Skills shortages and regulation complexity top SA infrastructure risks

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Insufficient engineering and artisanal skills, coupled with comparatively excessive legislation for a developing market context, are among the key risks to South Africa’s planned infrastructure project pipeline, director at infrastructure consultancy, I@Consulting, Rob Childs, told delegates gathered at the Institute of Risk Management South Africa’s annual Cruywagen-IRMSA Risk Lab in Cape Town last week.

“According to the most recent World Economic Forum Global Competitiveness Report, South Africa falls roughly halfway – rated 63 of 148 countries for infrastructure competitiveness. This rating has been steadily declining over recent years,” said Childs. He added that the country’s National Development Plan (NDP) provides hope in this area, but will require that the country borrow significantly if the goals of the plan are to be met.

“At full implementation of the NDP with regards to infrastructure spending, gross general government debt as a percentage of GDP will rise from 42.3 per cent to roughly 56 per cent,” he explained. “It is critical that the capital is invested in the right projects.”

Skills deficit

A critical risk to accelerated infrastructure development is the significant skills and competency deficit in the country, said Childs. “South Africa is producing an average of 2 440 graduating engineers every year. In the United Kingdom, the number is 10 765, and in India, it is 763 635.” With the percentage of school-leavers passing mathematics and science subjects appalling low, there is an urgent need for an investment in the education of these skills, and this requires long-term thinking and investment, he emphasised.

Long-term measures required:

  • An ongoing long-term programme to improve maths proficiency and subscription in both maths and physical sciences at school level.
  • Coupled with an increase in bursaries to universities and universities of technology.
  • A move away from medium-term contracts for engineering professionals, towards a model of continuity where permanent positions are the norm.
  • Smooth infrastructure spending and communication of long-term commitments to the construction industry.
  • Increase graduate recruitment and training.

Solutions for the medium to short term:

  • Extend retirement ages for engineering professionals.
  • Only hire engineering professionals on the basis of competence – given the scarce supply, there is no need for affirmative appointments.
  • Greater innovation in project team resourcing, allocation and mobility – coupled with government supply chain reforms.

Regulation: stifling innovation

A further critical risk is the comparatively complex regulatory environment in South Africa, when compared with developing economies such as Malaysia and China, said Childs. “By way of example: the Department of Water Affairs and Forestry must comply with some 16 Acts. In addition, it must comply with a multitude of other standards, such as those for construction, accounting compliance and water quality and several others. On top of this, procurement (inclusive of construction), must also be packaged to meet multiple other government policy objectives, such as labour creation, black economic empowerment and others.”

This, he said, is the same across multiple infrastructure development sectors. The result, says Childs, is that professionals in the industry become more concerned with compliance than with getting things done. “Regulation in South Africa is stifling innovation. You think you’re doing well because you’re complying. We need to reward those that are taking risks and getting things done.”

The need for renewal

The country is continually faced with difficult decisions and torn priorities between spending on social support infrastructure, such as poverty alleviation grants, and investment in productive economic infrastructure. This, suggested Childs, requires the development of clearer decision making philosophies and techniques.

“Fortunately, we also have emerging experience and are increasingly demonstrating innovation in the practice of infrastructure asset management. Government is also increasingly focused on the need for economic infrastructure, reshaping cities for accelerated economic growth, and care of infrastructure,” he added, emphasising that much work was needed to deal with infrastructure renewal in particular.

“Infrastructure lasts a long time, but not forever. You do have to replace it. And if you don’t maintain it, you have to replace it sooner,” he noted, emphasising the need for adequate capital renewal and maintenance budgeting to ensure that assets last and can be replaced when required. The country is facing a renewals bow wave, he warned.

Renewal measures required:

  • Valuation of all public infrastructure on the depreciated replacement cost basis;
  • Quantifying asset lifecycle needs;
  • Establishing infrastructure risk profiles;
  • Incorporating risk-based optimised decision-making into planning within public sector organisations, and in national funding allocations;
  • Developing a national infrastructure risk monitoring system;
  • Learning how to sell infrastructure lifecycle needs and benefits of appropriately balanced lifecycle needs; and
  • Investing in infrastructure asset management practices and management capabilities.

Look out for full coverage of the jam-packed Cruywagen-IRMSA Risk Lab in the next issue of RISKAFRICA Magazine and like us on Facebook for photographs from the day.