Some action, but still weak

Gross fixed-capital formation by the public sector expanded at an annual rate of 11% during the first nine months of 2012 and this Project in Progress update reflects most of the key infrastructure programmes being undertaken, particularly by State-owned companies such as Eskom and Transnet.

Over the next three years, R827-billion is earmarked for spending by government departments and State-owned companies on a range of capital projects.

The on-Budget projects, which will be funded through transfers from the National Treasury, relate primarily to social infrastructure, such as the building of new schools, hospitals and houses.

Meanwhile, State-owned companies (SoCs) will be pursue the development of growth-facilitating economic infrastructure and will mostly fund these through a combination of debt and internal resources. However, guarantees have been extended to some utilities, while other SoCs have received loans or specific transfers.

Many SoC developments are large in scale. The Medupi and Kusile coal-fired power stations for example, which form part of Eskom’s R337-billion programme to add an additional 17 000 MW of electricity generation by 2018, while the transmission network will also be expanded and strengthened.

In the transport milieu, the main freight-focused rail and harbour investments being undertaken by Transnet also feature prominently.

However, there are also several emerging public-transport programmes. The Passenger Rail Agency of South Africa, for instance, is moving ahead with a major recapitalisation programme, while several of South Africa’s metropolitan councils have approved bus-rapid transit systems.

Water is another key theme. Among government’s so-called mega-infrastructure projects is the Olifants River Water Resources Development Project, which comprises the construction of the De Hoop dam and the bulk raw water distribution systems, and the Lesotho Highlands Water Project Phase 2, which is expected to get under way following the finalisation of agreements with the government of Lesotho.

This publication also features the development of the first renewable-energy projects that emerged after the first two bidding rounds under the Department of Energy’s Renewable Energy Independent Power Producer Procurement Programme (REIPPPP). The 28 wind and solar projects identified for development, following the first REIPPPP bid window reached financial closure late last year and most are currently firmly in the construction phase.

By comparison the private–sector pipeline is relatively weak, owing to poor levels of investor confidence and ongoing uncertainty about the future demand for South African commodities and manufactured products.

Project activity is, however, continuing across most of the mining subsectors and in some pockets of industry. This publication features a range of coal, diamonds, gold, ferrous minerals, uranium, petrochemicals and platinum developments.

Nevertheless, the project economy is still some way off from a point where it could be referred to as being strong.

This report is a summary of information published in Engineering News and Mining Weekly, as well as information available in the public domain.

The report does not purport to provide analysis of market trends.