After seven months of lockdown, South African President Cyril Ramaphosa tabled an “economic reconstruction and recovery plan” on Thursday in response to the staggering effects of Covid-19 on the country&#8217;s economy.



The president’s plans respond to the immediate economic impact of the pandemic by driving job creation and expanding support for vulnerable households.



“We aim to do this primarily through a major infrastructure program and a large-scale employment stimulus, coupled with an intensive localization drive and industrial expansion,” Ramaphosa said in his address.



Some of Ramaphosa’s economic reconstruction and recovery plan highlighted in Parliament:



<h4 class="has-text-align-center">1. “Create and support over 800,000 work opportunities in the immediate term to respond to job losses”</h4>



In his address to parliament, the president announced that the government has committed an R100 billion fund to create 800,000 public sector jobs in the next three years. This employment stimulus is focused on those interventions that can be rolled out most quickly and have the greatest impact on economic recovery.



“At the heart of the employment stimulus is a new, innovative approach to public employment which harnesses the energies and capabilities of the wider society,” Ramaphosa said.



Of the 800,000 job opportunities, 300,000 would go to unemployed grade 12 pupils to be hired as assistants to public school teachers. The aim is that these matriculants could help teachers with their added Covid-19 related responsibilities like such as ensuring classroom hygiene and daily health screening of pupils.



“We are going to create 300,000 opportunities for young people to be engaged as education and school assistants at schools throughout the country, to help teachers with basic and routine work so that more time is spent on teaching and enabling learners to catch up from time lost because of Covid,” said Ramaphosa.



<h4 class="has-text-align-center">2. “Unlock more than R1 trillion in infrastructure investment over the next four years”</h4>



In his recovery plan, Ramaphosa announced that there is a pipeline of projects in works that will completely transform the landscape of South Africa’s cities, towns, and rural areas.



The president stated that there are several projects that have been prioritized for “immediate implementation with all regulatory processes fast-tracked”. These projects include the 276 catalytic projects, which had an investment value of R2.3 trillion by the end of June 2020. Furthermore, the list of 50 strategic integrated projects and 12 special projects that were gazetted in July 2020.



“Our infrastructure build program will focus on social infrastructures such as schools, water, sanitation, and housing for the benefit of our people. We will focus on critical network infrastructures such as ports, roads, and rail that are key to our economy’s competitiveness,” Ramaphosa said.



<h4 class="has-text-align-center">3. “Achieve sufficient, secure, and reliable energy supply within two years”</h4>



The president said that the government would be accelerating the process of bringing additional energy generation on line. Part of this plan would be implementing the Integrated Resource Plan (IRP) to provide a substantial increase in the contribution of renewable energy sources, battery storage and gas technology.



“The work of restructuring Eskom into separate entities for generation, transmission, and distribution continues and will enhance competition and ensure the sustainability of independent power producers going forward,” Ramaphosa said.



“To achieve this, a long-term solution to Eskom’s debt burden will be finalized, building on the Social Compact on Energy Security recently agreed to by social partners.”

State Of The Nation 2020 in South Africa

Ramaphosa’s Rescue Plan For South Africa

Post-Office-388

The Sub City: What Lies Beneath Johannesburg

Although we sometimes desire change, there is no absolute way to measure change. What we do know is that the future invades the present faster than many entrepreneurs can handle.
We go to bed, only to wake up and see that a company with a lean work force and tiny office is now the fastest growing company in the world. The future of wealth creation and multiplication in Africa worries me because of our slow development of basic infrastructure. If Africa entrepreneurs are to be the future leaders in businesses, then our romance with the old rules will have to give way to more ingenious ways of wealth creation.
Steven Silbiger, who has written many business books, describes wealth in a way that contradicts the definition of wealth held by many African entrepreneurs, especially in the 20th century when land was the major factor of economic activities. Silbiger writes that “wealth is portable, it’s knowledge”.
In Africa, the popular understanding of wealth is that it is tangible and usually associated with the acquisition of property. Many African countries are blessed with lands that are either embedded with mineral resources or fertile for farming. This idea that land was a prerequisite for wealth creation led to Africans valuing tangible substance far above the intangible. That preference still prevails today. From Zimbabwe, to South Africa and Nigeria, there is heated discussion on land matters.
<a href="http://www.forbesafrica.com/investment-guide/2017/11/30/single-market-windfall-africas-economy/" target="_blank" rel="noopener">READ MORE: Single Market A Windfall For Africa&#8217;s Economy</a>
Africa&#8217;s first entrepreneurs, according to history, were both farmers and traders with extensive trade routes that developed across kingdoms. Famous ancient African business hubs, such as Timbuktu, Ashanti, and Oyo, became wealthy empires due to their wide trade networks of agricultural produce.
Today, many of those business hubs are reduced to passive historical business cities because of an unexpected change that occurred. Have Africans learned lessons from these sudden changes that shocked us in the previous century?
In Nigeria, there is a wave of young entrepreneurs rushing to farming. When I talk to them about starting such a business venture, I see a genuine passion. The challenge is that many of them avoid the discussion on the agriculture value chain. They just want to farm and trade the produce. That was the same thinking of entrepreneurs in the 20th century who had vast cocoa farm, but no factory to produce chocolate.
The dynamics of wealth have shifted from crop farming to agricultural value chain, productive thinking and digital value creation. The rule of wealth creation has extended beyond Adams Smith’s theory of “the rent of the land”.
<a href="http://www.forbesafrica.com/focus/2017/12/22/entrepreneurs-born-made/" target="_blank" rel="noopener">READ MORE: Entrepreneurs Born Or Made?</a>
In the present business environment, the human brain matters most. An economy with digital technology and an acute investment in the human mind creates an enabling environment for wealth creation. No city can be better than the thinking of the entrepreneurs within it. That is the philosophy that differentiates poor nations from the rich. Business growth now largely depends on workers’ creative ability which cannot be quantified, but explains the underlining factor for all disruptions in business.
Today, creative problem solving and the human mind are the fields for wealth creation. I cannot think of a self-made billionaire who didn’t resolve a problem.
In light of this, an entrepreneur will get rewarded to the degree of the problems they solve. All cities with outstanding development are products of businesses and individuals solving problems and improving existing solutions.
Thinking creatively and prioritizing intelligence will help any business. The next generation of entrepreneurs must embrace creative thinking over tangible assets. &#8211; Written by Victor Mamora

Change The Rules And Be Rewarded

It was a painful ordeal for a parent.
In most African cultures, rain is a sign of blessings. The irony is, in this case, the poorest of the poor, who need the water the most, are the ones who hurt the most when it rains.
Three-year-old Everlate Chauke, her father Shadrack, and mother Cynthia were in their makeshift home in Alexandra, next to the Jukskei River, six kilometers from Africa’s richest square mile, Sandton, when it started to pour. When water filled their shack, they climbed a tree for safety; Cynthia on one branch, Everlate and Shadrack on the other. The branch broke and Everlate fell into the raging waters. Shadrack jumped in after her, but couldn’t find her. What started as a celebration, amid South Africa’s longest drought ever, ended in death and despair. Little Everlate was found 10 kilometers downstream, almost three weeks later.
The Chauke family is among 150 other people who lost their homes and property in the downpour at the Setswetla settlement in Alexandra. Several other people around Johannesburg died during the floods and many others lost their property. Yet, Africa may one day go to war over the lack of water. Too much water can take lives – yet so can the lack of water that one day Africa may go to war over. It has already happened elsewhere in the world.
The Khedevite of Egypt invaded Ethiopia, in the mid-1870s, to gain control of the Nile River. The dispute between India and Pakistan over Kashmir is largely about control of the Indus River. For now, for most of Africa, it’s a king-sized headache.
On March 10, major dams in Africa were down. In Lesotho, Katse Dam, the highest dam in Africa built in the Maluti Mountains, was 53.6% full; Swaziland’s dams stood at 75.8% and in Zimbabwe, Kariba Dam, one of the biggest in Africa at 128-meter tall and 579-meter long, stood at 32.8%. Water levels in Malawi, Mozambique, Kenya and most of the rest of Africa remain low. The UN warns of a looming crisis.
“Let us commit to invest in water security as a means to ensure long-term international peace and security,” says  former UN Secretary-General Ban Ki-moon.
Ratings agency, Moody’s, early last year, went as far as to say a lack of water was causing rising inflation, risking a weak South African economy going into recession. It is so concerning that, Cape Town’s Executive Mayor, Patricia de Lille, declared the city of the rich a disaster zone. At the time of going to print, the city had just over 100 days of useable water left.
The problem is the average household uses about 20,000 liters of water a month but Cape Town’s top water wasters, located on Haywood Road‚ Crawford‚ used a shocking 702,000 liters in one month. The city is naming and shaming all water wasters in an attempt to ensure they comply. On February 1, the city introduced harsher water restrictions; meaning everyone should use 30% less water or face a R5,000 ($380) fine and a higher bill. It is helping.
On March 6, in the Western Cape province, dam levels had dropped to 31.5%, which was 1.6% down from the week before. If the situation does not change, the province could run out of fresh water in dams by 2019.
“With the last 10% of a dam’s water mostly not being useable, dam levels are effectively at approximately 21.5%. Consumption has broken through the 800 million liter barrier for the first time to 783 million liters of collective use per day, but we have still not achieved the new collective usage target of 700 million liters per day,” says the City’s Mayoral Committee Member for Informal Settlements, Water and Waste Services, Councillor Xanthea Limberg.
Water Scarcity: Cooperation or Conflict in the Middle East and North Africa?, an article in Foreign Policy Journal written by Lisdey Espinoza Pedraza, International Relations lecturer at the University of Aberdeen, and International Relations researcher, Markus Heinrich, suggests while Africa struggles to quench its thirst, some regions of the world have ample supply of this scarce resource.
“While 70% of the planet is covered in water, only 2.5% of it is fresh water. Of this, only 1% is easily accessible, as much of the world’s freshwater is trapped in glaciers and ice caps. Compounding this is that this scarce resource is very unevenly distributed,” say Pedraza and Heinrich.
One problem is Africa is not pouring money where the rivers flow.
Water projects account for a meagre 1.3% of total infrastructure investment in Africa, according to the Africa Construction Trends 2016 report by Deloitte Africa. The report notes that there are only 15 water projects across the continent, valued at $4.8 billion, in comparison to 271 non-water infrastructure projects valued at $319.2 billion. The water sector is thirsty for investment. But it’s not that simple.
“If you are asking the private sector to finance water, what’s the return, who is going to pay them and how are they going to collect their money? Water is a basic human right. This also colors how people treat water from a drinking point of view. Should you be paying for something that falls from the sky? In many instances, the charges that cities levy on water are often far too low from a cost recovery basis,” says John-Pierre Labuschagne, Infrastructure &amp; Capital Projects Leader at Deloitte.
According to Labuschagne, water does have an opportunity for investors.
“The economics behind it though is what makes it difficult… The trick is how do we get the water from the dams to the cities? The water network is crucial. It needs to be rehabilitated and also expanded,” he says.
Ethiopia is leading the way to a solution with its $5-billion Grand Ethiopian Renaissance Dam project.
Located about 500 kilometers north west of the capital, Addis Ababa, in the region of Benishangul-Gumuz along the Blue Nile, it is expected to be completed in July this year. It will be the largest dam in Africa at 1,800 meters long, 155 meters high and with a total volume of 74 billion cubic meters. The dam will generate some 6,000 megawatts of electricity which will be sold to neighboring countries and is expected to aid Ethiopia’s growing economy.
This world’s ninth biggest hydroelectric project dam, however, has been under fire because it will flood 1,680 square kilometers of forest, displace 20,000 people and possibly affect the flow of the Nile River, which is shared by Tanzania, Uganda, Rwanda, Burundi, the DRC, Kenya, Ethiopia, Eritrea, South Sudan, Sudan and Egypt.
In Namibia, 4,860 kilometers south of the Nile, the answer is desalination.
Dewald Duvenhage, General Manager: Engineering Services at the Swakopmund municipality in Namibia, says desalination may be the only solution for the water problems Africa faces. The only problem is it uses a lot of energy.
“If the energy is renewable – solar panel farms, wind generation, concentrated solar power – all with suitable storage to allow 24-hours-a-day operation – then yes, it is sustainable. Interesting also is that all the large luxury shipping passenger liners are producing their water with desalination,” he says.
Sustainable, yes. Cheap, not so much.
The Namibian government is considering desalination with a special Cabinet committee, but media reports indicate that about N$57 billion ($4.36 billion) may need to be spent on it.
“Desalination water is presently exclusively used for mining water supply, yet since the same pipes transport and the same reservoirs store the water, we are all drinking desalination water mixed with borehole water as far as Henties Bay, Swakopmund and Arandis is concerned,” says Duvenhage.
He says we should use water responsibly but should also consider other avenues.
“We may consider recycling – but given the complications when industrial waste pollutes water, it is cheaper and physically simpler to desalinate seawater than to recycle sewage back to potable water. Yet we should first ask whether there is anything we can do to solve the energy supply crisis. No energy, no desalination, no water,” he says.
Professor Neil Armitage, the Head of the University of Cape Town’s Urban Water Management research unit, agrees that desalination is expensive and power-hungry.
“Most of our power is generated by thermal power stations that contribute to greenhouse gases contributing to global warming and contributing to climate change which is what caused the problem in the first place,” says Armitage.
That’s not all. For many years, Australia had a drought and opted for desalination plants, which according to Armitage, would cost between AUD2 billion ($1.5 billion) and AUD4 billion ($3 billion). As Australia was in the process of commissioning them, it rained.
“There were major floods, people were washed away in cars, reservoirs filled up and the residents said they don’t want to pay for the water when they can have water at a quarter of the price from the tap,” he says.
To do a similar project in Johannesburg or Cape Town, according to Armitage, may cost anything between R30 billion ($2.3 billion) and R50 billion ($3.8 billion).
“Someone proposed to me that we should build an undersea pipeline from the Congo River to Cape Town… another said can’t we get water from the Orange River to Cape Town… these are very expensive for something that can be managed if we change the way we manage our water.”
Armitage says two to three times more rain falls on Cape Town than is distributed to the people. The rest of it is wasted.
“There are two ways of dealing with that. One is rain water harvesting where you have a rain barrel taking water straight off your roof. This is very common in farming rural areas… the biggest problem though is that Cape Town’s climate has long dry summers and relatively short winters. You need more water in summer time than winter… If you are going to make rain water harvesting to work, you will need rainfall all year round.”
Another option is storm water harvesting.
“If we can find a way of harvesting that, storing it and treating it, then there is potential to supply all the cities with storm water. The reality is, it is very difficult. Storage and quality is a problem. Storm water can be very polluted,” he says.
It has worked in Singapore. For years, the country heavily relied on imported water from Malaysia and catchment water. Now it also has NEWater, produced from treated purified used water and desalination.
“In Cape Town, we have a natural sand aquifer on the Cape Flats. We are doing research to see if we can’t store water underground for periods of time; could be a month, six months or a year. It has been done in Cape Town for many years up on the coast where, for about 40 years, water to [the Western Cape town] Atlantis came from harvested storm water, treated sewage affluent put into the ground and then taken out again after a period of time… we are proposing to do something similar but on a bigger scale.”
It’s time Africa pours more money in its water, before a long dry season could lead to war.
&nbsp;

Water , The new oil?

Sure, optimism shone forth in Cape Town like the late summer sun bouncing off Table Mountain, as more than 6,000 powerful people, including more than 20 government ministers, headed for the biggest mining gathering on the planet.
<img decoding="async" loading="lazy" class="alignleft size-medium wp-image-4586" src="/wp-content/uploads/2017/04/Chris-Bishop_JC-200x300.jpg" alt="" width="200" height="300" />
There were more mining companies this year, up 50% on last year, after more than five years of decline. The keen-eyed investors were back and looking for contenders across the continent. A fruitful place to be for the brave, like the motorbike riding maverick Mark Bristow who has spent the last 20 years making money digging gold in mines from Mali to Cote D’Ivoire. Two decades ago many fellow South Africans may have laughed at Bristow for taking risks far from home, in what many see as barren land for mining, but now they’re laughing on the other side of their faces. At the Mining Indaba, Bristow’s Randgold Resources announced it had increased gold production, for the fifth year in a row, plus it was debt free with more than $500 million in cash. Many mining companies would kill to be in that position.
Among the investors looking to blaze a trail across Africa is the Lagos-based African Finance Corporation that began life, in 2007, with a fund of $1.1 billion and now has assets of $3 billion, according to one of its directors, Osam Iyahen. It is a public-private fund, 42% owned by government, that invests in: oil; gas; resources; infrastructure and power. In January, it broke ground on a $200-million bauxite mine in the Boffa region of Guinea Conakry, just 15 kilometers from the coast, with plans to ramp up to 15 million tons.
“I think there has been a rebound in the industry this year,” says Iyahen in Cape Town.
“Last year was a bit of a disaster. People were not interested in talking about transactions; all they were worried about was protecting their downside. There was a lot of sulking going on.”
You could be forgiven for thinking the host nation is still sulking. South Africa, the biggest mining country on the continent, has been like a boxer on the ropes since the power cuts and global financial collapse of 2008. More than 60,000 jobs have been lost since 2012; capital expenditure ground to a halt and the South African industry lost R38 billion (about $2.8 billion) in 2016 alone, in a year when mining output fell 4.8%.
“We have to get our house in order in South Africa, capital is a coward and it goes to the place where there is least risk. We have to remember mining is a global game now and it is easier than ever for foreign investors to move capital around. Our grandchildren will live with the legacy of what we do now,” says Kieran Whyte, a lawyer and partner at Baker McKenzie, who specializes in energy and infrastructure.
The last few months of 2016 were better as commodity prices lifted, according to the Chamber of Mines, especially the risk haven of gold in the wake of the unpredictable, to put it kindly, presidency of Donald Trump.
“I think we are seeing the green shoots here, we just have to watch out for frostbite,” says Roger Baxter, the CEO of the Chamber of Mines, with a smile on the first day.
Baxter was alluding to two cold fronts: the first, the fact that South Africa – that mined more than a third of the world’s gold – is no longer the king of mining. In fact, in these troubled economic times, more and more nations, from West Africa to South America, are ready to accept foreign investors with open arms. A sign of the times is that, on the eve of the Mining Indaba, analysts in Cape Town were extolling the virtues of the copper, gold and coal mining nation of Chile.
The second frosty front is regulatory uncertainty. The South African government, which has met six times with the Chamber of Mines, has been working on amendments to its mining law since December 27, 2012. It promises to gazette the amended Mineral and Petroleum Resources Development Act (MPRDA) by the end of March; the Chamber of Mines feels it could be April.
<div id="attachment_4588" style="width: 310px" class="wp-caption alignleft"><img aria-describedby="caption-attachment-4588" decoding="async" loading="lazy" class="size-medium wp-image-4588" src="/wp-content/uploads/2017/04/Mark-Bristow_JC-300x200.jpg" alt="" width="300" height="200" />Mark Bristow</div>
What is likely to be in the bill could cause conflict. It is expected there will be greater ministerial discretion and set in stone that all mining companies have to have 26% black ownership at all times. One of the problems is black shareholders, once they have passed their lock-in date, often cash in their stakes by selling to white shareholders, thus diluting the empowerment stake.
The Chamber of Mines, which represents almost all South African mining houses, disagrees strongly with this. It feels that once mining companies have borne the cost of financing black shareholdings it has done its job regardless of dilution. If this so-called “once empowered, always empowered” principle is accepted, many of the country’s biggest mining houses will be compliant overnight.
“I have never seen the Chamber of Mines so aggressive. Normally they get along to go along, but it seems the worm has turned,” says one mining insider in Cape Town.
It is all likely to end up in court where mining lawyer Peter Leon reckons they have a strong case.
“All they have to do is challenge section 100 of the MPRDA. This gives the minister the power to promulgate the act, but doesn&#8217;t give the minister the right to rewrite or amend the act. That would blow it out of the water,” says Leon.
There appears to be little sign of a U-turn by the government over an issue that could further confuse and deter investors.
“We don&#8217;t want to encourage a place where courts take the place of government. We don&#8217;t agree with the norm that if you don&#8217;t agree with us you take it to court,” says South African mining minister Mosebenzi Zwane.
It’s a cold front that could mean a Chile future.

Beware, It’s Chile Out There

In a week of tumultuous South African political news, as Finance Minister Pravin Gordhan’s battle with the National Prosecuting Authority came to a head, a crucial infrastructure story broke to little fanfare.
The South African Forum for Civil Engineering Contractors (SAFCEC) announced that under its auspices, most of the major listed construction companies reached an historic, unique and far-reaching voluntary agreement with the South African government.
The signing of this settlement ends years of dispute between the construction companies and government following findings of collusion by the Competition Commission investigation launched in 2009. The agreement commits the parties to chart a new future co-operative trajectory underpinned by measurable commitments to empowerment and transformation.
Collectively, the construction companies will make a combined contribution of R1.25 billion ($87.5 million) over 12 years into a trust fund to be controlled by a board of trustees appointed from government, the construction companies and SAFCEC. Each year, individual companies will pay between R15 million ($1 million) and R21.25 million ($1.5 million).
This voluntary contribution is in addition to the R1.46-billion ($100-million) penalty imposed by the Competition Commission Tribunal on some companies in 2013.
The trust will use the payments to develop and enhance the construction industry in line with government’s transformation goals and to develop emerging contractors and suppliers in South Africa.
Initiatives to be supported by the fund will include financial support for young trainee artisans and engineers from disadvantaged backgrounds, support for the teaching of maths and science at public schools, funding for social infrastructure and the development and promotion of construction companies owned and managed by black people.
The funding will also be used for the appointment of professionals to provide the government with engineering, project management and other services to strengthen its capacity to deliver the public infrastructure.
Combatting large-scale collusion and corruption, opportunities for South African companies in infrastructure projects elsewhere on the continent will be identified.
The construction companies have also individually undertaken to either develop up to three emerging black-owned businesses or dispose of a portion of their South African basic construction businesses to majority black-owned enterprises.
The agreement provides a framework for settlement of claims by the industry regulator, the Construction Industry Development Board (CIDB), as well as civil claims by public entities against companies investigated by the Competition Commission.
The positive implications of the Competition Commission extend beyond South Africa’s borders. The investigation was active in other territories and being watched across Africa and the rest of the world. Foreign competitors gained ground in these markets because our construction groups were not supported by the South African government until a resolution was found.
That is all set to change now and perhaps South Africa can hunt as a pack and claw back markets and jobs for the benefit of people and suppliers in those territories and within South Africa.
Those who have followed my column will have noted my consistent call for an end to the destructive standoff between the South African government and the construction industry. In my latter years as a CEO in the industry, and now in retirement, I have been committed to resolving the industry’s future and was a member of the CEO group who helped craft the early foundations of this voluntary resolution program. I recall many late evenings driving back from ministerial meetings in Pretoria and intensive debate and strategy sessions within SAFCEC. Important stakeholders from black business, who will likely significantly benefit from this agreement, were included.
Simultaneously with this announcement came an uptick in the project outlook for gold, the announcement of two big private sector coal power plants, and momentum on nuclear power.
“Through the transformation commitments in the agreement, we can rebuild the relationship with the companies concerned and work in partnership in future,” says Gugile Nkwinti, the Minister of Rural Development and Land Reform, as well as the Chairperson of the Management Committee of the Presidential Infrastructure Coordinating Commission.
“This arrangement also demonstrates the commitment to a transformed, transparent and ethical industry, which has a major role to play in delivering much needed infrastructure,” says Webster Mfebe, the CEO of SAFCEC.
I was thrilled to learn of the successful conclusion of this agreement. It took seven years, but the benefits might be felt for decades to come.

Burying the hatchet  for a brighter future

In the space of four months, a small group of athletes will have gone full circle – from the tough life in refugee camps, where sometimes food is rationed, to rubbing shoulders with the world’s most celebrated names in world-class facilities.
This is the strange reality for South Sudan’s Olympic athletes.
Being at the Olympic Games in Rio de Janeiro for three weeks will be a completely new experience for these young athletes, who might never have got to the world’s largest sport event if they were not refugees.
Even their compatriots in South Sudan are stunned  how the athletes got access to an arena reserved for the crème de la crème of international sports.
Olympic Villages have world-class infrastructure, with beautiful apartments, paved roads, working sewerage systems, hospitals, and shopping centers.
For the five young men and women from South Sudan, this is a far cry from the refugee camps they come from. Here, the refugees live in tin-walled houses, with little sanitation. The camp is littered with long-drop toilets, although refugees prefer to use thickets and bushes, leading to the rampant outbreak of deadly diseases are rampant. They are conditions the majority of athletes at the Olympic Games will find unimaginable.
The civil war has destroyed South Sudan’s economy. Before the current bloodletting resumed in early July, the newly-formed Transitional Government of National Unity asked for international support to rebuild the country. The conflict has halved oil production which, coupled with the global decline in oil prices, has left the government short of cash.
Although better than living among warlords, life inside refugee camps is not for the faint-hearted. Roads are dusty and rough. Some schools within the camps have sports fields, but the lack of grass makes playing on them difficult.
These young athletes will leave these fields of dirt and be welcomed to Rio with roads lined with exotic flowers and trees. The Olympic Village’s gardens rivals those found in Buckingham Palace.
When those inside the Kakuma and Dadaab refugee camps heard their brothers and sisters would be at the Rio Olympics, they burst into ecstatic celebration. The five South Sudanese refugees were selected by the International Olympic Committee (IOC) to form part of the first-ever Refugee Olympic Athletes team. The other athletes making up the 10-man team are two judokas from the Democratic Republic of Congo, a marathon runner from Ethiopia and two swimmers from Syria.
The President of the International Olympic Committee (IOC), Thomas Bach, says the team will raise awareness of the refugee crisis, which, according to the United Nations, stands at over 59 million displaced people.
“This will be a symbol of hope for all the refugees in our world, and will make the world better aware of the magnitude of this crisis. It is also a signal to the international community that refugees are our fellow human beings and are an enrichment to society,” says Bach.
Kenyan marathon legend Tegla Loroupe, who founded the Tegla Loroupe Peace Foundation, identified the South Sudanese athletes that will make up the rest of the refugee team. They are Pur Biel Yiech (800m), James Nyak (400m/800m), Rose Nathike (800m), Angeline Nadai Lohalith (1,500m) and Paulo Amoton Lokoro (1,500m).
The athletes have tear-jerking stories. They fled to neighboring Kenya as civil war erupted in Africa’s youngest nation, where compatriots supporting rival leaders were tearing into one another with machetes and guns. Girls and women were raped, property vandalized and homes looted. Tens of thousands died and many more were displaced. The survivors, mostly orphans and widows, were forced to cross into Kenyan camps.
The athletes are unified in their call for peace. They say this would allow many more young South Sudanese to pursue their dreams – whether in academics, sport or business.
“I would be representing my country in the Olympics had there been peace in my country. While other athletes will be carrying their countries’ flags, which is an honor and prestige, we will be participating under the Olympic Flag. That is good, and we are grateful to the IOC for remembering refugees, but sometime in the future, I would wish to run under the South Sudanese flag,” says Lohalith, who left home in 2001 and reached Kakuma the following year.
Lohalith started running for fun while attending primary school inside the Kakuma camp. She was among those scouted by Loroupe and transferred to Nairobi for specialized coaching.
Lohalith believes the refugee team at the Olympics will inspire other displaced people, even if they don’t win medals.
“It will be the first time refugees are represented in the Olympics, which will inspire other refugees because they will realize that they are just like normal people,” she says.
Jackson Pkemoi, who is managing the team at the church-run Anita Children’s Home in Ngong, 20 kilometers south of Nairobi, says the athletes are not taking the selection for granted.
“It is never easy to make an Olympic team. These athletes appreciate that this is a godsend, an opportunity to join the rest of the world at the Olympics,” he says.
Lokoro is glad he will be able to represent the refugees he lives with in his camp.
“When the refugees, and our people at Kakuma camp, heard of this, they were proud and celebrated. They are happy for us,” says Lokoro.
Nathike, who escaped her war-ravaged country with her parents, is running to help those she left behind.
“My people are happy and praying that I perform well so that I can change their lives,” she says. “Since we have talent, this can help promote peace all over the world.”
Nyak sent a massage to warring factions.
“Fighting is not the right way for people to solve issues. The more people fight, the more young people who have talent run away from home. So those countries [that] have conflict have to sit down and see where the problem is because this affects so many countries,” he says.
While their competitors are running for gold, these athletes from South Sudan are competing for something more important – peace.

The Olympians Who Want Peace  More Than Gold

Plans for Nairobi to enter the Global Financial Centre Index (GFCI) – a ranking of the competitiveness of financial centers around the word – finally appear to be on track, following the recent introduction of the Nairobi International Financial Centre (NIFC) Bill. Although the city is yet to be included in the global rank, it’s already among 16 associate centers expected to join the index in the near future.
One of the key roles of the NIFC will be to attract international financial services and multinational corporations to grow and develop the market for financial services in the region. It will help all NIFC-licensed firms to generate new and sustainable revenue streams. On this front, Nairobi is already playing host to several representative offices of global lenders, such as HDFC Bank, Nedbank, First Rand and Bank of Kigali. In addition, the NIFC will provide access to local and regional investment opportunities. Business can be transacted inside or outside Nairobi, in local or foreign currency. This is to allow businesses to operate both locally and internationally. For this reason, plans are already underway to make Nairobi Africa’s first clearing house for the Chinese yuan.
According to the GFCI ranking, for Nairobi to become an international financial center, it will need to enhance five key areas of competitiveness: financial sector development, business environment, infrastructure, human capital, and reputational and general factors. With this in mind, it was encouraging to hear the Cabinet Secretary for the National Treasury, Henry Rotich, propose changes for the local debt market during this year’s budget speech. To start with, market players will now see the introduction of electronic bond auctions which will spare investors from the current manual process of submitting paper bids, the separation of retail and wholesale components of the market and the introduction of primary dealers and market makers. It is likely to attract international portfolio funds looking to investment in the region.
Furthermore, Rotich, through the Financial Services Authority (FSA) Bill will set the stage for mergers across the existing non-banking regulators. The move is expected to address issues around consumer protection, existing regulatory gaps and issues of market conduct. Once enacted, Nairobi’s international status is expected to become even more essential. Some leading institutions have already taken notice. Ecobank Transnational is now planning to upgrade its Nairobi office to be the regional hub of operations for 18 countries. Similarly, global financial services firm, SWIFT, plans to open a regional hub in Nairobi.
A further indication of Nairobi’s increasing competitiveness is the improving business environment. In the 2016 FinAccess survey, Kenyan’s access to financial services stood at 75.3%, up from 66.7% in 2013. But, issues revolving around corruption and rule of law are also key. Kenya would not be an ideal international financial center if its people are corrupt, lazy and lawless. In view of the current financial scandals that have rocked some of the major financial centers, such as the Panama Papers scandal, it’s obvious that reputation is a vital asset that needs to be protected. In fact, reputation has become more important than reality. It is no surprise to see Athens and Moscow at the bottom of the global ranking.
While Nairobi gears up for a leap forward, its efforts so far have attracted attention. Kenya was ranked number 42 out of 140 countries by the World Economic Forum Global Competitiveness Report 2015/16 in financial market development. In 2015, the country was also ranked first in the world for leveraging technology to drive inclusion by the Brookings Financial and Digital Inclusion Project (FDIP).
Looking at this trend, it is safe to say that it’s only a matter of time before Nairobi catches up with the big boys.

Giant Leap Forward

It is sad how our minds have been conditioned a certain way towards debt. We are told that debt is bad, but there is good debt that can work for an entrepreneur.
There are cases for and against debt. It was the Holy Grail that allowed the automobile, housing, banking and furniture sectors to become successful; it was also the curse that ushered the world into the economic meltdown in 2008.
So, what is good debt and how has it benefited those who know how to play the game?
In real estate, people use debt in innovative ways, like going to the bank to apply for finance for a new house. Once the bank approves, a tenant is brought in and their monthly rental is used to repay the loan. Then they go back to the bank as they still qualify for another property as their income at the time of application still remains the same. This qualifies them for another property, and the model is replicated while tenants service the loan, and their balance sheet increases.
Property developers use this model with a cluster of residential buildings, apartment blocks, and major developments. Developers identify the land, get the correct approvals and compliant paperwork in order, then they hire architects to draw the building plans. Once this is done, the properties are sold off-plan and this money is used to construct the infrastructure.
Another sector where people use debt, with less risk, to become successful is franchising. Firstly, franchises have a proven business model with high probability to succeed. Secondly, banks are more willing to finance new sites or buy an existing branch if the franchise has an established brand. With good management, the debt will be settled.
As entrepreneurs in Africa, we need to be savvy in gearing debt to work for us, and understand the power of leverage.
The recession hit when the US economy was over leveraged in real estate asset class. This is the same asset that many entrepreneurs use as their capital base. They approach banks to take another bond on their house to start a business, or grow it, at the risk of losing their primary residence should things not go according to plan.
Leverage is crucial when you are dealing with financial institutions, particularly banks. However, there is another avenue where leverage is not necessarily a physical asset; there are venture capitalists that fund a company on the perceived current or future value of the company. Others go further by focusing on the team behind the company, credibility and successful track records.
Above all, entrepreneurs need to be careful not to over-leverage themselves. When under-leveraged, the risk is manageable.
Start-up entrepreneurs are famous for bootstrapping their companies, until they produce a viable prototype or penetrate the market. An example of this is Fuseware, a successful African tech company founded by Mike Wronski before he sold it to Ornico.
This presents a challenge between two funding models: debt versus equity financing. Well-structured debt is preferable, provided the company can service the debt in the short term. This is best option for expansion purposes.
Equity is best for start-ups and growth-stage businesses. In this regard, an investor buys a stake in the company and takes on the same risk as you. The downside is that that the entrepreneur loses some control the moment an investor comes into a company.
Sooner or later, it is going to be necessary to approach capital markets to raise money. The fundamental reason for listing on a stock exchange is to raise money. Today, there are other reasons, but raising capital is the main one. A company’s share price is based on perceived value that might be influenced by its income, assets or track record. At the end of the day, the company is worth what the market is prepared to pay for and what investors agree to sell shares for.
There are many times when an entrepreneur’s personal debt overlaps with his company’s debt, predominantly in small to medium sized companies. If able, entrepreneurs should only deal in debt held by the company, rather than their personal accounts.
While debt is not entirely encouraged, any company that is going to be of global significance needs to be familiar with it.

How To Make Debt  Work For You

Despite preconceptions, you will find women in powerful roles are more than capable of outperforming their male counterparts across the infrastructure value chain.
As a sponsor of Woman in the Built Environment initiatives and training and career development, my former company, Group Five, led from the front. But it’s the girl power that we unearthed and nurtured that was an inspiration to me.
We committed ourselves to targeted recruitment at student level to attract ladies in all the engineering disciplines, quantity surveyors, construction management, finance and HR, to drive gender and racial transformation. Dedicated gender orientated programs followed.
The success stories are legendary. The 14,000-employee Group Five created an environment where women rose to the highest ranks, including board level and divisional unit directors, through to technical and support roles.
The most incredible stories came from the construction divisions. We placed newly graduated female students to fast track local-based programs and then deployed them to participate on an equal footing with the guys in some of the most remote sites across Africa.
One young lady was a construction management graduate who was bored with building another Sandton office block. So, we sent her to a mine construction site in Ghana. A few years later, she rose to become the successful multidisciplinary construction manager responsible for the complete mine construction project in a remote site in Mali, with a workforce of over 300. She did this while in her twenties!
HR is often a female-dominated field, but not historically in construction, given the robust male-dominated manpower, and remote location, challenges. Group Five changed that and after only a few years many of the most senior human and industrial relations posts were occupied by a group of tough, confident ladies. They dealt with violent labor disputes at home and in Southern and West Africa, but were able to stand as role models for the young recruits and we started to see long-term careers being nurtured across the group after many years of countering the notion that construction is not sexy or rewarding. For the next generation, particularly for females, we changed that perception.
The group won the right to construct the iconic Nelson Mandela Children’s Hospital as a direct result of the strong female and demographically representative team that inspired the trustees of the Children’s Fund. The team delivered on every promise made in the execution of the project, which included tough social and transformative targets.
Female leadership in finance and commercial law is an inspiration to the construction industry, from gender activists and shareholders to the many aspirant female accounting graduates who rapidly rose to manage the finances of a suite of highly complex businesses. From basic construction to the securing of turnkey power plant and transport projects across Africa, where the group took an equity stake and executed the turnkey engineering design and construction, or led the debt and equity strategies with financial services partners, females led the way.
Group Five’s CFO won the 2014 Business Woman of the Year award for her leadership in driving business systems re-engineering, transformation, shareholder relationships and women in construction initiatives within the industry, and raised two kids at the same time. How many men can follow that?
In African construction, “if the mossies don’t get you, the taxman will” – some may recall this amusing tale from an earlier column. We nurtured another young star from the finance team who became an industry authority on African tax, the law, and what coercion one might find at a site when the taxman arrives with his own militia. Our team knew more about their tax laws than the taxman himself.
Our protégé was so successful that she became the tax lead for a big branded legal firm.
We attracted and developed skilled females across Africa and beyond – our brand had become synonymous with enlightened attitudes, was recognized as a socially responsible organization in many countries. To drive our geographic strategy, we needed skills from across the target countries. This gave us technical, construction, finance and HR skills from as far afield as the Philippines, India, the Democratic Republic of Congo and Zimbabwe.
Fast forward to 2016 and look at which construction companies are surviving, if not thriving, amid an industry in deep recession. I wonder if it’s the female touch that has made the difference?

A Woman’s TOUCH

Banks and investors are reluctant to risk money in untested projects. Start-ups are left penniless and broken across Africa. Nairobi-based entrepreneur Erik Hersman struggled for capital from banks unwilling to take a risk. Crowdfunding was the answer.
“We had to make sure that we made this innovation come alive and crowdfunding made it easier. Although the process of marketing the idea while being funded is hard, it is worth it,” he says.
Through online crowdfunding platforms, people pledge small amounts of money to projects for 90 days, for a reward.
Hersman turned to crowdfunding and met people that gave his new business a lifeline.
“It wasn’t just about raising money for the project but we also wanted to test out if anyone else wanted this product. Sometimes something sounds great in our heads but no one else would be interested,” he says.
Using Kickstarter, one of the many crowdfunding sites in Africa, he raised over $160,000 for BRCK – a device that helps people go online where electricity is scarce. It can hop between Ethernet, Wi-Fi and 3G and 4G.
“We looked at the market and we were asking ourselves, why are we trying to connect to the internet using devices that are made in Europe and the US when we have a different infrastructure in Kenya; so we started designing and developing a new way to connect to the internet.”
BRCK began shipping units in July 2014. Thousands had been sold to 54 countries by February 2015. The company employs 40 people.
Hersman is grateful for crowdfunding and says entrepreneurs should use it.
“It is not currently well used and understood in the continent but I wish more people could make use of it,” he says.
Entrepreneur Patrick Schofield, co-founder of Thundafund, a crowdfunding site based in Cape Town, says many businesses fail in their first year and good ideas rarely see the light of day.
“Crowdfunding is the most powerful mechanism we have in Africa. If you have a really good idea and people like it, they will support it. People can put $100 for a good idea, for example, but they are sceptical to put down $5,000 for something that hasn’t been tested,” says Schofield.
“Through the process of the campaign, we test if the idea is viable and if there is a market for it. The entrepreneurs say how much they need to execute their plan. If the target is not reached, the donated funds are returned to the funders.”
Thundafund claims it has funded 170 projects worth R6,123,843 ($550,000).
“There are a lot of ideas around how you can thank or reward backers. This is a very important part of crowdfunding because it will determine how well your campaign will do. For example, you can offer the product you want funding to create as reward, early access to the product or service for example when looking for funding for an album, you will offer signed CDs, VIP access to shows; you can make your backers part of the project and much more,” says Schofield.
Crowdfunding platforms like Malaik, AngelList, EarlyShares, and Seedrs offer equity.
Malaik spokesperson, Vias Lustig, says equity crowdfunding is great, but has drawbacks if not well managed.
“An early-stage company that has raised financing from a hundred different investors through an equity crowdfunding platform will have more trouble getting follow-on investment from venture capitalists,” says Lustig.
Malaik, based in West Africa, acts as a nominee. All the crowdfunded money is channelled through a special purpose vehicle (company formed for investing in equity) that appears on the entrepreneur’s books as a sole investor.
“Smaller investors that participate in equity-crowdfunding are also less likely to contribute and help the entrepreneurs with their business plan, since they have smaller incentives. Malaik also thought about curbing this when developing its model by adopting a lead investor format, this way the lead investor takes at least 25% of the equity round, thus ensuring the company has a larger, more invested individual that can possibly act as an advisor,” says Lustig.
Lustig claims equity crowdfunding could take advantage of the $140 billion to $160 billion gap in finance for African SMEs, because they enable many investors to commit small amounts of capital that would usually be out of the question.
The founder of London-based The Crowdfunding Centre, Barry James, says crowdfunding has not had a massive impact in Africa because of a lack of awareness.
“The UK lagged far behind the US four or five years ago until we started to tackle this. Even now, only a small percentage of people in either country are getting the help and funding they could from crowdfunding, so it has a long way to go,” he says.
“If you’re writing a book, the best advice is to write about what you know. The same is true with crowdfunding and entrepreneurship. That said, campaigns in the tech category tend to raise the most money, while games and comics have the highest rate of success – around 50 percent.”
In South Africa, Schofield says consumer products, arts and entertainment projects are the most supported.
The future could be brighter for struggling entrepreneurs, if you have a dream that draws a crowd.

If you want to get Ahead Draw A Crowd – But Be Careful

Last month I suggested that the South African government is unsure of which route to follow to find a shared strategy with the private sector to deal with the infrastructure backlog preventing the region’s progress.
Has the ruthless march towards recession, higher unemployment, coupled with the prospect of credit ratings downgrades and potential changes in voter sentiment, finally struck home?
Finance Minister Pravin Gordhan’s recent bellwether meeting with 60 CEOs reminds me of the Union Buildings meeting I attended after South Africa successfully hosted the 2010 World Cup. The President and most of the Cabinet met with business in high spirits to reinforce the need to harness the collaborative momentum that had delivered so well.
Will the economic crisis that has followed the inaction and ineptitude after that euphoric session finally galvanize government and business into action?
Economic revival will not be achieved without massive investment in infrastructure and it cannot be delivered effectively without collaboration between the public and private sectors at the highest level.
In many countries there is a close relationship between the government, the national agenda and the construction industry. Many have transparent cross shareholding and collective arrangements that make for quicker infrastructure expansion.
The key is harnessing private sector funding for public infrastructure through commercially viable PPPs and concessionary projects, where each party takes a share in the risk for reward. This relieves the fiscus of having to fund everything and can then direct scarce public funds towards infrastructure that will attract industrial investment and drive long-term economic growth.
My previous company has decades of experience with this in Africa and Eastern Europe, but political ideology in South Africa has bedeviled this opportunity.
After 2010, we had numerous discussions with Brazilian groups and learned of this collective mindset in Brazil ahead of their 2014 World Cup and 2016 Olympics programs.
France has a deep collaboration between government and construction. The United States infrastructure is now undergoing massive rebuilding, with a strong private sector participation in both funding and implementation.
Likewise for overseas work, our competitors come into our region with robust political and financial backing from their governments.
The French approach to business is founded upon national interest and long-term foreign relationships, which was evident in recent years with the prospects for a fleet of nuclear power plants for South Africa. For several years, I participated in the developing French strategy for this work that encompassed major technology groups, their suppliers looking to localize in South Africa, the French national power utility and their government representatives.
Likewise, the Russians and South Koreans have strongly developed public/private trade institutions and strategies and have engaged with targeted partnerships with local companies. The success of South Korean business in our market is remarkable. The Russians are now firm contenders for nuclear power.
In stark contrast, in my experience in working across Africa and the Middle East, South African business generally feels alone and has to fend for itself internationally.
South Africa’s tax-payer funded development finance institutions have been known to fund projects in other African countries without involving any South African content. Most competitor nations would have contractual requirements that their funding has a high content from the lending nation.
This further diminishes South Africa’ growth prospects, the tax base and the desired employment and regional cooperation. The lack of support, and the time lost, is eroding the commitment to South Africa as the bigger companies shed local jobs and continue to shift to new international markets.
The construction industry has been through hell but it’s ready to make a difference. To do this it needs a champion in government, that has until now been absent.
The industry has tabled robust investments and long-term plans that include significant additional training and skills program. It has also offered to assist distressed municipalities and undertake social projects.
There is also a suite of execution strategies that will deliver on the commitment to collaborate with, mentor and jointly execute large projects with black-owned business to ensure the next generation of large construction companies are created from a solid experience base.
Perhaps out of adversity, the need for radical change in ideology and policy from government and for business to deliver more jobs, demographic and economic transformation and black industrialization, Gordhan’s new approach will find traction.
The engineering and construction industry in this country cannot wait much longer.

Collaborate Or Else

South Africa needs a solid plan to deal with the more than $245 billion of backlogged infrastructure that is curbing industrial growth and social development.
A toxic cocktail of events and cruel circumstances continues to damage a hitherto world class industry that is vital for any planned economic revival.
The construction industry is suffering like never before. It is still shrinking from its 2008/9 peak, shedding several hundred thousand jobs, margins plunging to around 2% and little sign of relief.
The reality is that, despite political hot air, very little of the backlog of crucial infrastructure, needed to attract foreign and domestic industrial development, is being dealt with. As inaction continues, the capacity to deliver this crucial infrastructure is being destroyed, potentially leaving South Africa at the mercy of foreign influence.
The political influence that black business has in demanding an end to perceived white dominance of the sector, as well as the ratcheting of transformation demands and targets for black empowerment and black industrialization, drives a relentless, but necessary, agenda at a difficult time of negative growth.
In addition, many of the local construction groups have suffered reputational damage and have been heavily financially penalized by government for reported competition infringements.
The industry has suffered massive losses on major projects in South Africa, Africa and Australia, many of which are public sector projects which were poorly engineered and badly managed by both government and contractor.
Share prices have plummeted in recent years and skilled people have been eagerly sucked up by banks, consulting firms, mining and industrial companies.
The public view is negative, and notwithstanding the understandable loss of trust, the government has paid little attention to the damage to the South African economic revival that we all hope for.
The localization of the nuclear program and the infrastructure embedded in the National Development Plan are wishful thinking.
There is a new group of transformational CEOs appointed into many of the large construction groups. We realized a massive wake-up was required. The old guard had gone and we had to deal with the fallout and culture change required to root out historic anti-competitive behaviors and racist tendencies. We found we were not close enough to government and black business and we were not listening to the messages nor understood the outrage directed at the industry.
A few of us traveled a lonely journey trying to facilitate a new beginning and open dialogue between a diverse and relatively untransformed industry peer group leadership and the fragmented approach from four ministries that purported to have control or influence over the industry.
It was not until the chasm between traditional business and government claimed its first victims, through the heavy fines imposed by the Competition Commission and the threat of further action, that the attitudes of some of the diehard leadership among the peer group changed.
They had finally realized it could not be business as usual. Their anger was misplaced. Government and black business action was not about a perceived vendetta, it was fueled by the perceived exclusion of black business and broken trust in the construction leadership’s apparent lack of commitment to transformation and clean business.
After five years, the unproven remnants of the competition matter remains disputed. The Construction Industry Development Board (CIDB), the industry’s regulatory body, continues to threaten to impose blacklisting sanctions and state-owned corporations charged with implementing the major infrastructure works remain short of capacity and technical skills to be able to manage the projected infrastructure projects worth R4 trillion ($245 billion).
Yet the economy is screaming for the infrastructure to be built to attract regional and international trade and investment.
Construction leaders have fast tracked the inclusion of black business interests, cleaned house and retained capacity at great cost to support the national infrastructure agenda. Yet government remains distant and unengaged, while some black business structures continue to bark demands with self interest in mind.
It is suspected that tenders for much needed infrastructure are being withheld pending a resolution of the trust and empowerment issues. It also appears that cabinet is unsure of which politically acceptable route to follow. This is very worrying and is preventing the country’s progress.

Inaction And Ineptitude

Africa has 54 diverse countries, a billion people on the move, an abundance of raw materials, the largest new market for goods and services, a food for generations and an insatiable infrastructure market for a hundred years.
Despite fragmented infrastructure delivery, due to a lack of domestic fiscal strength, weak regional integration and inexperienced internal project delivery capacity, Africa’s foreign direct investment (FDI) inflows have quadrupled since 2000.
Although FDI projects in Africa fell 8.4% in 2014, the continent’s share of global capital investment and job creation hit an all-time high, attracting more FDI than North America, Latin America and the Caribbean, and Western Europe.
Despite claims to the contrary, European investors continue to dominate investment in Africa as American interest rebuilds, while the commitment from Asia-Pacific has weakened over the past decade.
Projects are getting more complex, with the average investment of $174.5 million per project in 2014, up from $67.8 million in 2013; a 68% increase that created 188,400 jobs.
Many of the basic public infrastructure contracts in poorer countries are implemented through diverse aid agencies, barter deals, or in rare cases, through public-private partnerships.
The more than 70 Chinese contractors in Africa benefit from barter deals in relation to energy and minerals, or aid-related projects tied to the State. Many smaller Chinese contractors battle with indigenization, and the interpretation of local contract specifications, leaving technical and socioeconomic problems and a legacy of unfulfilled expectations. Group Five were called to rectify a partly constructed commercial building in a neighboring country. It had been poorly constructed by a Chinese contractor, somewhat to the architect’s specification, but as the program became tighter and the cash flow ran out, innovation ran wild. The photographs amused us for years.
Government-funded infrastructure on open tender is the area where acquiring projects can be the most difficult, and then there is the matter of securing payment. These are highly contested bids where innovation in packaging the right mix of local resources, commitment to local communities and skills development make all the difference. In some cases, corruption rears its ugly head and staff come under duress in difficult locations. Zero tolerance is mandatory. Management needs to train employees to deal with corruption and to uphold the international standards by which a business should be judged. Contrary to popular misconception, it is possible to uphold ethical business values in Africa. Robust risk assessment of counter parties is a key factor in preventing corruption.
Foreign-financed-loan or aided-public-infrastructure projects favor their own contractors, providing a partnering or sub-contracting opportunity for the larger African-based contractors.
Projects funded by the World Bank and the African Development Bank are open tenders and often bureaucratic and highly contested, with strong competition from Asia and Eastern Europe. Often funding is inadequate – causing disputes. I remember a 10-year dispute where the specifications were completely at odds with the actual site, meaning additional work was required to build the road. The dispute ended favorably, but with significant cost and delayed payment.
Technically complex projects in power, oil and gas, mining and agriculture are available in the private sector.
The Independent Power Project market is exciting but requires time and resources to support the developers. My previous company built more than 1,200MW of power plant capacity across Africa with at least another 1,000MW now in construction in renewables and gas-fired power. Mining plant construction has provided a massive boon to local construction companies in gold, copper, cobalt, uranium and coal as far afield as Madagascar, Liberia, Mali, the Democratic Republic of Congo, Ghana, Malawi, Mozambique and Sierra Leonne.
Local knowledge, the best people, the right partners, efficient execution and innovation wins these bids.
Sites are manned by a multinational workforce, so there is substantial risk in the assumptions made at the bid stage on local manpower skills, rates of production and quality of work which will determine the cost and duration. The industry exists on incredibly low margins, yet takes on massive risk. One has to see through the complexity of a multi-year project to get your bid cost accurate. It’s a tough call, yet very rewarding when it comes off.
On the flip side, the most successful long-term client relationships have been born out of managing adversity and still delivering the project.

Tough Calls Are  worth it

Will the announced nuclear program energize South Africa’s manufacturing and construction?
My background is power engineering. Building power plants across Africa generates as many stories as they do megawatts. It is ironic that, in Africa’s most electrified economy, there are tales of powerless people and an economy running out of juice.
Eskom, South Africa’s national power generator, is cooking with gas (turbines) – at the cost of around $78 million a month – while grinding away at the late completion of the new 9,000MW Kusile and Medupi coal power plants. Medupi’s first 800MW unit is generating power and will be on commercial load in September, with up to 1,600MW coming onto the grid each year for the next five years.
Keep your gas cylinders full and your camping lights charged – there’s more to this story!
South Africa has a 40GW-headache to cure in the next 20 years. The first 10GW is merely to match current demand. Generation capacity is 40GW with only about 30GW available due to the UCLF (unplanned capacity loss factor) being high. The national demand is over 40GW as mines and smelters have shut down to help Eskom. Medupi and Kusile will merely tick this box.
The second 10GW is needed to replace the old coal plants before 2025. They have been run hard well beyond their time. The third 10GW is needed to attract investment for growth and the fourth 10GW is for reserve capacity to allow for maintenance.
Coal may be easier and cheaper, but it’s dirty stuff and our economy has to be environmentally attractive to foreign investment. Few investors will stump up if it will worsen their carbon footprint.
So, 40GW in the next 20 years! Simply put, double Eskom. It has to be greener than ever before too – no dirty coal. That means nuclear topped up with clean coal IPPs. Wind and solar may be very sexy but they don’t deliver the big base load power that we need.
Like it or not, nuclear is the leading renewable energy source and South Africa is in play on the global nuclear stage to procure 9,600MW of nuclear power.
Contrary to the naysayers, nuclear energy’s lifetime cost is lower than most technologies, it’s expensive at the start, but cheaper to run.
South Africa’s nuclear regulatory body has defined that only the safest technology will meet the environmental and safety specifications for any new build program.
Russia, France and China are likely frontrunners, but who has the better and safest kit and who can offer a compelling financial deal? That’s where technology, money, politics and common sense meet in a witches brew.
The International Atomic Energy Authority (IAEA) Integrated Nuclear Infrastructure Review (INIR) sets the readiness criteria for building nuclear plants. A nuclear power plant is split into three main sections: The Nuclear Island, The Conventional Island (Turbine) and the Balance of Plant. South Africa is ready to manufacture and construct on the last two sections, which are similar to the local content of Medupi and Kusile, with some nuclear safety alignment.
The nuclear codes and quality standards take a quantum leap in the Nuclear Island and that is where the nuclear certified contractors like Group Five, Lesedi Nuclear Services and the South African Nuclear Energy Corporation (NECSA) are qualified. The country’s industry will have to partner with the successful vendors to hone those skills, train a workforce and learn from the build program in Europe, China and Russia.
There’s a buzz again. Nuclear vendors expected a request for proposals in August with a preferred Nuclear Vendor Country announced by March. Next year will see tendering for the local manufacturing and construction sector, with contracts signed in 2017 and construction starting in 2018.
The capital expenditure for 9,600MW will be approximately $40 to $50 billion, plus government costs and interest on capital. All this leads to trillions being spent over 15 years. That’s a big number that will reignite local industry and a knowledge economy after the last seven years of power cut misery.
Could we “boom” again?
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Additional reporting from Des Muller, head of Group Five Nuclear Construction Services.

Tag: Infrastructure

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double or quit?