GROWTH OF SA S ROAD INFRASTRUCTURE: WHAT TO EXPECT SOUTH AFRICAN FORUM OF CIVIL ENGINEERING CONTRACTORS LR 2/6/3/138 SKHUMBUZO MACOZOMA CHIEF EXECUTIVE OFFICER SANRAL
IN ORDER TO DEFINE A FUTURE IT MUST BE PROPERLY CONTEXTUALISED NATIONAL DEVELOPMENT PLAN o Too few people work o The quality of school education for black people is poor o Infrastructure is poorly located, inadequate and undermaintained o Spatial divides hobble inclusive development o Goal is to eradicate poverty and inequality o Acknowledgement that national development is not linear but rather cyclical opt for a virtuous cycle where one element feeds off of another or enables another o Infrastructure is a catalyst but not a panacea the economy must grow o Roles of Govt and Private sector are distinct and not inter-changeable 2
WHAT THE NDP 2030 SAYS o GFCF at 30% of GDP o Public infrastructure investment at 10% of GDP financed through tariffs, PPPs, Taxes and Loans and focused on Transport, Energy and Water. o New spatial norms and standards o Faster and more inclusive economic growth o SA needs to fix the future - Starting today o Focused leadership (long-term) o Support for plans (participation and consultation) o Institutional capability (capable developmental State) o Resource mobilisation and agreement on trade-offs (some things may have to wait) o Sequencing and willingness to prioritise (focus on a few strategic priorities) o Clarity on responsibility (and hence accountability) 3
SANRAL - OUR JOURNEY ROAD NETWORK o Growth from 6700km to 22000km o What next? 25000km or 35000km? FUNDING o Growth from R1.2bn to R20bn o Non-Toll: R15bn; Toll: R5bn in 2017 o Public & Private funds R15bn in 2009 o National Treasury custodian of funding policy TOLL ROADS o 2952km or 13% of SANRAL network o R128bn worth of projects uncertain o Call for new toll roads policy o Urgency of resolution of e-toll debacle ORGANISATION o Staff growth from some 89 staff to 359 staff since 1998 o Operating model review o Institutional strengthening STRATEGY o Departure from Horizon 2010 approach o 1. Visioning 2. Planning 3. Funding 1998-2010: Horizon 2010 Road network growth Intro of private finance Accelerated investment Regional trunk network Technical Excellence Support for other roads authorities 2010-2020: MTSF 2015 and 2019 Road network growth e-toll and toll uncertainty Economic slowdown less funds Reputation & public trust deficit Leadership transition 2020-2030: Horizon 2030 Focus on long term visioning Review of network growth Review of funding model Long term roads plan Review of SANRAL mandate Review of RA support model Emphasis on relevance Aggressive transformation agenda 4
SANRAL MTEF BUDGET 2017-2019 MTEF 309 Projects R50.7 billion 5
NON TOLL BUDGET (R 000) 6
THE OTHER HALF OF THE STORY SANRAL KEY MEDIUM TERM PROJECTS Project R72/N2 Port Elizabeth to East London Initial Capital Costs (R 000 2014R) GFIP Phase 2 (New Routes) R 25 768 840 GFIP Phase 3 (Upgrades) R 17 655 160 R300 Cape Town Ring Road R 4 861 600 Current Status Designation - Toll N1/N2 Winelands R 9 316 100 Joint Planning and Reprioritisation Toll abandoned N2 Botrivier to Port Elizabeth R 11 272 540 Basic Planning (Non-Toll) N2 Wild Coast (Ndwalane to Haul roads construction underway R 7 578 656 Mtamvuna River) (SIP 3) Mtentu bridge awarded N2 Durban South (Prospecton) to North R 7 847 000 Detail Design (non-toll) (Umdloti) N2 Richards Bay to Ermelo R 7 284 140 Detail Design (non-toll) N3 Pietermaritzburg (Twickenham) to Durban (EB Cloete) (SIP 2) R 15 777 205 N3 De Beers (SIP 2) R 5 500 000 Detail Design (non-toll) New alignment required Van Reenen Development Project Detailed investigations underway Pampoen Nek Construction Started construction (Non Toll) N4/PWV3 extension Pampoen nek R 1 716 900 N12 Johannesburg to Klerksdorp R 2 731 700 Basic Planning (Non Toll) N12 Benoni to Witbank R 811 840 Basic Planning (Non Toll) R 6 301 200 Detail Design, Phased Construction Started (Non Toll) O&M Toll Funding Model Agreed Toll abandoned 7
FUNDING LANDSCAPE ROAD NETWORK o 2030 Roads Plan to inform future national roads projects o Network management to be informed by funding policy position adopted o New roads, road transfers, capacity expansions and improvements face the biggest risk FUNDING o Funding envelope threatened need decision on roads funding o Budget per/km severely constrained o Quality index vulnerable o Trade-offs must be made RELEVANCE o Drive projects with biggest development potential o Community development projects o Road safety o Public transport enablement OWN REVENUE o Join SA Inc in pursuing Africa and elsewhere o Best practice o Roads authority support Rand ('000) Network Length (km) R 40 000 000 R 35 000 000 R 30 000 000 R 25 000 000 R 20 000 000 R 15 000 000 R 10 000 000 R 5 000 000 R 0 35 000 R 2 000 000 30 000 25 000 20 000 SANRAL Funding Trend Financial Year Toll Non Toll Other Total Note: 5% Annual Non Toll Budget Increase Budget per Road Kilometre Trend R 1 800 000 R 1 600 000 R 1 400 000 R 1 200 000 R 1 000 000 15 000 R 800 000 10 000 R 600 000 R 400 000 5 000 R 200 000 0 R 0 1998 2002 2006 2010 2014 2018 2022 2026 2030 Year Budget per Kilometre of Road (2017 Rands) Network Length (km) + 2000 km/year Budget/Km + 2000 km/year Network Length (km) + 200 km/year Budget/Km + 200 km/year Note: 5% Annual Non Toll Budget Increase 8
TRANSFORMATION R 20 000 000 R 18 000 000 R 16 000 000 SMME Budget Trend 3000 2500 BUDGET TREND o Black SMME Spend generally < 25% of budget o Black SMME Spend reached highest level of 83% of total SMME Spend in 2009, but has since slipped to 50-55% o New PPPFA Regulations demand a MINIMUM of 30% subcontracting for projects above R30m SANRAL wants partners that will commit beyond the minimum SMME DEVELOPMENT o The number of SMMEs out there is cause for concern role of industry in creating sustainable SMMEs o SANRAL visibility in development limited o Local SMMEs cry foul Generally Grades 1-4 o SMMEs demand direct contracts with SANRAL MISSED OPPORTUNITIES o Localisation o Training o Sustainable job creation o Cyclical development alignment of key government interventions & private RISKS o SANRAL Office invasions o Project disruptions and paralysis of service delivery o Project delays and escalating costs Budget (R '000) R 14 000 000 R 12 000 000 R 10 000 000 R 8 000 000 R 6 000 000 R 4 000 000 500 R 2 000 000 R 0 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Year SANRAL Budget (Rbn) Total SMME Budget (Rbn) Black SMME Budget (Rbn) Total SMME No Black SMME No Black Owned Enterprises Appointed by SANRAL 2015/2016 Total SMMEs Black SMMEs % Black SMMEs Count Rbn Count Rbn Count Rand 2 056 3.6 1009 2.0 49% 55% 2016/2017 Total SMMEs Black SMMEs % Black SMMEs Count Rbn Count Rbn Count Rand 1 833 4.0 1045 2.1 57% 53% 2000 1500 1000 Number of SMME
TRANSFORMATION Ownership More aggressive demands on Large Construction Sector Equitable Access Limitation of number of contracts per company per province and nationally Equitable allocation of projects across CIDB grades Balance of JVs and sub-contracting Sanral to have more say in sub-contracting Review of project packaging size, duration, budget Community Empowerment Direct benefit of communities in materials sourced locally Supply Chains Create space for black business in rigid supply chains materials, equipment etc. Competition Create space for black business in Toll Operations and all supporting sectors in Sanral business SMME Development and Support Sanral to play a more direct role in emerging contractor development 10
FLAGSHIP PROJECTS 2017-2024 N2 WILD COAST o Project Cost ~ R9bn o 2 Mega Bridges Mtentu Awarded; Msikaba Retender o Brownfields improvements East London to Port St Johns o Greenfields section Port St Johns to Mzamba o Access roads and Community Development projects MOLOTO ROAD o Project Cost R5bn o 3 sections Limpopo, Mpumalanga, Gauteng o Limpopo Improvement of single carriageway o Mpumalanga and Gauteng Dualling of carriageway o Access roads and Community Development projects Ndwalane Ntafufu Port St Johns Lusikisiki Msikaba Bridge Mtentu bridge 11
PROJECTED ROAD INFRASTRUCTURE TREND OVER NEXT DECADE NATIONAL ROADS o Sustained road maintenance levels fundamental engineering approach o Non-toll network capital expenditure on recently transferred roads to improve QI is this the right focus? o Toll network Delayed implementation of new major capital projects due to anti-toll drive and pressure on public allocations o Delivery of flagship projects - N2 Wild Coast; Moloto Road; Van Reenen Development Project o Toll Concessions Maybe one, but highly uncertain PROVINCIAL AND MUNICIPAL ROADS o Pressure for capital investment on dilapidated and/or congested secondary strategic road network o Pressure for more road transfers to SANRAL o Urgency of improved Roads Authority delivery capacity NDP Priority Action o Pressure for rural access and urban mobility o Persistent questions on value for money in roads projects o Backlog still outstrips budget allocations o More infrastructure damage due to climate change effects 12
KEY RISKS FISCAL CLIFF HARD CHOICES SOCIO ECONOMIC AND SOCIO POLITICAL INSTABILITY INCLUSIVITY & TRANSFORMATION GEO-POLITICS OF DEVELOPMENT STRATEGIC ALIGNMENT PRIVATE VS PUBLIC IN/CAPABLE STATE THAT S THE QUESTION 13
THANK YOU 14