Pragma comment on 2012 budget

July 25, 2012

Infrastructure investment one of central policies in 2012 budget.
Pragma offers a wealth of experience and know-how

The expansion in infrastructure investment was one of the central and much-needed priorities of the 2012 budget. According to leading physical asset management company, Pragma, this was an extremely positive step in the right direction due to the current backlog in maintenance and replacement of infrastructure, especially in water and sewerage, as well as electricity distribution.

Says Alan Tait, MD of Pragma: “The national government hasnot been able to allocate as much funding to infrastructure asinternational best practice would indicate, which would be about 10% of GDP. The reason for this can be found in the budget speech. Government institutions, and specifically those in local government, have consistently not been able to effectively spend the infrastructure budgets allocated to them.” Adds Albertus Nolte, Solution Engineer – Financial Services of Pragma: “The finance minister has warned that officials will be held responsible where this underutilisation of budget allocation continues to happen. The clear message is that the funds toperform the work on assets that is required are available, but the correct skills need to be applied to ensure that it does happen.”

Nolte reckons the reason why these government institutions persistently fail to spend, underspend and misspend their capital expenditure budgets is that “they don’t always have the correct skills, experience and knowledge to develop and implement effectiveasset management strategies and plans. Another challenge is the lack ofsupporting systems and procedures to ensure that the asset strategiesand plans are properly executed and monitored. Only 68% of the planned R260-billion set aside forinfrastructure in 2010/11 was actually implemented due to the above.”

Tait continues: “There is clear intent that national government wants service delivery to improve, and in support thereof they’ve made the allocations to infrastructure spending in the national budget. It’s up to the various government departments and institutions, all the way to local municipalities, to ensure that the available funds are properly utilised. Pragma has 21 years’ experience in the field of asset management and is perfectly positioned to assist government on all levels with this enormous task. We provide the skills, experience and knowledge required to develop and execute asset management and maintenance strategies and plans that meet the overall strategic objectives of our clients. For government institutions, our assistance will result in their ultimate objective of better service delivery to their constituents.”

Adds Nolte: “The Finance Minister has made it very clear that this spendwill be monitored and an inability to spend will be punished. I’m convinced that the writing is on the wall for the underperformancein asset management and maintenance in government.”

According to Nolte, the allocations of energy projects as well astransport and logistics investmentsare very welcome and applicable to theneeds of the South African economy. “To ensure maximum benefit, theseassets must perform at their optimum, and this is where Pragma will addvalue. We can ensure that proper management and maintenance of these newassets form part of the investment planning and execution of theprojects. On successful completion of the projects, we can ensure thatthe continuing management and maintenance of these assets are performedin line with international standards and best practice.”

Tait reckons the private sector has an enormous role to play in the delivery ofinfrastructure, particularly in the areas of renewable energy, telecomsand other investments. “The private sector has a huge role to play in the form ofpublic-private partnerships. These partnerships can provide governmentwith essential skills, knowledge and experience available in the privatesector, while they in turn will be provided with long-term investmentopportunities.” Nolte adds: “There is a great future for public-private partnerships andit would now appear that the government is developing a bigger appetitefor this. In the past public-private partnerships in infrastructure hasbeen a low 4% of government infrastructure spending. Hopefully, this willincrease with this new willingness by government to involve privatesector as stated by the Minister of Finance in his budget speech.”

Nolte concludes: “South Africa is a wonderful country filled with opportunity.When we put our differences aside and work together for the greater good,we all prosper. This budget provides some specific opportunities for thedevelopment of our country by improving infrastructure. Pragma is in aunique position to provide specialist advice and services to thoseresponsible for delivering on this opportunity. Let us do it!”

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