An ambitious infrastructure build and maintenance programme, consisting of a reliable pipeline of bankable projects using public funding to leverage private and other forms of financing, is key to stimulate economic activity and employment in the wake of the coronavirus pandemic.
This was the message from South African President Cyril Ramaphosa at the Joint Sitting Debate on the South African Economic Reconstruction and Recovery Plan in Parliament on 21 October.
The urgent need to take stock of and recalibrate infrastructure priorities to meet the needs of the moment and emerge stronger post coronavirus also emerged as a key message at the United for Infrastructure Week from 14 to 21 September in the US. Steve Morriss, former EMEA CEO and now Americas CEO of AECOM, participated in a virtual panel discussion on the role of infrastructure in economic recovery.
“The rand/dollar exchange rate means we are very competitive, giving us a significant edge in terms of some of the mega projects we are currently delivering, particularly in Saudi Arabia,” comments Darrin Green, who assumed the role of AECOM MD for Africa at the beginning of 2020, in addition to his role as MD Civil Infrastructure for Africa.
A low cost base and good local availability of world-class skills means that the infrastructure delivery company is well-positioned to respond to the rallying cry of President Ramaphosa and other global focus events like United for Infrastructure.
While access to a diverse pipeline of international projects will assist AECOM in mitigating the risk of post coronavirus recessions in any of its markets, the African business “needs to remain relevant.”
Fortunately AECOM’s multidisciplinary approach makes it unique on the continent, ranging from cost management to quantity surveying, engineering and environmental services. “I do not think that any other company is able to offer the same breadth of services that we do,” asserts Green.
The coronavirus pandemic has dealt yet another blow to the South African construction industry, which was already facing a recessionary market prior to the hard lockdown in March. Added to this is the uncertainty surrounding many projects going forward, particularly in the private sector. This is where the government’s spotlight on infrastructure development has struck such a chord.
President Ramaphosa, also African Union Chair, underlined the importance of infrastructure as a growth driver at the Sustainable Infrastructure Development Symposium of South Africa (SIDSSA) in Sandton, Johannesburg as early as June.
He stated that SIDSSA represented “a new beginning for infrastructure development – a new beginning that promises inclusive growth, development, transformation and, above all, hope for a better tomorrow for all our people.”
In July, the ANC’s Economic Transformation Committee officially launched a discussion document entitled ‘Reconstruction, Growth and Transformation: Building a New, Inclusive Economy’. This proposes a massive, infrastructure-led economic recovery that will include expanded public-private partnerships and a strengthening of the District Development Model at the local government level.
“While there are a number of scenarios, my instinct is that we are in for a prolonged period of recession. Due to the tight business environment, I think that the public sector will likely fare better than the private sector. The latter will be cautious going forward, especially in terms of allocating funding. However, funding is also a challenge with regard to public-sector infrastructure, especially given the government’s commitment to its assorted relief packages to deal with the socioeconomic fallout from the coronavirus pandemic,” comments Green.
Linked to the issue of funding is the capacity within government and the procurement models necessary to ensure that all of the projects identified materialise as quickly as possible.
Hence AECOM is working closely with key local institutions such as Consulting Engineers South Africa (CESA) to ensure that all work complies with the stringent coronavirus health and safety protocols as mandated by the National State of Disaster promulgated in March to deal with the pandemic, and which is still in effect.
“The fact that public works and civils sites are operating again has removed a huge source of risk for us,” notes Green. AECOM has responded to the new business paradigm by working remotely wherever possible. This has proved so successful that delivery to a large extent has not been disrupted. The main issue that the entire industry is grappling with is where projects are being put on hold indefinitely or cancelled outright by private-sector clients grappling with their own financial constraints.
“Adding value to clients by providing them with the necessary solutions to navigate the current crisis has never been more critical,” argues Green. AECOM is investing significantly in digital innovation and remote working to enhance its flexibility and adaptability, especially if the proposed project pipeline materialises according to the government’s ambitious timeline.
It includes bespoke tools as such as AECOM’s Environmental Engagement platform to streamline environmental documentation and stakeholder engagement. Its Virtual Public Consultation Tool enables virtual community engagement in an interactive online platform. Together, these solutions provide powerful support to clients managing existing and future projects through the key planning and approval gates.
“We are finding that our clients themselves have different levels of capability in dealing with the crisis as it has progressed, so supporting them throughout has been paramount. Hence there has been a lot of client engagement to identify any pain points so as to ensure business continuity,” explains Green.
“The end result is a much better understanding of what projects will go forward and where we need to relook at projects in terms of either budgetary constraints or different drivers due to the protracted crisis.”
In terms of what the future holds for the rest of Africa, Green predicts that funding from International Financial Institutions (IFIs) is likely to dry up due to the lingering impact of the coronavirus pandemic on their own economies, combined with the potential for a secondary resurgence in infections resulting in stricter lockdown measures being reinstated.
The short-term focus is thus likely to be on basic infrastructure such as water supply, sanitation and healthcare in particular, as well as logistics and transportation infrastructure.
“These requirements will vary from country to country, which will require adaptability and a high level of responsiveness from us, for which we are well prepared,” concludes Green.