The Civil Engineering Contractor September 2018 | Page 3

COMMENT Government’s dead weight Eamonn Ryan - editor [email protected] A recent online survey conducted among its readers by Kenya- based Construction Review Online, posed the question of what readers perceive as the greatest impediments to the development of infrastructure projects in Africa. The results of the survey are in no way surprising, though the quantum of percentages certainly comes as a shock. Even people grown cynical about the ‘facilitating role’ of sub-Saharan African governments in initiating projects to grow their economies, may be startled at how bad things are. A striking 67% of respondents (3 325 voters) described Corruption as the single biggest impediment to infrastructure roll-out. That figure tends to crowd out other reasons, but the second biggest was also laid at the feet of government in the form of Political Interference at 17% (841 respondents). That means the dead weight of government accounts for no less than 84% of the perceived reasons as to why infrastructure projects do not happen in sub-Saharan Africa. Lack of Funding was identified as an impediment by 11% of respondents (536), followed lastly by Lack of Skilled Manpower at just 5% (266 of respondents). This sadly means the levers to change the industry are not within our direct power — except through the ballot box. As to how this plays out in the broader economy, this was described in a recent report by Kevin Lings, senior economist at STANLIB, who described the process of deindustrialisation currently under way in South Africa, as that South African manufacturing capacity has declined in each of the past nine years. The rest of sub-Saharan Africa simply never industrialised. The South African Department of Trade and Industry (dti) in May launched the tenth iteration of its Industrial Policy Action Plan, focusing on the development of a wide range of South African industry. Lings says there have been some successes, especially in the case of the motor industry, and some of the dti’s programmes are considered dynamic and innovative by industry participants. Nonetheless, the overall performance of South Africa’s industrial output since 2006 can only be viewed as dismal by global standards. Lings says the “most striking and extremely concerning” aspect of this under-performance is the rapid decline in the country’s manufacturing capital stock since 2008 — which effectively means a decline in the country’s capacity to produce manufactured goods. According to the Reserve Bank, the value of capital stock (mostly machinery and equipment as well as buildings) within the manufacturing sector grew by a total of more than 26% in real terms between 1994 and 2008, peaking at a value of R677-billion in 2008 (values based to 2010 prices). However, in the years since 2008, the capital stock of the manufacturing sector has fallen by almost 17%, for an effective annual average decline of -2.0%. It shrank in each of the past nine years, taking the capacity of the manufacturing sector back to the level that prevailed in 1995 — coincidentally almost back to when this government assumed power. The dti has highlighted a view of the reasons, arguing that “there is lack of policy certainty, programme alignment, and integrated support across government”. This, according to the dti, “has a severe negative impact on the effective use of critical industrial policy levers”. Furthermore, they argue that the “lack of proper alignment has not just been a matter of poor coordination; it has often been both caused and compounded by corruption, collusion, and rent-seeking”. According to the dti, a few examples include “the stalling of the highly successful renewable energy programme; ongoing uncertainties around proposed amendments to the Mining Charter; and the failure so far to establish a viable framework for gas- based industrialisation”. Here we see the dead weight of government in all its glory, as described by a key pillar of government itself. Lings described some additional events that have hurt South Africa’s manufacturing capacity in recent years: regular electricity outages; concerns about water supply; periodic strike activity that, in many instances, has turned into prolonged strikes; a lack of research and development and product innovation within the broader manufacturing sector; a shortage of critical skills; and inadequate infrastructure. All of this leads to poor productivity and a lack of new investment, thereby compounding the stagnation of the sector. Every one of these arguments applies as much to infrastructure construction as to manufacturing. For those hoping Ramaphoria will save the country’s economy, the current policy debate regarding land redistribution without compensation is simply the latest in the ‘same old same old’ unhelpful and ultimately destructive policy debates. Eamonn CEC September 2018 - 1