In the 2023/24 Budget Speech, the minister of finance, Enoch Godongwana, stated: “Infrastructure investments lay the foundation for inclusive and sustainable growth – they address supply-side constraints and expand access to basic services.”

This means that the long-awaited investment in infrastructure is back on the table, with R903 billion allocated to the building of roads and bridges, and R448 billion allocated to water and sanitation. Godongwana further promised continued spending on roads and dams in the 2025/26 budget, increasing from R62 billion to R104,2 billion in 2025/26.

Infrastructure spending

As many large projects were postponed or cancelled during the economic pressures of the pandemic, this infrastructure budget is good news for the industry. The construction of bulk infrastructure is intended to support further projects such as the Lufhereng mixed-use development in Gauteng, with 31 000 mixed-housing units, slated to begin June 2023. Hopefully this will stimulate demand from the private sector, which has also been subdued.

The government expressed interest in leveraging private sector resources in public infrastructure delivery. This includes the following initiatives: Funding the development of a pipeline of projects and programmes, fast-tracking public private partnerships (PPP) regulatory review framework recommendations and kickstarting the implementation of conditional grant pledging. In this way the rollout of infrastructure is not constrained by funding in a particular year, if there is capacity to deliver more.

Impact of greylisting

For businesses that are relying on the global supply chain and foreign investment, the greylisting of South Africa by the Financial Action Task Force (FATF) was perhaps the most worrisome news in February. The increased due diligence required to do business in South Africa will be costly, and local businesses may find it more difficult to transact with international banks or to send funds offshore – hamstringing an already strained global supply chain. It may also provide an opportunity for local construction companies that have struggled to compete with foreign companies, which have been bringing in project financing from abroad.

It was heartening to hear an acknowledgement that there is a need to address criminality, or the so-called “construction mafia”, in the construction sector. There can be no doubt that the intimidation and extortion of legally appointed contractors across many sites should be curtailed. How and when this may happen remains to be seen, but perhaps the R14 billion budget allocation to “fight crime and corruption” will prove to be helpful.

Renewable energy

The softening attitude towards renewables bodes well, with businesses being able to reduce their taxable income by 125% of the cost of an investment in solar, regardless of the project size, for two years from 1 March 2023. Likewise, private houses are being incentivised to install rooftop solar panels, with a tax rebate of 25% on the cost of the panels to a maximum of R15 000, for the next year.

However, equipment supply shortages are already causing longer lead times and delays in installations, according to the industry body. This timeframe may therefore not be sufficient for enough households to install rooftop solar panels and reduce the demands on the grid, which this incentive envisages.

The construction industry has endured some immense challenges, as the pipeline of large projects dried up amid Covid-19 and difficult economic conditions. The government’s investment in infrastructure projects will hopefully turn the tide, injecting some optimism into the market and providing relief for a beleaguered industry.

Full acknowledgement and thanks go to www.gov.za/, www.news24.com/fin24 and www.bizcommunity.com for the information in this editorial.

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