South Africa’s decaying water, electricity and logistics infrastructure presents a R100-billion-a-year repair and refurbishment investment opportunity that could provide much-needed stimulus for the declining manufacturing sector, Steel and Engineering Industries Federation of Southern Africa COO Tafadzwa Chibanguza has said.

“Infrastructure spend in terms of the big capital projects is important for long-term industrialisation. [However], there's also an important discussion that needs to be had at an intermediate level. You can actually run a massive scale industrialisation project just by repairing and rebuilding the current infrastructure.

“Some of the numbers that we are coming to [are in] excess of R100-billion a year investment across these three areas, just on refurbishment. That's on a medium-term basis. So therein lies an opportunity for intermediate industrialisation,” he said on July 31.

Chibanguza was speaking as part of an expert panel in a Local Manufacturing webinar hosted by Creamer Media, which brought together experts in the South African manufacturing industry to discuss ways to arrest the decline in the South African manufacturing sector.

The expert panel, which, alongside Chibunguza, also included Shell technical and services manager Mpho Mokwena, Nedbank national manufacturing manager Amith Singh and Actom CEO Mervyn Naidoo, and was facilitated by South African Capital Equipment Export Council chairperson Eric Bruggeman, also explored whether incentives to boost local content were proving effective and whether there were innovative financing solutions available to manufacturers.

Other issues raised included how best manufacturers could reduce their environmental footprint, what the role of technology in improving competitiveness might be and how manufacturers were adapting to energy, water and logistics crises.

Several of the panellists highlighted the urgent need for electricity transmission upgrades as an opportunity to bolster the local manufacturing sector.

“Grid stability, I believe, is an important thing to reignite our manufacturing space and sector. If you have a look at what has happened over the last couple of years with the lack of supply and how that's affected manufacturing, [it] has been tremendous,” Singh pointed out, highlighting the significant amount of investment being poured into renewable-energy projects, leading to a transmission bottleneck.

“One of the key things with that is that these new power projects are scattered across the country. The current transmission network is concentrated primarily around . . . Mpumalanga. So in order to unlock the potential of these new renewable projects and [independent power producer] projects, there's going to be a massive need for investment into the transmission infrastructure of the country,” Naidoo said.

He estimated that about 14 000 km of transmission lines and about 170 transmission substations would need to be built.

“All of these initiatives are going to change the trend when it gets to demand for manufactured product. Our expectation is that we see a massive projection in terms of demand going forward over the next 20 years plus, and that will ultimately stimulate manufacturing in the country,” Naidoo added.

Singh pointed out that there was an urgent need for infrastructure development, refurbishment and repair, not just to stimulate new manufacturing jobs but also to save companies from having to spend their capital on securing their own utilities because they cannot depend on the existing infrastructure.

“Companies are responding by stepping in and providing for themselves in those areas where crises are manifesting. The capital allocation opportunity cost for these companies . . . is money that could have been elsewhere spent in investing in operations, which now obviously goes into fixing what should have been a public good [provided by the State],” Chibanguza said, citing examples of companies that have had to invest millions of rands into ensuring water and electricity supply.

“The impact of all these inefficiencies . . .is that the end consumer is ultimately the one who pays for that inefficiency, and for the solutions that these private sector companies have to then step in to and deploy,” he added.