The EFF’s proposition on the mandatory role of a state-owned construction company

The EFF has proposed the establishment of a state-owned construction company. File Picture.

The EFF has proposed the establishment of a state-owned construction company. File Picture.

Published Mar 6, 2024


Sam Matiase

Just like the 2019 elections manifesto, this year’s EFF elections manifesto towards 2024 national and provincial elections makes bold commitments in addressing the massively stubborn unemployment in the country amongst the unemployed youth.

The 2019 election manifesto commits the EFF to adopting a “long-term funding framework for infrastructure development, explore different build, operate and transfer models as a means of infrastructure delivery”.

This year’s elections manifesto takes this commitment forward and states “the EFF government will maximally use infrastructure development and expansion as a means for massive labour-absorbing industrialisation for upstream and downstream sectors” and once more, commits to establishing several state owned companies, in the main, among others, the construction company and how this could contribute in creating sustainable job opportunities in the country.

This paper contextualises this electoral commitment and constructs the model of the State Construction Company as proposed by the EFF.

It is common knowledge that, there is also ample international evidence of the complementarity of infrastructure investment and productive investment from both capitalist and ‘market socialist’ worlds.

Provision of infrastructure, for example, roads, bridges, railways, dams, waterways, reservoirs, telecommunications, airports, ports, and power stations is therefore a precondition for sustainable economic growth and this requires a type of economic system involving social partnership, cooperative enterprises and public-private partnerships.

Currently in South Africa, big capital is refusing to play its part and thus, frustrates efforts towards infrastructure development.

It is only in South Africa over the past 30 years that productive investment in infrastructure has been surrendered to private sector through a practice called tenderisation of public infrastructure projects.

The EFF’s founding manifesto correctly states that, “the state should build internal capacity to construct and maintain infrastructure such as roads, railways, dams, basic services such as schools, houses, hospitals and recreational facilities”.

It is only in South Africa where this role is outsourced and tenderised in multiple folds and leading in the erosion of the state mandatory role in infrastructure provision.

It is only in South Africa that lack of infrastructure is not seen as a barrier preventing the integration of the domestic market, regional trade, and causing considerable efficiency losses and uneven regional development.

Imagine if the N8 road which stretches from Kimberly in the Northern Cape through Bloemfontein to the Maseru boarder gate, was to be expanded over the Ukhahlamba-Drakensberg Mountains straight to Pietermaritzburg in KwaZulu-Natal what value-adding would that make to regional integration and economic development between South Africa and the land-locked Lesotho.

Besides quantity and numerous road infrastructure in South Africa, the quality of roads seems deficient and built of inferior material and poor workmanship, not least because of the underfunding of maintenance, but also because of inaccuracies in design.

This paper argues that adequate financing of infrastructure can only be achieved through a proper reorganisation of infrastructure provision and establishment of a state-owned construction company as envisaged by the EFF.

Under the EFF’s government, South Africa will shift rapidly to a socialist market economy which will offer new ways to improve the provision of state-led infrastructure investment.

To maximise the benefits of the market as an allocation mechanism, South Africa needs to fundamentally reconsider the tasks of government in infrastructure provision.

A crucial step in this direction is to ‘detenderise’ infrastructure provision and place it entirely under state ownership, management and control.

Below, is what EFF’s founding manifesto says about the state handicapped by tendering system, it says “the state’s dependence on tenders has massive political implications and often reduces the quality of work provided because of corruption and the corruptibility of the whole tendering system”.

Currently, government’s remaining role in infrastructure provision, is limited to budget allocation and determining tender specifications and adjudication and leave the rest to self-regulating bodies such as Airports Company of South Africa (Acsa), the South African National Roads Agency Limited (Sanral), the Passenger Rail Agency of SA (Prasa), the Ports Regulator, and many others, whose role is nothing but to allocate tenders to big construction companies with links to ANC politicians.

Furthermore, in the context of intergovernmental fiscal reforms, the assignment of government responsibilities in infrastructure over spheres of government need to be addressed and be given institutional coherence.

This can only happen through a better reorganisation of the functions currently assigned to Sanral and Prasa and other infrastructure provisioning agencies.

Finally, the financial fiscal reforms and institutional reconfiguration offer an opportunity to address the infrastructure financing problems and backlog challenges.

This paper tries to contribute to the rationalisation of future South Africa’s system of infrastructure provision and discusses how the EFF led government will organise itself to perform its functions efficiently and effectively.

For this to happen, the EFF holds a view that “concrete steps which the state should initiate, establish and give strategic and financial support to, should lead to the creation of s state housing company, state roads construction company, state cement company, amongst others.

Government has a role to play in the provision of infrastructure as mentioned above because if this role is left without government intervention or surrendered to market, the latter is ill-equipped to provide it efficiently free from corruption, collusion and price fixing.

Government’s inefficiencies to provide sustainable infrastructure can be due to a number of factors of infrastructure dynamics:

– infrastructure usually requires large, lumpy investments, with many coordination problems in implementation and management;

– some of these goods (electricity, telecommunications, ports, dams) have characteristics of natural monopolies, where the minimum optimal scale is close to the market size;

– pricing of services by the market could be prohibitively costly from an economic point of view (e-tolling roads); and

– the market price could be considered too high from an equity perspective.

In a socialist market economy, all these barriers could be addressed through decisive regulation of the construction industry from manufacturing of materials, pricing and the provision of infrastructure as a social need to enhance economic growth and development.

Government intervention does not imply government monopoly in production, (quarry mining could still be allowed to supply all materials to support infrastructure development goals of the government as private enterprises).

Infrastructure is a bundle of functions, many of which can be more efficiently performed by an independent state-owned construction company or roads and rail entities like what was commonly known as “PAO” during an apartheid-era such as Spoornet/Railways and many other mechanisms.

At least, about two pillars of the EFF’s founding manifesto are tailor-made and address in detail about the need to create conditions to accelerate building state capacity in various ways.

These pillars are:

– “Building state and government capacity, which will lead to the abolishment of tenders”.

– “Massive protected industrial development to create millions of sustainable jobs, including the introduction of minimum wages in order to close the wage gap between the rich and the poor, close the apartheid wage gap and promote rapid career paths for Africans in the workplace”.

These pillars underline the EFF’s commitment to foster increased state’s ability to create millions of sustainable and decent jobs for millions of unemployed youth especially in the construction sector.

Anchored on the cogent, logical and rational understanding of the role that could be played by the state to direct and intervene meaningfully in the transformation of the South Africa’s society, the EFF states that “a supposition that the South African economy can be transformed to address the massive unemployment, poverty and inequality crisis without transfer of wealth from those who currently own it to the people as a whole is illusory”.

The EFF founding manifesto further states that to ensure the transfer of wealth from the minority should fundamentally focus on the commanding heights of the economy.

It says “this should include minerals, metals, banks, energy production, telecommunications and retain the ownership of central transport and logistics modes such as Transnet, Sasol, Mittal Steel, Eskom, Telkom and all the harbours and the airports” in state custodianship, control and management.

The route towards building state capacity to create millions of sustainable and quality jobs, should decisively be led by the creation of a state-owned construction company which will equally be efficiently managed and administered in a manner that will raise the levels of public confidence in the capacity of the state to do business and contribute to infrastructure investment and economic development.

This state-owned construction company, will also contribute in increased, sustainable and labour intensive and absorptive downstream and upstream industries and linking rural areas with urban centres of the country’s economy. The construction industry is a significant contributor in job creation and a big employer in South Africa.

A thriving construction industry has a direct and indirect impact on the economy.

Directly, it allows the country to dramatically increase employment, especially for the semi-skilled people. in addition, it creates demand along the entire construction value chain, creating a massive multiplier effect for the economy.

The total construction spending in 2023 amounted to about R7.1 trillion and currently employs around 820,000 people and the informal sector employs about 340,000 people.

This makes the industry the second biggest after the agricultural sector. By comparison with other sectors, construction accounts for round 8% of total formal employment and about 17% of total informal employment.

With state direct intervention, both formal and informal components of the construction industry could been regulated, aligned and managed more productively to create more job opportunities.

It is the EFF’s perspective and vision that, through massive infrastructure investment in collaboration with private sector through public private partnerships, this will maximise infrastructure development and expansion as a means for massive labour-absorbing and create millions of sustainable quality jobs for the South Africa’s youth.

Finally, at the centre of this vision, is the organization’s commitment to create the state-owned construction company. For the state-owned construction company to succeed in its mandate to build roads, bridges, airports, harbours, railways, dams, waterways and reservoirs, telecommunications, schools, hospitals and recreational facilities, a developmental state bank could be a direct means of making that possible by providing subsidized funding and finance for massive infrastructure development in the country, and simultaneously, create millions of urgently needed jobs for the unemployed youth.

To get the economy growing and thus creating significant job opportunities, the spatial environmental spaces and certain areas around the country should be declared special construction zones (SCZ) with emphasis on production of both construction and building materials and supplies.

In this way, millions of jobs could be created and thus draw youth as many as possible into permanent employment. This could also be done in partnership with the National Defence Force’s available human resource and capabilities.

* Matiase is an EFF Member of Parliament

** The views expressed do not necessarily reflect the views of Independent Media or IOL