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Infrastructure policy reforms and logistics plans could reshape SA ’ s economy By Roelof van den Berg , CEO of Gap Infrastructure Corporation
There is a considerable mountain for South Africa to climb if we are to reach the country ’ s infrastructure goals by 2030 .
As was recently acknowledged at the 2024 Sustainable Infrastructure Development Symposium , the public sector will need to invest some R1.6-trillion and the private sector some R3.2-trillion to achieve these goals .
The good news is that hard yards have been made in preparation for the challenge ahead , with several significant regulatory reforms already underway . These include critical amendments to the Division of Revenue Act and the PPP regulatory framework that will strengthen public-private partnerships ( PPPs ), streamline project processes , and encouraging greater private investor involvement .
But perhaps one of the most important focal areas for the country will be plans for the large-scale modernisation , maintenance , refurbishment and expansion of local logistics networks , including port and railway systems .
Some quick wins could also potentially be achieved in areas like operational improvement through effective management and reforms and bringing long-standing locomotives back to service to immediately alleviate congestion problems .
This includes a focus on operational performance improvement , upgrading rolling stocks , ensuring the safety of the rail network , and capital investment for expansion and sustaining operations . Some quick wins could also potentially be achieved in areas like operational improvement through effective management and reforms and bringing long-standing locomotives back to service to immediately alleviate congestion problems .
LOGISTICS IS THE LINCHPIN FOR SUSTAINABLE , INCLUSIVE GROWTH
Ultimately , enhanced logistics infrastructure is the catalyst needed to ignite lasting economic transformation , making our economy substantially stronger , more sustainable and more inclusive .
For example , by improving our logistics efficiency , South Africa can reduce business costs , translating to increased competitiveness on both local and global scales . In turn , enhanced competitiveness could spur business expansion and stimulate employment . Streamlined logistics systems often drive growth in industries reliant on freight transportation , such as the manufacturing , agriculture and retail sectors – all of which are highly labour absorbent . Likewise , this would improve export capacity , resulting in billions and even trillions of rands in additional income for the country in coming years , delivering outsized returns .
SUCCESS HINGES ON PUBLIC- PRIVATE PARTNERSHIPS ( PPPS )
Notably , PPPs will be critical to achieving the country ’ s infrastructure objectives , as private sector investment and expertise will be needed to expedite improvements in our logistics systems and create an environment conducive to innovation .
Partnerships such as those between the Gap Infrastructure Corporation ( GIC ) and various public entities , for example , exemplify the benefits of PPPs in delivering critical infrastructure projects efficiently and costeffectively . By leveraging private sector resources and capabilities , public entities can successfully navigate the complexities of large-scale infrastructure development without falling victim to common traps .
HURDLES THAT MUST BE OVERCOME
It ’ s common knowledge that large-scale infrastructure projects internationally are often susceptible to delays and budget creep because of ever-present practical challenges .
Inflationary pressures , exacerbated by global market dynamics and currency volatility , are one such challenge , posing significant risk to budgets for construction materials and machinery . Statistics South Africa ’ s Construction Input Price Index ( CIPI ), for instance , reveals that overall construction costs increased by 7.8 % year-on-year in January 2024 .
Demonstrating how dramatic the effect of inflation can be on projects , a 2022 Brookings study on infrastructure in the United States of America ( USA ) showed that if inflation was just 2.3 % higher than predicted every year , it would lead to infrastructure industries losing an estimated USD137-billion in purchasing power .
Meanwhile , supply chain disruptions can also complicate matters by delaying essential materials and machinery . In recent times , shipping lanes have been heavily disrupted due to geopolitical tensions like the conflict in Gaza , which lead to attacks on cargo ships in the Suez Canal . Additionally , extreme weather conditions such as droughts can cause low water levels in key shipping routes , further affecting travel time .
Supplied by Gap Infrastructure Corporation
Roelof van den Berg , CEO of Gap Infrastructure Corporation .
In South Africa , another obstacle is the urgent need to develop and retain expertise in the construction and logistics sectors . Investing in skills development programmes in these areas could go a long way in enhancing efficiencies in logistics infrastructure projects in the long run .
Given these challenges , private sector involvement is vital . Private infrastructure developers such as GIC can help reduce risks by offering expertise and experience in project management , finance and innovation . They can also offer access to specialised skills in engineering , planning and construction , and demonstrate how innovation can be used to digitise , simplify and automate processes in the construction industry for improved efficiency and cost savings .
If utilised effectively , PPPs could maximise the impact of policy reforms , infrastructure plans and the millions in funding being channelled towards logistics networks , fundamentally reshaping South Africa ’ s communities , economy and future for the better . CLA
8 www . coldlinkafrica . co . za COLD LINK AFRICA • September 2024