Construction slowdown: SA Roads Agency responds
Sanral answers several critical stories in Times Select about the agency’s lack of spending on infrastructure
LETTER TO THE EDITOR
The editorial by Giulietta Talevi in Times Select on June 20 paints a distorted picture of the role of the SA National Roads Agency (Sanral) role in the slowdown in the construction industry.While the slowdown is an undeniable fact, it is a reflection of the continuing tardy economic growth in the country, and not because of a policy by Sanral. If you study the budget publications freely available on the National Treasury website, one will notice that over the three-year Medium Term Expenditure Framework of National Treasury the total infrastructure allocation is R834.1-billion, of which Sanral’s allocation is R55.3-billion or 6.63% – clearly highlighting your distorted picture or overrated role of Sanral.
In addition, Afrimat’s Construction Index (ACI) released just this week reflects the downward trend in construction activity. Compared with the fourth quarter of 2017, only two of the nine ACI sub-indices recorded improvements in the first quarter of this year. Further, seven of the nine indicators also declined when compared with the first quarter of 2017.Some of the reasons behind the poor showing of the ACI relate to interest rates that are still too high; policy uncertainty, especially regarding the issue of land reform; the strong rand; fiscal pressures resulting from an unavoidably conservative budget in February; and dysfunctional local authorities hampering infrastructure development.
With regard to the specific reasons for Sanral’s reduced expenditure, these are twofold:
1. As you might be aware from the press, numerous National Treasury regulations have been issued in the past two years with regard to procurement, including the Preferential Procurement Framework (2017 PPPFA Regulations).
2. Public anti-toll sentiment and political acceptability of tolls, and the impact of the low collection rate of e-tolls for the Gauteng Freeway Improvement Project (GFIP) on the Sanral toll portfolio.
The first resulted in National Treasury questioning the consultant tender model utilised by Sanral for the appointment of consulting engineers. This led to protracted engagements between Sanral and National Treasury from January 2017, with the aim to obtain written approval for the consultant tender model followed by Sanral. This was important to avoid Sanral expenditure being deemed to be irregular as has happened with our routine maintenance (RRM) contracting model. Sanral only obtained written confirmation on February 23 2018 to proceed with its consultant tender model.By this time the backlog of consultant tenders that could not be processed due to this matter was well in excess of 50. In addition, Sanral could not advertise any new tenders until this matter was resolved. This is the main reason for the slow issue and award of construction tenders as they would naturally flow from the design work performed by consultants.
Sanral has since March 2018 resumed with the award of consultants’ tenders that closed before January 2017 through the various Sanral bid adjudication committee structures as per Treasury SCM regulations.
Sanral will do what it can to fast track the process, however the delay is already evident and will be felt throughout the course of the 2019/20 financial year as well.
The GFIP e-toll challenge has meant that Sanral’s position in the bond market has unfortunately weakened, thus making it difficult for Sanral to secure the much-needed funding to implement toll projects. As a result, major capital projects have had to be delayed until a sustainable solution is found to the GFIP challenge and broader toll portfolio of Sanral. The impact of this is nearly a 30% reduction in the Sanral capital expenditure budget when compared to the previous three years. This matter is now receiving attention at the highest political level, and it is expected that a sustainable solution will be found during this financial year.Finally, with regard to transformation, Sanral is experiencing project site invasions by local business forums and communities demanding access to the 30% subcontracting that is stipulated in the 2017 PPPFA regulations as well as practical challenges relating to the National Treasury demand for a subcontractor database to be handed to all the main contractors at main tender stage. This resulted in violent methods being used to force main contractors to share work and this has meant that there has been a high safety risk to staff and property. As a result, some Sanral contracts have been halted, and fewer new contracts were signed. Sanral has of course drafted and released its new transformation policy to enable it to respond to these challenges. Sanral continues to engage industry, communities and National Treasury in this regard in order to avoid the service delivery paralysis that is emerging as a result of this matter.
Sanral regrets the stress the construction industry is under and in particular, potential and real job losses. Within the constraints it has to work with, Sanral is issuing tenders where possible and doing everything possible to ensure a return to normality to the small part of infrastructure expenditure we are accountable for.
Vusi Mona, general manager communications: Sanral