SACPCMP How the Construction Industry and Government can work towards creating a more sustainable delivery model for addressing the infrastructure backlog An African Perspective 28 June 2016 Dave van der Merwe

Common goals & aspirations – so why a backlog? Drive economic growth Improve service delivery through infrastructure delivery Facilitate job creation and alleviate poverty – development impact Funds available for infrastructure and yet projects are lagging © 2016 Deloitte Touche Tohmatsu Limited

Africa – the need for infrastructure grows daily 1 2 3 4 The African population is projected to expand from around one billion in 2014 to almost two billion by 2040 (United Nations Population Division). In 2010 there were 355 million people, or 34% of the population, considered middle class. By 2030 over half a billion Africans are projected to be middle class. More than 200 million of Africans are aged between 15 to 24 years and that is expected to grow to 321 million by 2030. These younger Africans will play a critical role in the region’s economic development as they drive growth in the middle class. The urban population in Africa is expected to grow from 38% in 2010 to 47% in 2030. Many of these urban areas will link up major populations and create sizeable markets and trade routes While just 21% of Africa’s population access the internet, this situation is dynamic and developing fast. Telecoms growth in Africa over the past 5 years has been the fastest globally – with mobile growth enabling Africans to leapfrog poor landline infrastructure. 5 Unprecedented population growth The promise of the growing middle class Africa’s youth Rapid urbanisation Leapfrogging technologies © 2016 Deloitte Touche Tohmatsu Limited Source: “The Deloitte Consumer Review – Africa: A 21st Century View”, December 2014

Government & Industry at odds – yet they need each other Multiple and complex issues abound in the African context Significant levels of distrust Projects are primarily government owned at 71 % but only 16% government funded (African Construction Trends 2015) We need a paradigm shift. Here are some thoughts for both parties to embrace © 2016 Deloitte Touche Tohmatsu Limited

Creating capacity Issue Inadequate skills at artisan / trade skill levels / finishing trades Lack of entrepreneurial skills and too few SMME contractors Possible Solution Skills development Jointly fund investment into maths and science skills Prioritize development of trade schools (incentivise trade zones) Internships (articles for graduates) – greater focus Small business growth Entrepreneur development – maker spaces / innovation zones Drive real change in SMME’s – a bedrock for future economic stability Community involvement – key driver in modern metro growth Skills development – supports growing middle class Small business – satisfies young population SMME’s – embrace supplier & enterprise development Small business – similar to the German economy © 2016 Deloitte Touche Tohmatsu Limited

Enhancing competence Issue Inadequate competence / practical skills. Trained but no ability to apply Experienced skills being lost through low growth or technology changes Possible Solution Structured skills transfer Mentoring – but with real intent / outcomes based Insights programmes – practical learning that links technology driven training with experience Leveraging technology Innovative e-learning (think Khan Academy) Data analytics – rethink productivity Encouraging competitive innovation (X-prizes) © 2016 Deloitte Touche Tohmatsu Limited

Enabling environment Issue Significantly different regulatory and legislative issues Inconsistent standards / infrastructure delivery approaches Differing application of supply chain practices and increasing timelines Possible Solution Common enabling environment Standardized capital project capability model (e.g. World Bank approach to projects, PIDA) Single set of infrastructure principles (e.g. Millennium Challenge Corporation) Program selection criteria / development impact objectives / implementation frameworks Standardized infrastructure standards & approaches Benchmark costs / user requirement templates / strategic briefs / repeat designs / modular construction / © 2016 Deloitte Touche Tohmatsu Limited

Project pipeline visibility Issue Poor visibility of Government project pipelines Conflicting agenda’s between service delivery & political masters Long timelines between project and delivery Possible Solution Visibility of project pipelines Multi-stakeholder engagement and collaboration (e.g. Phakisa) Single data base with forward projections (e.g. World Bank) Long term spatial & infrastructure planning Long term capital planning framework – NDP with identified catalytic projects Master plans with tangible projects © 2016 Deloitte Touche Tohmatsu Limited

Additional sources - African Construction Trends 2015 - Deloitte Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. Deloitte provides audit, tax, consulting and financial advisory services to public and private clients spanning multiple industries. With a globally connected network of member firms in more than 150 countries, Deloitte brings world-class capabilities and high-quality service to clients, delivering the insights they need to address their most complex business challenges. The more than 200 000 professionals of Deloitte are committed to becoming the standard of excellence. This communication contains general information only, and none of Deloitte Touche Tohmatsu Limited, its member firms, or their related entities (collectively, the “Deloitte Network”) is, by means of this communication, rendering professional advice or services. No entity in the Deloitte Network shall be responsible for any loss whatsoever sustained by any person who relies on this communication. © 2016 Deloitte & Touche. All rights reserved. Member of Deloitte Touche Tohmatsu Limited Deloitte