman Sachs at the time. But it is the subsequent dialogue which is of relevance where Tuld sums up the situation as follows, “I’m here for one reason and one reason alone. I’m here to guess what the music might do a week, a month, a year from now. That’s it. Nothing more. I’m standing here tonight I’m afraid that I don’t… hear… a thing. Just…. silence. So, now that we know the music has stopped, what do we do about it?” 

We do not know whether Covid-19 has stopped the music or is just slowing it down. It is too early to say. However, the music has elicited a huge amount of commentary on all social media platforms with responses varying from “hoax” to “overreaction” to “mythical moment for humankind” and everything in-between.

What we do know is that the Covid-19 crisis is a human tragedy and, in that sense, a clear lesson for humanity to not overestimate the resilience of our global society to external shocks.

In the beginning of the pandemic’s spread out of China, the commentary focused almost exclusively on the nature of the virus itself, and potential threats it posed. Very soon, however, as case numbers increased and nation-wide shutdowns started, the topics covered in the commentaries broadened.

Commentators were quick to seize on the opportunity to use the pandemic as a moment to change our consumption and production patterns. Many argue that the underlying systemic weaknesses in our socio-economic structure create the enabling environment for Covid-19-type crisis to flourish. Similarly, questions are asked about our seeming inability as a specie to think about tomorrow. Despite much finger-pointing at the tardiness with which some countries responded to putting containment measures in place, the overall sentiment is one of hopeful optimism that some good can come out of it.

This notion that we are poor at thinking about tomorrow suggested that a short history of epidemics and pandemics was required to assess whether there has been a time or times in the past when we did better. The answer, regrettably, is no.

Changing our consumption and production patterns inevitably means revaluing our relationship with the natural environment and the impacts it causes. This argument is strengthened by early suggestions that the virus spread from a wet seafood market associated with the trade of wildlife. There is significant evidence that links past pandemics to the same source.

Commentators also took the opportunity to draw parallels between fighting climate change, and our response to Covid-19. On this subject, opinion is divided as to whether governments and the electorate for that matter, will connect the dots.

What also emerges very clearly is the implications of global socio-economic and political links. These links are not only founded on the movement of goods and people but also the dependencies that global outsourcing creates together with the lack of a globally coordinated response.

One of the earliest axioms to come out of the sustainable development movement in the 1980s was to “think globally, and to act locally”. This is a timely moment to unpack this notion again in light of the current crisis. The state of national preparedness – or absence thereof – features prominently in this narrative. The state of healthcare and its ability to respond quickly and effectively is perhaps the most poignant question asked, and extensive reviews will need to be done to recalibrate this critical service.

All the above takes us firmly into the study field of human ecology being the interdisciplinary and transdisciplinary study of the relationship between humans, and their natural, social, and built environments. Human ecology theory considers the interactions of humans with their environments as a system. This systemic scrutiny provides an appropriate platform from which evaluate Covid-19 and its broader socio-economic and environmental impacts.

While there is considerable commentary on the Covid-19 impacts and lessons for the social and natural environments, it is the third environment i.e., built environment, and its interaction with the natural and social environments that is my real field of study. While commentaries did emerge on possible lessons and impacts on placemaking, they tended to focus on a priori textbook urban design and planning interventions rather than on what the emerging Covid-19 data i.e., planning commentaries are based on theoretical deduction rather than empirical observation. The empirical observation uses a wide enough lens to encompass all the commentaries and observations made to explore and propose a raft of possible responses capable of enriching while repurposing and futureproofing our built environments.

Covid-19 is highlighting numerous structural shortcomings in the way we live as a species.

While they touch on almost all aspects of society some notables include human impact on the natural environment, consumption and production patterns, health care (or lack thereof), infrastructure fragility, and the quality (and absence thereof) of public places. All of these are and will increasingly continue to be severely tested by climate change too. Covid-19, therefore, grants us a unique moment to measure our resilience to forecasted climate change impacts and, if we choose, to recalibrate our adaptation and mitigation instruments.

Over the course of the ensuing months, I will unpack many of the above themes in greater detail and expand on the lessons learned. Without pre-empting the many lessons, there are three standout messages: first, how unprepared governments were (and continue to be) to deal with severe disruptions; second, how fragile many of our systems are; and third, many structural fault lines were already active – Covid-19 has just exposed them.

Now, more than ever, is the opportunity to fix our many broken systems.

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