SA taxpayers to foot unexpected R205bn bill annually due to problem projects

© Ivan Kruk – 123RF.com

This has a substantial cost to taxpayers. Modelling done by Mace, the consultancy and construction company behind projects such as the Zeitz MOCAA in Cape Town and the London 2012 Olympics, shows that if major projects continue to experience issues at the rate they do now, taxpayers will be faced with an unexpected bill of R205bn every year by 2030.

The new Mace Insights report, A blueprint for modern infrastructure delivery,¸looks at the main reasons why so many large projects go wrong and what we can do to put it right. Nearly 40 senior executives from around the world were interviewed for the breakthrough report alongside a review of latest academic literature and new modelling.

Some of the main issues identified include:

Lack of clarity of outcome when deciding on which schemes to take forward. Often decisions are driven by political pressure rather than rigorous cost and benefit analysis.

The poor predictive abilities of project teams in their early stages, who are pressured into providing fixed point price estimates and programmes well before accurate predictions are possible or realistic.

Procurements based on ‘cheapest price’ rather than ‘value’. On large and complex projects, cheapest price procurement is a false economy.

Drawn from the report, top solutions for addressing concerns with South African infrastructure are:

Create a department for growth

In many countries around the world, the political responsibility for planning, business regulation, housing and transport are separate. This means that when a mega infrastructure project comes along, it cuts across multiple policy areas with a very wide range of stakeholders. Bringing the relevant elements together into a coherent single government department would improve decision-making and efficiency.

Create an independent scrutiny panel

If your project or programme is large enough or you are a government agency with many large projects, you should create a panel of industry ‘heavyweights’ outside normal public sector structures to challenge the project scope, timescales and costs. Their sole role should be rigorous challenge. This independent scrutiny panel needs to have the teeth and executive support to get the information they need for proper challenge. The London 2012 Olympics and the Hong Kong Aviation Authority both took this approach. Governments may choose to use this panel to challenge their top 10, 20 or 50 projects at regular intervals.

Training academy for project ‘sponsors’ and leaders

Many large infrastructure owners are public bodies who can struggle to attract the right calibre of people to work for them due to pay constraints. Hence it makes sense to provide high-quality practical training to current government employees to try and upskill them and enhance their skills. A particular focus should be given to the understanding of probability and risk and what that means to a project alongside how to hone in on a clear outcome for a project to achieve.

Kelvin Byres, South Africa country manager, said: “The delivery of infrastructure in South Africa is key to continue to enable economic growth across the country. As population pressures on our urban centres grow, we must keep pace with our infrastructure programmes.

“The government rightly has ambitious plans for infrastructure investment across South Africa, but if we can’t deliver them effectively, we risk huge costs for our taxpayers.”