Thokozile Mahlangu, chief Executive Officer, IISA
Government’s plans to invest hefty amounts into infrastructure development to boost the country’s economy is good news for South Africa, particularly for the ailing construction industry, which has been in decline over the past few years.
During his State of the Nation Address, earlier this year, President Cyril Ramaphosa announced that government would invest over R100 billion in infrastructure projects to support economic growth and better livelihoods, especially in the energy, roads and water management sectors.
The Finance Minister, Enoch Godongwana reiterated this factor in the National Budget Speech. He said that the government would be accelerating infrastructure investment to boost economic growth. Godongwana also laid out plans to improve financing prospects for infrastructure through the public-private partnerships (PPP) framework.
Various industry bodies have applauded the said announcements. The Steel and Engineering Industry Federation of South Africa (SEIFSA) expressed its hope for the creation of 200 000 downstream jobs through the injection of funds into the manufacturing and infrastructure development projects.
Reacting to Gondongwana’s announcement, the Construction Alliance South Africa (CASA) said it welcomes the budget speech and is thrilled about the investment commitment to infrastructure development. The Alliance also stated that the industry is keen to collaborate with government in its efforts to boost infrastructure development. CASA unequivocally supports the government’s plans in this regard, as it is positive that the move will be good for job creation and economic growth.
Is it enough?
While government’s approach towards the construction and engineering sectors has been generally applauded, some have questioned whether the endeavour will be adequate for the resuscitation of the already ailing construction and engineering sectors.
At this point, it would be fair to say that any significant investment in these sectors, which were hard hit by the COVID-19 pandemic, is welcomed. Whether this investment plan will be a catalyst for economic recovery or not, only time will tell. There is consensus within the industry that cooperation between the private and public sectors will be needed to get building projects going before growth can become a reality.
Questions have also been asked about whether the economic pressure and urgency to kick-start the infrastructure projects could result in compromised standards in the construction industry, thus increasing risk. Considering this, concerns have also been raised about what the insurance industry is doing to withstand the pressure on premiums and the increased competition.
Firstly, I would argue that it is an unfounded fear that the pressure and urgency placed on the construction sector could result in inferior infrastructure projects. South Africa has previously seen largescale infrastructure projects rapidly rolled out.
World Cup projects
One good example is when South Africa embarked on an accelerated infrastructure development programme in preparation for the 2010 FIFA World Cup. According to a research paper on the topic, published in Structural Engineering International, the awarding of the tournament to South Africa resulted in 10 stadiums having to be either upgraded or newly constructed for the event. Additionally, major highway upgrades were also carried out in Gauteng ahead of the World Cup, under the banner of Gauteng Freeway Improvement Project.
All the work in question was carried out in record time. None of the projects nor the quality of the work carried out was compromised. In fact, in its conclusions, the paper notes that the stadiums developed in South Africa for the 2010 World Cup presented an opportunity to the South African construction industry to showcase its skills and capabilities.
The local insurance industry is mature, stable, and quite capable of absorbing a vast number of largescale infrastructure projects. KPMG’s South African Insurance Industry Survey 2021 highlights the contribution of the insurance industry to the stability and financial soundness of the South African economy. The survey demonstrates the capital strength, resilience, and the ability of the industry to adapt, innovate and show up when needed.
I am confident that from a capacity perspective, our industry has many world class underwriters that are poised to handle any liability risks emanating from the government’s accelerated infrastructure plans. After all, South Africa makes up the largest and most established insurance market on the continent, accounting for 70% of total premiums in the region.