South Africa Infrastructure Report Q4 2008

South Africa Infrastructure Report Q4 2008
Published: 26 November 2008

Construction projects continue to get South Africa’s infrastructure ready in time for the country to undertake its role as host for the 2010 World Cup. In June 2008 FIFA, the organising body for the tournament stated that the construction of the five new stadiums that South Africa has planned for the World Cup are on track and will meet FIFA’s pre-set deadlines. Major construction projects are now underway in the country. The World Cup build scheme includes 5 new build stadiums the Moses Mabhida Stadium, Green Point Stadium, the Mbombela Stadium, the Nelson Mandela Stadium and the Peter Mabhida Stadium.

On top of new builds five of South Africa’s stadiums are undergoing renovations and upgrades for the World Cup. The hosting of the World Cup has proved to be a windfall for construction companies operating in South Africa. The country’s National Treasury has set aside ZAR8.4bn (US$828mn) in total for the upgrade and building of stadiums for the event. As well as this construction companies have been drafted in for repairs and new build projects within the country’s transport infrastructure, to ensure everything runs smoothly for the tournament.

BMI has been tracking the World Cup transport infrastructure related projects and notes major developments over the last quarter in projects within South Africa’s airport sector. In June 2008 the Airports Company of South Africa (ACSA) announced that the country’s three main airports would be ready in time for the World Cup kick off. The event is expected to bring heightened tourist levels to the country with as many as 350,000 people expected to attend the World Cup. To cater for this number projects are currently underway to prepare and upgrade the South African airports for Johannesburg, Cape Town and Durban International. The ACSA has pledged a ZAR5.2bn (US$705.63mn) infrastructure expansion programme for these three airports plus seven other smaller airports ahead of 2010.

BMI believes that having met its current deadlines South Africa is well on the way to being ready for 2010. We continue to fear however that South Africa’s ongoing power problems may hamper the preparations for the event and maybe even the event itself. South Africa’s power crisis erupted at the beginning of 2008 and a scheme of load-shedding has been implemented ever since to manage the deficit.

New developments in the last quarter display some new initiatives that are being instigated to increase the country’s power supply. In July 2008 Eskom, the South African power utility announced plans to demothball the Ingagane power plant. The plant was decommissioned in 1999 due to an excess of power capacity in South Africa. The plant has a potential of 600 megawatt (MW) and Eskom is interested to have it refurbished and operated by the private sector. BMI notes that during the 19910s Eskom mothballed a total of 11 power stations; three of these facilities are now being brought back into service.

The restart of the Ingagane power plant may serve as a precedent for bodies other than Eskom to use methods to solve South Africa’s power problems. This is certainly the case for Lafarge. In July 2008 the French construction material producer announced it planned to finance the proposed ZAR40mn (US$5.2mn) Middelvlei facility. The plant will provide electricity for the company’s new cement grinding plant in Randfontein.