Thursday, 10 July 2014 08:15

South Africa’s Infrastructure: Where the Opportunity Lies

By Alexander Kurchin

MOSCOW, July 10, 2014 (Buziness Africa) --- One of the most enduring gains of the 19th FIFA World Cup 2010 in South Africa was the great improvement in the perception and image of the host country. From an investment standpoint, the championship was an even greater success as long as the overall capital investments exceeded 3 billion GBP.


The South African economy continued to grow at a rate of over 4,5% after the event, thus creating jobs and serving as an economic growth multiplier.


Investments in infrastructure spiralled up, boosted by the general upswing in economic activity. The country’s infrastructure, which had suffered from years of neglect, was revitalized, thanks to large-scale construction projects in support of the Championship.


Ever since, domestic and international interest to South Africa’s infrastructural potential has been growing. An infrastructure Coordinating Committee was established to coordinate 18 strategic integrated projects (SIPs), and by January 2013 work on all of them had been commenced.


South Africa’s Transnet (rail, port and pipeline company), Eskom (Africa’s biggest electricity company) and other infrastructure-related companies have substantially expanded their activities.


Former South African Finance Minister Pravin Gordhan told parliament that the country could spend as much as 846 billion Rand (79 billion USD) on new and upgraded infrastructure over three years. He also noted that social infrastructure expenditure (health, education and community facilities) would increase by over 30% over the same period.


These developments have altogether positively affected South Africa’s infrastructure competitiveness ratings. A recent World Competitiveness Report 2014 released by Institute for Management Development in cooperation with Brand South Africa’s International Investor Perception Research suggest that global investors have an increasingly positive attitude towards the South Africa’s infrastructure investment prospects.


A example of this is Transnet’s contract awards worth 50 billion Rand (4,5 billion USD) to two Chinese and two North American companies to build 1064 diesel and electric locomotives as part of a seven year expansion of South Africa’s railways, ports and pipelines.


Additionally, South Africa’s Passenger Rail Agency has planned the procurement of more than 300 six-car trains with initial deliveries expected in 2015-16. Overall, the South African infrastructure market is projected to reach over 100 billion USD over the next few years with the average growth rates fluctuating around 10% a year.


This huge prospect clearly represents an opportunity for Russian companies to participate in tenders for infrastructure projects in South Africa.


As Sergey Korotkov – Director of UNIDO Center for international industry cooperation in Russia  put it at a BRICS conference in Moscow in May, “Russia and South Africa have great potentials for business collaboration within the framework of BRICS, and among other potential sectors cooperation, infrastructure looks particularly attractive as long as both countries have mutual need for investment in infrastructure.”


So far, bilateral economic relations between the two remains anemic. That in itself gives Russian businessmen the much needed opportunity to start bidding for projects in South Africa’s infrastructure.  (This article is part of Brand South Africa project.)


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