CIVIL ENGINEERING INDUSTRYPIERRE BLAAUW

Economic Overview

Infrastructure HISTORYPre 1900 1900-1930 1930-1960 1960-

1982Post 1982

Post 1996

Transport:Local Roads1859 First RailwayNo Flying

SAR&H createdRail extended into AfricaRegional Airports1st Powered Flight : East L.

National Roads Board (1948)1934: SAA establishedDevelop SASOL 1

Freeway ConstructionRichards Bay & Saldanha PortsPipeline Network Expanded

SARCC created in 1990ACSA established to look after 9 airports

NPA establishedCoega PortRail competitiveness decline

Energy:Discover Gold.1882 1st power station Kimberley

1906 Victoria Fall Power1923 Eskom power to non mining

1948 Eskom buy Victoria Power1950’s Develop crude oil refineriesSasol Formed

1972: Eskom’s role as central generating authority established

1984: Koeberg Commissioned1986: Nuclear fuel enrichment plant1988: BEVA Nuclear fuel fabrication plant

Water & San.Bucket latrines in JHB & CPT

Dam building1903 Rand Water1904 Sewerage in JHB

1930 Vaalharts irrigation scheme1950 Dam building stepped up

Massive Dam building

1986 Lesotho Highlands Water Project2001 Focus on phasing out bucket latrines

ICT1791: First Post Office CPT1876: 1st Telephone CPT

1901: Radio1902: 1st Public payphone in Bloem1905: ‘Cullinan’ Diamond Posted1924: 1st Telegraph

1932: 1st Airmail service1932: 1st Overseas Phone call

Fixed line communicationsLimited Mainframe computers1976 Television

WWW – 19891990 5 millionth telephone1994 Mobile Telephony2003 Telkom listed

Global Construction Spending (US$ bn) 2007

SA: 13bn US$ (@ 7.50 Growth 2006-2007: 21%

0

10,000

20,000

30,000

40,000

50,000

50 55 60 65 70 75 80 85 90 95 00 05

Gov Public Corp Priv

General Government Savings and Current Balance

Source: Treasure Medium Term Policy Statement

Source: Treasure Medium Term Policy Statement

Sectoral Trends

Public-sector economic infrastructure investment (gross) and depreciation

0

6

12

18

24

30

36

1960 1970 1980 1990 2000

R b

illio

n, 1

995

pric

es

Infrastructure investment Depreciation

Paved national and provincial roads, passenger vehicles,and commercial vehicles for transport of goods

0

100

200

300

400

500

1940 1950 1960 1970 1980 1990 2000

Inde

x (1

970

= 10

0)

Paved roads Passenger vehicles Goods vehicles

20000

22000

24000

26000

28000

30000

32000

34000

36000

38000

40000

42000

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

Year

Peak

Dem

and

and

Cap

acity

(MW

)

Peak Demand Expected Peak DemandInstalled Capacity (MW Sent-out) Operational Capacity (MW Sent-out)

Reserve

margin = 25%

Reserve

margin = 20%

Reserve

margin = 16%

Reserve margin aspiration = 15%

Reserve

margin = 8-10%

IMPLICATIONS

GROWTH BASED ON STABILITY & EXCELLENT NATIONAL TREASURY & SARB

GROWTH CAUSED INCREASED DEMAND; ROADS WATER ELECTRICITY RAIL CONNECTIONS PORTS

NEXT PHASE OF GROWTH DEPENDS ON INCREASED CAPACITY OF INFRASTRUCTURE

Medium Term Budget Statement

2008/09 – 2010/11: R482 billion

BUDGET: Election orientated – focus on delivery and social grants possible tax incentives, unlikely to operate on the basis of a surplus.

2010 Allocations: 2005/06-2010

Allocations: 2010 Infrastructure Related R million

Tshwane 694

Johannesburg 1320

Cape Town 766

Mangaung 298

Rustenburg 69

Polokwane 179

eThekwini 851

Mbombela 212

SANRAL 430

SA Rail Commuter Corporation 1316

Buss rapid transit system and municipal busses 2317

Monitoring and evaluation 65

Total 9 038

2010 Allocations: 2005/06-2010

Allocations: 2010 Stadia Related R million

Green Point 1930

Kings Park (eThekwini) 1800

Soccer City (Johannesburg) 1530

Ellis Park (Johannesburg) 229

Vodacom Park (Mangaung) 220

Mbombela 855

Prince Alfred Park (Nelson Mandela) 895

Peter Mokaba (Polokwane) 696

Royal Bafokeng (Rustenburg) 147

Loftus Versveld (Tshwane) 98

Total 8 400

Transnet’s five year gross capital investment budget

12,015,311,4 14,7 11,1

64,5

53,3

41,4

26,7

11,4

010203040506070

2006/2007 2007/2008 2008/2009 2009/2010 2010/2011

Rbn

Financial years

And Some Other Projects

SANRAL R23 billion R10 billion over the next two years

Koeberg Interchange R500 millionMajuba Rail Link R2-2.5 BillionR300 around R500 millionCoega Several BillionsKing Shaka Airport R3 billion (Civils)Gautrain R1.5-R2 million a day

Capacity Funnel Projects

Research

PBMR

UCG

ConcentratingSolar

CogenerationHydro

Nuclear

Gas

Coal

Solar

Transmission

Renewables * Red outer circle indicates – out of Borders project

OpportunityIdentification

New Coal SupplyOscar Yank

eeDiscard Coal November

Victor

Gas 2

Zulu

Mike

Hwange

Coal 1 Hydro 1CBM

Coal 2 Non EskomGeneration 1 Hydro 2 Whiskey

26 125 MW

Pre-feasibility

TangoSierra

Co-Gen 1

Foxtrot

HVDC 1

Golf

Nuclear n

22 650 MW

4500 3500

1600

1200

1775

1200

100 6000

500

400

500 1000 0

2000 350

1000500

165

350

100

1150 1600

900

4500

0

4500

10000

Feasibility, Business Case, ContractConcluding

India Lima

Papa Nuclear 1

EchoQuebec

Delta

Juliett

Kilo

Bravo

600 1500

2400 3000

1000 1050

2400

600

1300

4500

18 350 MW

Build

Renewable1 Ingula Komati

Camden Grootvlei

MedupiArnotP1&P2

Gas 1Ankerlig

400kV 765kV

11 941 MW

100 1332 961

1520 1128

4500300

1050 600 450

Gourikwa

Private Sector

87 Projects announced worth R134.9 bill

Manufacturing R68.2 bill

Mining R32 bill for next 5 years

Real Estate Developments R30 bill

Nedbank Project Listing

Civil Engineering industry

-40.00%

-30.00%

-20.00%

-10.00%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2

2000 2001 2002 2003 2004 2005 2006 2007

Real % Change: Turnover and Awards

12 Month % Change Contract Awards 12 Month % Change Turnover

0

5000

10000

15000

20000

25000

30000

35000

40000

70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 20 2 4 6 8 10 12 14 16 18 20 22 24

Civil Engineering Turnover: 2025

CIVOPT CIVPES

2000 and GREAT?

SUSTAINABILITYSPEED BUMP NOT DERAILED –

ECONOMIC INFRASTRUCTURE BOTTLENECKS

POLITICAL CHALLENGESEXCHANGE RATE WEAKER – ESCALATION

– STIMULATE EXPORT ORIENTATED INDUSTRY

SKILL SHORTAGES

Key Risk Issues in effective infrastructure project structuring

Low Risk High Risk

Payment

Design Development

Schedule

Status of Partner

Low Bidding

Client Management

Portfolio Risk

Project Development

Growth & Expansion

Risk vs. Reward

Contract Models

Qualified Resources - skills

Risk Management Process

Change Management

Source: ECRI

Training and EducationCurrent trends and requirements for technical skills to cater for growth

-12500

-10000

-7500

-5000

-2500

0

2500

5000

7500

10000

12500

15000

17500

20000

22500

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Retirement

Early retirement

Emigration

Loss due to premature death

Leaving the industry

Immigrants

National Diploma graduate

BSc/BEng graduate

In industry from 2004

EX Allyson Lawless

Civil Engineering – Engineers & Technologists

0 50 100 150 200 250 30024

29

34

39

44

49

54

59

64

69

Age

Number per age group

BlackWhite

EX Allyson Lawless, June 2004

Source: Treasure Medium Term Policy Statement

Price Escalation for Construction Works: 2003 -2006

Construction Charter

Latest DevelopmentsPPPFAVerificationSupplier Status?CHAOS

Concluding Remarks

THIS IS NOT BUSINESS AS USUALYOU MUST DELIVER MORE

INFRASTRUCTURE IN A SHORTER TIME WITH LESS RESOURCES THAN EVER BEFORE.