PIERRE BLAAUW

Infrastructure Bottlenecks and the Civil Engineering

Industry

Infrastructure HISTORYPre 1900 1900-1930 1930-1960 1960-

1982Post 1982

Post 1996

Transport:Local Roads1859 First RailwayNo Flying

SAR&H createdRail extended into AfricaRegional Airports1st Powered Flight : East L.

National Roads Board (1948)1934: SAA establishedDevelop SASOL 1

Freeway ConstructionRichards Bay & Saldanha PortsPipeline Network Expanded

SARCC created in 1990ACSA established to look after 9 airports

NPA establishedCoega PortRail competitiveness decline

Energy:Discover Gold.1882 1st power station Kimberley

1906 Victoria Fall Power1923 Eskom power to non mining

1948 Eskom buy Victoria Power1950’s Develop crude oil refineriesSasol Formed

1972: Eskom’s role as central generating authority established

1984: Koeberg Commissioned1986: Nuclear fuel enrichment plant1988: BEVA Nuclear fuel fabrication plant

Water & San.Bucket latrines in JHB & CPT

Dam building1903 Rand Water1904 Sewerage in JHB

1930 Vaalharts irrigation scheme1950 Dam building stepped up

Massive Dam building

1986 Lesotho Highlands Water Project2001 Focus on phasing out bucket latrines

ICT1791: First Post Office CPT1876: 1st Telephone CPT

1901: Radio1902: 1st Public payphone in Bloem1905: ‘Cullinan’ Diamond Posted1924: 1st Telegraph

1932: 1st Airmail service1932: 1st Overseas Phone call

Fixed line communicationsLimited Mainframe computers1976 Television

WWW – 19891990 5 millionth telephone1994 Mobile Telephony2003 Telkom listed

General Government Savings and Current Balance

Source: Treasure Medium Term Policy Statement

Source: Treasure Medium Term Policy Statement

Sectoral Trends

Public-sector economic infrastructure investment (gross) and depreciation

0

6

12

18

24

30

36

1960 1970 1980 1990 2000

R b

illio

n, 1

995

pric

es

Infrastructure investment Depreciation

Paved national and provincial roads, passenger vehicles,and commercial vehicles for transport of goods

0

100

200

300

400

500

1940 1950 1960 1970 1980 1990 2000

Inde

x (1

970

= 10

0)

Paved roads Passenger vehicles Goods vehicles

20000

22000

24000

26000

28000

30000

32000

34000

36000

38000

40000

42000

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

Year

Pe

ak

De

ma

nd

an

d C

ap

ac

ity

(M

W)

Peak Demand Expected Peak Demand

Installed Capacity (MW Sent-out) Operational Capacity (MW Sent-out)

Reserve

margin = 25%

Reserve

margin = 20%

Reserve

margin = 16%

Reserve margin aspiration = 15%

Reserve

margin = 8-10%

IMPLICATIONS

GROWTH BASED ON STABILITY & EXCELLENT NATIONAL TREASURY & SARB

GROWTH CAUSED INCREASED DEMAND; ROADS WATER ELECTRICITY RAIL CONNECTIONS PORTS

NEXT PHASE OF GROWTH DEPENDS ON INCREASED CAPACITY OF INFRASTRUCTURE

MTEF Infrastructure Allocation

TOTAL: R 568 billion

MTEF SPLIT

Eskom Capital Investment

Total: R342 billion

Capacity Funnel Projects

Research

PBMR

UCG

ConcentratingSolar

CogenerationHydro

Nuclear

Gas

Coal

Solar

Transmission

Renewables* Red outer circle indicates – out of Borders project

OpportunityIdentification

New Coal Supply

Oscar Yankee

Discard Coal November

Victor

Gas 2

Zulu

Mike

Hwange

Coal 1 Hydro 1

CBM

Coal 2 Non EskomGeneration 1

Hydro 2 Whiskey

26 125 MW

Pre-feasibility

TangoSierra

Co-Gen 1

Foxtrot

HVDC 1

Golf

Nuclear n

22 650 MW

4500

35001600

1200

1775

1200

100 6000

500

400

500 1000

0

2000350

1000500

165

350

100

1150 1600

900

4500

0

4500

10000

Feasibility, Business Case, ContractConcluding

India Lima

Papa Nuclear 1

EchoQuebec

Delta

Juliett

Kilo

Bravo

600 1500

2400 3000

1000 1050

2400

600

1300

4500

18 350 MW

Build

Renewable1

Ingula Komati

Camden Grootvlei

MedupiArnotP1&P2

Gas 1Ankerlig

400kV 765kV

11 941 MW

100 1332 961

1520 1128

4500300

1050 600 450

Gourikwa

Estimated SA Capital Spend (2007-2025)

Source : PBMR; EIA; Eskom interviews; TSAPRO team analysis Estimates

Preliminary Estimates

Transnet’s gross capital investment budget

Total: R61 billion

And Some Other Projects

SANRAL R23 billion R10 billion over the next two years

Koeberg Interchange R500 millionMajuba Rail Link R2-2.5 BillionR300 around R500 millionKing Shaka Airport R3 billion (Civils)Gautrain R1.5-R2 million a dayRand Water R7bn

Private Sector – Greater Risk

87 Projects announced worth R134.9 bill

Manufacturing R68.2 bill

Mining R32 bill for next 5 years

Real Estate Developments R30 bill

Nedbank Project Listing

Civil Engineering industry

0

1

2

3

4

5

6

7

8

40

50

60

70

80

90

100

110

120

130

9501

9503

9601

9603

9701

9703

9801

9803

9901

9903

200001

200003

200101

200103

200201

200203

200301

200303

200401

200403

200501

200503

200601

200603

200701

200703

200801

200803

Bill

ions

Tho

usand

s

Civil Engineering Employment and Turnover

Employment Turnover

2008 – TILL LATE

SUSTAINABILITYSUPPLY CHAIN CONSTRAINTS

HUMAN CAPITAL RETAIN EXISTING CAPACITY DEVELOP ALL POTENTIAL INVEST IN THE FUTURE CHALLENGE EXISTING MODELS

MATERIALESCALATIONPROCUREMENTPOLITICS INDUSTRIAL ACTIONCOMPETITION

Key Risk Issues in effective infrastructure project structuring

Low Risk High Risk

Payment

Design Development

Schedule

Status of Partner

Low Bidding

Client Management

Portfolio Risk

Project Development

Growth & Expansion

Risk vs. Reward

Contract Models

Qualified Resources - skills

Risk Management Process

Change Management

Source: ECRI

Training and EducationCurrent trends and requirements for technical skills to cater for growth

-12500

-10000

-7500

-5000

-2500

0

2500

5000

7500

10000

12500

15000

17500

20000

22500

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Retirement

Early retirement

Emigration

Loss due to premature death

Leaving the industry

Immigrants

National Diploma graduate

BSc/BEng graduate

In industry from 2004

EX Allyson Lawless

Civil Engineering – Engineers & Technologists

0 50 100 150 200 250 30024

29

34

39

44

49

54

59

64

69

Ag

e

Number per age group

BlackWhite

EX Allyson Lawless, June 2004

Site Supervisors

0

10

20

30

40

50

60

70

80

Serious More than usual Very Few None

% D

istr

ibut

ion

Skilled Workers (All Artisans and Tradesmen)

0

10

20

30

40

50

60

70

80

90

Serious More than usual Very Few None

% D

istr

ibut

ion

Material

0

5

10

15

20

25

30

35

40

45

50

Serious More than usual Very Few None

% D

istr

ibut

ion

Price Escalation : 2005 -2008

Source: Statistical Release P0021, Annual Financial Statistics

POLITICAL PARALYSIS

COMPETITION

Concluding Remarks

THIS IS NOT BUSINESS AS USUALYOU MUST DELIVER MORE

INFRASTRUCTURE IN A SHORTER TIME WITH LESS RESOURCES THAN EVER BEFORE.