By: Willem Louw

It is ironic and puzzling to read and hear leading decision-makers in the country regularly calling for citizens to claim ownership of the National Development Plan (NDP) and give it momentum, but without any reference to the question regarding whether we have the managerial capacity and business acumen required to implement it.

Early last month, a meeting was held between President Jacob Zuma and business leaders within the context of the NDP. Nowhere, other than a slight reference to government wanting to explore ways in which the private sector can offer skills such as project management for the infrastructure programme, was any mention made of the role management needed to play to increase the probability of success of the overall programme.

It would have been an ideal opportunity for business to also have included PPC CEO Ketso Gordhan, following his call for a negotiation body to add momentum to the execution of South Africa’s multibillion-rand infrastructure programme. It is imperative that Gordhan’s argument for political will, project leadership and transparent processes be supplemented by the inclusion of business leadership – that is, the boards and executive teams.

There is sufficient evidence globally that, when it comes to the governance of large and important projects, boards or governing bodies are not asking the right questions early enough to deter bad decisions.

There is sufficient empirical data showing that 65% of global mega- or large-scale projects do not meet one or more of the following criteria and are subsequently classified as failures:

• Overrun on costs greater than 25%
• Slip in execution schedule greater than 25%
• Inability to meet the production plan within the first two years after startup

The jury is still out on how much the 2010 World Cup stadiums really cost and the extent to which these monoliths will be used gainfully in the future.

It is also fair to ask whether decision-makers were asking the right questions early enough regarding the following collection of projects: the Transnet new multipurpose product pipeline (NMPP) project, from Durban to Heidelberg; Eskom’s Medupi and Kusile power stations; and the South African National Road Agency Limited’s (Sanral’s) Gauteng Freeway Improvement Project, generally referred to as e-tolling.

On the NMPP, Transnet originally budgeted R12.7-billion for the project. The final cost of R23.4-billion includes the cost of the distribution terminals in Durban and Heidelberg, which are still under construction. The pipeline, plus the terminals, will only be complete by January 2014, three years behind schedule.

In the case of Medupi, it was and still is the responsibility of the Eskom board to have ensured that Brian Dames and his executive team managed the process meticulously. Further, the board should have ensured that the following governance issues were dealt with in a more vigorous manner:

• placement of the order for the turbines from Hitachi;
• Eskom’s executives’ involvement in the development of the project labour agreement; and
• the determination if owner skills and capacity in the areas of project and engineering management were at an appropriate level.

As to the current saga of e-tolling in Gauteng, one has to question why there has been continued interaction with the courts by Sanral for matters that could potentially have been dealt with in an alternative manner.

How has the learning gained from the e-tolling implementation and the interaction with the courts that Sanral has had thus far been transferred to the proposed Western Cape project? The hypothesis is that stakeholder management has again not been dealt with effectively.

To ensure that appropriate attention is focused on the right questions at the right time, the following high-level recommendations are provided:

• An executive sponsor should be appointed, particularly for a large project or programme, at the highest level in the organisation, reporting directly to the board. This sponsor’s primary job is governance.
• Successful executive sponsors must be connected throughout the organisation. This is a severely underestimated role in the broader scheme of roles and responsibilities on a project.
• Learning from the Eskom scenario, as an alternative to firing the current incumbents or appointing expensive foreign expertise, it would serve Public Enterprises Minister Malusi Gigaba far better to ensure that the boards and executive teams under his control have created a governance framework enabling them to ask the right questions at the right time.
• The performance of front-end loading or front-end planning on the project must be measured, as it is the world’s best capital investment. Unclear business or delivery objectives and the lack of enough knowledgeable staff are failures of the board or business management early in the project.

In South Africa, particularly during the period from the middle of the last decade to the present, large capital projects completed or being completed have essentially all failed on one or more of the criteria listed – we are even worse off when compared with the global failure norm of 65%.

If we do not address the glaring vacuum in business management skills at board and executive level immediately, we will continue our slide towards mediocrity as far as service delivery and our comparison with global measures are concerned.

Louw is director at the Centre for Business Management of Projects, USB-Executive Development.