Wednesday, February 12, 2025
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HomeConstruction and EngineeringSouth Africa: Time for action on infrastructure

South Africa: Time for action on infrastructure

It’s rolling up the sleeves time for South Africa as work is underway to fix and upgrade existing facilities and invest in new infrastructure in order to stimulate economic growth.

Such is the importance attached to infrastructure in South Africa that a separate structure called Infrastructure South Africa (ISA) has been created. ISA was established in 2020 and reports to the Presidential Infrastructure Coordinating Commission, which is chaired by the President of South Africa, Cyril Ramaphosa.

When one aspect of the country’s infrastructure was threatening the country’s security, it was a measure of the respect that the President has for the man who was then in charge of ISA, Kgosientso Ramokgopa, that he was then capped in a new post, that of Minister of Electricity and Energy.

ISA acts as an infrastructure centre of excellence and provides a single point of entry for infrastructure planning, management and delivery. Part of its brief is to be a catalyst for closing the infrastructure investment gap.

The biggest event in ISA’s calendar is the Sustainable Infrastructure Development Symposium of South Africa (SIDSSA). A highlight of the 2024 symposium, the third holding of the event, was the first publication and release by ISA of a construction book which lists all the infrastructure projects to be initiated by government and state-owned companies (SOC) during the 2024/25 fiscal year. The book allows for informed decision-making for relevant companies.

ISA acts as an infrastructure centre of excellence and provides a single point of entry for infrastructure planning, management and delivery. Part of its brief is to be a catalyst for closing the infrastructure investment gap.

A total of 153 projects representing a total capital expenditure of R158.5-billion across the transport, electricity, water and port-logistics sectors were covered.

In the context of the summit, President Ramaphosa said, “Meaningful infrastructure [investment] would have the potential to strengthen the economy, bringing the country a step closer to achieving the NDP’s commitment for the economy to attain 5.5% year-on-year economic growth, a 6% unemployment rate and 30% gross fixed capital formation to GDP.”

President Ramaphosa is invested in improving infrastructure. Photo Credit: GCIS

Other highlights of SIDSSA were the unveiling of the Infrastructure Fund Pipeline and updates on the progress of the Strategic Integrated Projects as gazetted in 2020 and 2022.

Private commitment

One of the most interesting and consequential aspects of the South African infrastructure landscape is the commitment made by a large group of CEOs of the country’s biggest companies to contribute to fixing problems.

The failure of the rail network to deliver mining product to ports, the failure of ports to deliver citrus and grapes in sufficient quantities and continuous power failures that had become a feature of every South African’s life had reached a point where something out of the ordinary had to be done.

In 2023 the CEO Pledge was signed by about 140 CEOs, a number which by 2024 had risen to 160. Representing roughly R11-trillion in market capitalisation and with more than 1.36-million employees, these CEOs were not interested in virtue signalling. Rather, working groups were established to work together with the state in three critical areas: energy, transport and logistics and crime and corruption. Reports to President Ramaphosa would be made on a regular basis.

In 2023 the CEO Pledge was signed by about 140 CEOs, a number which by 2024 had risen to 160.

A year into the project, a good deal had been achieved, as Steuart Pennington of www.sagoodnews.co.za discovered when he spoke to Mxolisi Mgojo, a former CEO of mining company Exxaro. Among the wins are increased electricity generation, reduced loadshedding to the point where citizens were no longer counting the days since the last time the lights went off, improved volumes through ports and fewer incidents of crime on the northern railway network. Power facilities were receiving help from 17 different private companies at power stations and 350 private-sector experts were engaged across the three areas of engagement.

With problems in the water sector becoming more acute as 2024 drew to a close, there was some discussion about whether the CEO Pledge would expand its operations to include water.

ISA Top 12 priority projects:

    • Healthcare Infrastructure Programme (national)
    • Education Infrastructure Programme (national)
    • Ngqura Port Liquified Natural Gas (LNG), Eastern Cape
    • Project Ukuvuselela (high-capacity rail for automotive sector), Gauteng–Eastern Cape
    • Amatola Bulk Water Augmentation, Eastern Cape
    • Nkomazi Special Economic Zone, Mpumalanga
    • Namakwa Special Economic Zone, Northern Cape
    • Liquified Natural Gas (LNG) Import Terminal (Richards Bay), KwaZulu-Natal
    • Durban Container Terminal (DCT) Pier 1, KwaZulu-Natal
    • Eskom Tubatse Pumped Storage Scheme, Limpopo
    • Rooiwal Wastewater Treatment Works Phase 2, Gauteng
    • Reinstatement of Mossel Bay GTL Refinery, Western Cape

Read more about Special Economic Zones in South Africa

Clean water requires good infrastructure. Photo Credit: TCTA

Financing infrastructure

The Just Energy Transition Partnership (JETP) came into being at the COP26 Climate Summit in 2021 where South Africa and France, Germany, the UK, the US and the EU agreed that funds would be made available to assist South Africa to transition from being fossil-fuel dependent in a just manner.

South Africa has put forward an Energy Transition Investment Plan (JET IP) for the five-year period to 2027, setting out details of what needs to be done and at what rate it should be done to reduce greenhouse gas emissions. About R150-billion has been pledged, much of which will be devoted to building transmission capacity so that any energy generated by renewable sources is able to be dispatched.

In addition to the government-to-government funding, infrastructure financing is attracting increasing interest from fund managers and corporates.

Harith General Partners is paying R6.5-billion for the shareholding of the Pan African Infrastructure Development Fund in Aldwych Holdings. Noticeable in transactions of this sort is the variety in play: 37.5% of Lanseria Airport; 37.92% in AHL which has a subsidiary that supplies energy to 23-million customers in various African countries; and 15.3% in CIVH, which controls a number of fibre companies and an IoT network.

Standard Bank has already provided more than R2-billion to more than 1 500 SMMEs to switch to renewable energy and is preparing to bulk up its offering in water and waste-management financing. A generous tax incentive (section 12BA), whereby the solar PV asset can be depreciated at 125% of the capex value in the first year, has contributed to a big take-up in converting power supplies.

In addition, the bank has been part of deals adding up to more than R60-billion in connection with private producers participating in the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP). Five bidding rounds have attracted about R250-billion in committed investments into energy generation in South Africa through the programme. All of South Africa’s major banks have dedicated renewable-energy units.

The Presidential Climate Commission reports that the pipeline of REIPPPP projects stood at R377-billion in June 2024. Applications for the development of 4.5GW were received in 2023, sharply up from the two previous years, 135MW (2021) and 1.6GW (2022). The establishment of a one-stop shop to deal with registering projects is part of the reason for the expansion of potential new capacity.

According to the National Energy Regulator of South African (NERSA), R11.4-billion was spent on solar PV in the third quarter of 2023. Seven commercial generation facilities were registered out of a total of 98 facilities which created new capacity worth 908MW.

The South African Wind Energy Association (SAWEA) calculates that the 34 wind farms currently operating across South Africa have collectively brought in R89.6-billion in investment.

Investors in the renewable energy sector in the Eastern Cape, particularly the wind power sector, have been building energy facilities in the province for more than a decade. Credit: Cennergi Services

Sanlam Investments has launched a Sustainable Infrastructure Fund which primarily invests in senior or subordinated debt across a wide range of South African infrastructure assets, with the ability to invest up to 10% in equity.

The huge infrastructure drive promised by the state is relevant but in the context of climate change, the investment community is increasingly putting emphasis on sustainability. Sanlam Group will invest R6-billion in the fund and aims to attract a further R5-billion from institutional investors. Investments will be made in housing, transport, health, water, waste, communication, conventional energy and renewable energy, a fast-growing sector with enormous potential. Sanlam, established in 1918 as a life insurer and with its headquarters in Bellville, is Africa’s largest insurance company.


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