Last month I suggested that the South African government is unsure of which route to follow to find a shared strategy with the private sector to deal with the infrastructure backlog preventing the region’s progress.
Has the ruthless march towards recession, higher unemployment, coupled with the prospect of credit ratings downgrades and potential changes in voter sentiment, finally struck home?
Finance Minister Pravin Gordhan’s recent bellwether meeting with 60 CEOs reminds me of the Union Buildings meeting I attended after South Africa successfully hosted the 2010 World Cup. The President and most of the Cabinet met with business in high spirits to reinforce the need to harness the collaborative momentum that had delivered so well.
Will the economic crisis that has followed the inaction and ineptitude after that euphoric session finally galvanize government and business into action?
Economic revival will not be achieved without massive investment in infrastructure and it cannot be delivered effectively without collaboration between the public and private sectors at the highest level.
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In many countries there is a close relationship between the government, the national agenda and the construction industry. Many have transparent cross shareholding and collective arrangements that make for quicker infrastructure expansion.
The key is harnessing private sector funding for public infrastructure through commercially viable PPPs and concessionary projects, where each party takes a share in the risk for reward. This relieves the fiscus of having to fund everything and can then direct scarce public funds towards infrastructure that will attract industrial investment and drive long-term economic growth.
My previous company has decades of experience with this in Africa and Eastern Europe, but political ideology in South Africa has bedeviled this opportunity.
After 2010, we had numerous discussions with Brazilian groups and learned of this collective mindset in Brazil ahead of their 2014 World Cup and 2016 Olympics programs.
France has a deep collaboration between government and construction. The United States infrastructure is now undergoing massive rebuilding, with a strong private sector participation in both funding and implementation.
Likewise for overseas work, our competitors come into our region with robust political and financial backing from their governments.
The French approach to business is founded upon national interest and long-term foreign relationships, which was evident in recent years with the prospects for a fleet of nuclear power plants for South Africa. For several years, I participated in the developing French strategy for this work that encompassed major technology groups, their suppliers looking to localize in South Africa, the French national power utility and their government representatives.
Likewise, the Russians and South Koreans have strongly developed public/private trade institutions and strategies and have engaged with targeted partnerships with local companies. The success of South Korean business in our market is remarkable. The Russians are now firm contenders for nuclear power.
In stark contrast, in my experience in working across Africa and the Middle East, South African business generally feels alone and has to fend for itself internationally.
South Africa’s tax-payer funded development finance institutions have been known to fund projects in other African countries without involving any South African content. Most competitor nations would have contractual requirements that their funding has a high content from the lending nation.
This further diminishes South Africa’ growth prospects, the tax base and the desired employment and regional cooperation. The lack of support, and the time lost, is eroding the commitment to South Africa as the bigger companies shed local jobs and continue to shift to new international markets.
The construction industry has been through hell but it’s ready to make a difference. To do this it needs a champion in government, that has until now been absent.
The industry has tabled robust investments and long-term plans that include significant additional training and skills program. It has also offered to assist distressed municipalities and undertake social projects.
There is also a suite of execution strategies that will deliver on the commitment to collaborate with, mentor and jointly execute large projects with black-owned business to ensure the next generation of large construction companies are created from a solid experience base.
Perhaps out of adversity, the need for radical change in ideology and policy from government and for business to deliver more jobs, demographic and economic transformation and black industrialization, Gordhan’s new approach will find traction.
The engineering and construction industry in this country cannot wait much longer.
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