Cape Business News
3/2/2012

The establishment of a Greenroads rating system – similar to that employed by the Green Buildings Council of SA - was discussed at the recent Conference on Asphalt Pavements for Southern Africa (CAPSA).

SSI Engineers & Environmental Consultants has been instrumental in bringing the Greenroads principles to South Africa having been involved with the USA based Greenroads Foundation for over a year and having recently concluded a memorandum of understanding with the foundation to localise the tool for South African conditions.

Greenroads is a collection of sustainability best practices, also known as credits which relate to the design and construction of roads. A company will receive credits for employing sustainable practices in the design and construction of roads, such as using reclaimed materials from existing pavements in rehabilitation, rather than new materials, or moving from hot-mix to warm-mix asphalt thereby lowering the carbon footprint of the project whilst minimising the environmental impact.

Delegates attending the CAPSA conference agreed that there was a need for a Greenroads certification scheme in South Africa, which will be used as a tool to assess the sustainability of road projects in the country. A representative of the international Greenroads Foundation provided delegates with insight and information on how the system works in the USA.

Although an SSI initiative, the intention is to develop a true industry standard which requires the involvement and buy-in of as broad a spectrum of the roads industry as possible. Although the implementation of a Greenroads system is still a year away, SSI is considering applying the principles on a current project as a pilot for possible inclusion in a future Greenroads rating system.

An example of the ‘Green Roads’ technique is on the M5 in Durban where recovered existing asphalt was crushed, screened and stabilised and then placed on the roadway in a 150mm-thick layer followed by a 60mm thick asphalt-wearing course as the final surfacing. SSI resident engineer Peter Jerome explained that only recycled asphalt materials were used, resulting in significant cost savings on the project.

All asphalt recovered for reuse includes a 100%-recycled bitumen stabilised materials (BSM) layer, milled off asphalt haunch and recycled concrete kerbs. About 15% of the recycled asphalt added to the asphalt surfacing is delivered as Warm Mix Asphalt (WMA). The benefits of using WMA at lower temperatures include a reduction in energy consumption, greenhouse-gas emissions, fumes, and odours generated at the plant and the paving site.

Less obvious technical benefits include the reduction of short-term binder hardening, the reduction of mixture tenderness and a possible increase in the percentage of reclaimed asphalt pavement used in new asphalt pavement mixes. SSI says it has embraced the principles of the Greenroads imitative and is actively promoting its adoption as an industry standard in South Africa.

Sustainable practices in the design and construction of roads, such as moving from hot-mix asphalt to warm-mix asphalt or using reclaimed materials from existing pavements in rehabilitation, rather than new materials, will minimise the environmental impact and lower the carbon footprint of projects.

NICKY SMITH
Business Day
2012/02/02

Supply bottlenecks at SA’s oil refineries are causing shortages of bitumen, forcing road contracting companies to turn to Asian imports, a move that is likely to push up the cost of road construction.

Bitumen is a by-product from the refining of crude oil, and is a major ingredient in the making of asphalt. Prices are regulated and set by the Department of Energy and incorporate the fluctuating price of oil. In November, asphalt makers Raubex and Much Asphalt, a division of construction group Murray & Roberts , were forced to ship 4200 tons of bitumen from Singapore. This was after they were unable to secure the volumes they needed to meet their production requirements, Raubex chief financial officer Francois Diedrechsen said yesterday. He said another shipment of the same size was planned for next month.

The cost of Singaporean bitumen was about 20% more than the locally available product. SA needed about 1000 tons of bitumen a day to meet the demand of road-building contracts, Frost & Sullivan analyst Bhavisha Jaga said in a report yesterday. "Only 30 to 70 tons per day is being produced," Mr Jaga said. These shortages had "drastic implications for road maintenance and repairs over the past couple of months" and could result in job losses in the longer term unless solutions were found, he said.

With bitumen accounting for about half the input in asphalt, contractors and asphalt producers have had to reschedule projects. Raubex had been forced to idle its asphalt manufacturing plants for weeks at a time, said Mr Diedrechsen. "It has been quite a crisis for the last couple of months. There has been a dramatic cutback since the refineries have scaled back production due to more frequent maintenance shutdowns," he said. SA’s largest user of bitumen is the South African National Roads Agency (Sanral). The company was responsible for more than 16000km of the country’s strategic national roads, which accounted for 70% of bitumen use, it said yesterday. "Any bitumen shortage that exists within the industry is severely impacting the completion of Sanral projects, since it is used in the final surface layer," the agency said.

The company had "been informed recently by our supplier that bitumen supply remains limited". SA’s oil refineries are ageing and prone to unscheduled and frequent shutdowns, and the state of the refineries is cause for concern for the government. In November, Energy Minister Dipuo Peters called for an audit of the state of refineries after repeated, unscheduled shutdowns last year. Bitumen was expensive to produce because of the high cost of the technology required to manufacture it, Mr Jaga said.

Sanral said it was working with the Department of Transport, the refineries and the contracting companies to find a solution. "We are also requesting government to look at removing import duties that were imposed to protect the local bitumen industry, which now doesn’t want to produce the stuff," Mr Diedrechsen said. Fears were that the knock-on effects of the shortages could hit employment in the construction sector. "Job losses for road contractors are likely to occur until there is a normalisation in the supply of bitumen," Mr Jaga said.

Business Live
1/2/2012

SA is currently facing a bitumen supply shortage which has had drastic implications on road maintenance and road repairs over the past couple of months, according to Frost & Sullivan (F&S).

The notoriously potholed and dangerous Sunrise-on-Sea road outside East London has been given a tarred makeover, much to the delight of residents. One thousand tons per day of bitumen is currently required by the road construction industry in SA. However, only 30 to 70 tons per day is being produced, the consultancy firm said on Wednesday. In SA, 600,000km of roads are unsurfaced and, in the long term, it is predicted that an average of four to six million tons per annum will be required. There are a number of interrelating factors contributing to the shortage of bitumen supply.

Firstly, the production of bitumen is costly, as technology used in the manufacturing process is high. Secondly, production plants need to be located in close proximity to the end user, in order for the bitumen producer to produce profitably, the company said in a statement. "Onerous specifications to meet certain standards on national road projects can also prevent easy entry of new bitumen producers into SA," said F&S's chemicals, materials and food research analyst, Bhavisha Jaga.

"In addition, the closure of refineries, due to upgrading and maintenance of facilities, continues to place additional pressure on increasing the supply of bitumen. Chevron and Natref refineries, for example, have a limited bitumen supply, which adds to the US$14 billion road maintenance backlog." The price of bitumen fluctuates in line with the dollar price of crude oil, as crude oil is imported largely from Iran. With instability in the Middle East, and a US and European Union embargo on Iran crude oil exports, the price of crude oil, now valued at US$110.80 per barrel, is set to rise, causing the price of bitumen to further increase.

"With a growing restriction on Iran crude oil exports, seeking alternative crude oil suppliers such as Angola, Nigeria, Ghana and Saudi Arabia, may be an expensive, but unavoidable, consideration for asphalt producers in the future," says Jaga. Bitumen comprises 60% of the cost of asphalt production, which is used in road construction. The bitumen supply shortage will, therefore, strain future road maintenance projects, such as the Gauteng Freeway Improvement Project and N1 and N2 Winelands toll roads.

Smaller, yet significant projects such as the repairing of potholes, might end up being side lined as a result of the shortage of bitumen, as the primary focus will now be on major projects. "Job losses for road contractors are likely to occur until there is a normalisation in the supply of bitumen," notes Jaga. "The losses will have a detrimental impact on the economy in the face of the government's plan to create five million jobs by 2015."

Plans are currently underway to resolve the bitumen shortage. These are being coordinated between the Department of Transport, South African National Roads Agency Ltd (Sanral) and the Department of Energy. According to the Transport Minister Sibusiso Ndebele Sanral - which in 2010 accounted for 70% of bitumen used in the country - is engaging with the road construction industry to directly import bitumen from overseas. The first shipment of bitumen of 4,500 tons was directly imported in November 2011.

The import of bitumen can be expected to ease the high demand for bitumen, but logistical factors, aggravated by a weakening of the rand-dollar exchange rate, can impose higher costs on the bitumen industry. F&S expects that, as the demand for bitumen in SA continues to increase, warm mix asphalt technology will most likely be used on the roads. This technology allows for asphalt to be recycled, which can reduce the demand for bitumen. There is also an increased likelihood of a bitumen product export market arising, as recycled asphalt technology is utilised.

 Business Day
23/1/2012

Serious accounting and administrative problems at all three levels of government are restricting job creation and raising the cost of doing business, says the South African Chamber of Commerce and Industry.

In some areas, companies are undertaking government functions themselves in order to continue operating. A survey by the chamber at the end of last year found almost 21% of respondents believed service delivery problems were preventing them from doing business. Standard Bank economist Johan Botha said companies were thinking twice about investing in large capital projects. "Many companies do have cash available and interest rates are at their lowest in almost 35 years.

Yet, several factors, including the lack of delivery from government, increase uncertainty. Therefore companies adopt a wait-and-see attitude." The findings of the survey provide an insight into the harmful effect government maladministration is having on economic activity, the acceleration of which is vital if South Africa is to address its job-creation challenge.

Finance Minister Pravin Gordhan highlighted the extent of such maladministration in Limpopo last week when he justified having put five departments in the bankrupt province under national administration. Other provinces, such as the Eastern Cape and North West, are plagued by similar deficiencies, and local government — the most critical instrument of service delivery — is floundering in many parts of the country.

A report released by the Treasury 10 days ago revealed that local government finances had deteriorated significantly over the past four years and that the "increasingly visible" failures were harming service delivery. Sixty-six of the 278 municipalities in South Africa were identified as being in financial distress as of June last year — about the same number as in 2009-10, with 37 more on the borderline.

Signs of distress identified by the Treasury included the persistence of negative cash balances; overspending of operating budgets; underspending of capital budgets; and the high number of creditors and debtors. In the 2009-10 financial year only seven of the 237 municipalities audited received unqualified audit reports and 53 received disclaimers because the municipalities concerned had not provided sufficient document ation for the auditor to form an opinion.

Auditor-general Terence Nombembe also reported last week that unauthorised, irregular, and fruitless and wasteful expenditure had grown from R3,9bn in 2009-10 to R4,5bn in 2010-11. The chamber’s survey on service delivery problems found that road maintenance was the worst (39,7%), followed by electricity distribution (32,9%), water and sanitation (12,3%), parks and public spaces upkeep (11%) and solid waste removal (4,1%).

Service delivery problems caused higher operating costs for 52% of respondents, with 20,5% saying these prevented them operating at all, and 19,2% saying the failures reduced the amount of business generated. Only 8,2% did not see service delivery problems hurting business. Andre Oberholzer, head of communications at Sappi , agreed that nondelivery of services had increased the operational costs of the JSE-listed pulp and paper maker. A business could "sink or swim" on the proficiency of its municipality, he said.

"Government is supposed to enable economic growth," he said. "Its fundamental role is to remove stumbling blocks in the way of economic growth, yet it is the biggest creator of stumbling blocks." He said Sappi had to maintain the roads for the use of its trucks transporting logs from the forests to the mills, because provincial roads in the forestry areas where it operated were in a serious state of disrepair. "We have had discussions with local authorities (in the areas where Sappi operates) but received no reaction, so we had to do something ourselves. The problem is that local communities now expect us to take over the maintenance role of the state," Mr Oberholzer said.

Delays in issuing permits and licen ces had a ripple effect, adding to the cost of doing business. "Government has committed itself to the extension of forestry areas for communal projects yet the communities have to jump through so many hoops to get the projects off the ground, with government departments actually working against each other (in terms of policy issues)." Border Kei Chamber of Business CEO Les Holbrook said that in Gonubie, a flourishing area, a moratorium had been placed on new developments as the local authority was unable to keep pace with infrastructure development.

The moratorium on development in other areas has had a knock-on effect on companies involved in property management. The decline has been more severe in Durban and Cape Town, with some growth still evident in Pretoria and Johannesburg. The Buffalo City municipality gained metro status last year, but there was little evidence of benefits to the businesses and residents of the area, Mr Holbrook said. "Companies have been experiencing severe hardships, with the city sliding backwards in terms of service delivery."

Of grave concern was the suspension of people in key positions and the inability or unwillingness to appoint people to vacant positions. "We would like to build a relationship with the leadership, but it is rather difficult to do that when the people are constantly being suspended because of personality clashes and municipalities snatching qualified officials from each other." A civil engineering group in the Eastern Cape, which preferred to remain anonymous, said it was almost impossible to undertake long-term planning because there was no consistency in the awarding of tenders, infrastructure provisions in budgets, and the flow of work.

Compiled by the Government Communication and Information System
29 Jan 2012

Billions of dollars will be needed to upgrade and maintain the North-South Corridor road network said President Jacob Zuma. "In order to upgrade and maintain the North-South Corridor road network, we will need 6.9 billion US dollars, of which 4.5 billion is for capital investment and the remainder is for recurrent costs," he said.

The North-South corridor is the main trade route between Durban and Dar-es-Salaam, in Tanzania. South Africa was appointed to lead the Presidential Infrastructure Championing Initiative. Addressing the 26th Nepad Heads of State and Government Orientation Committee, Zuma said serious work needs to be done to improve rail infrastructure.

"The entire North-South road network was physically assessed and inspected. With the exclusion of the road network in South Africa, the North-South Corridor network that was assessed amounted to 8600 kilometres. "We categorised roads in the Corridor into those that need immediate attention; those that need attention in the next two to five years and those in good condition which need regular maintenance."

There is already work underway to upgrade and maintain the road network in some parts of the North-South Corridor. With regard to trade, Zuma said intra and inter-regional trade is not an option, it is an imperative. "Without trade, individuals, communities, countries and regions cannot reduce poverty or achieve economic growth. "We have to challenge these issues, failing which our key differentiator to boost intra-regional trade will remain inadequate and perhaps a distant dream. "We all know that efforts to accelerate the development and structural transformation of African economies are hindered by very substantial obstacles, particularly those related to finance and infrastructure as well as governance, and human capital," Zuma said.

by Terence Creamer
Creamer Media
27 January 2012

As with every other Gauteng motorist, I am certainly not enamoured with the idea of having to pay toll fees. But as a citizen of South Africa, I am even more troubled by the lack of leadership being shown on the e-tolling issue.

True, Transport Minister Sibusiso Ndebele and his deputy, Jeremy Cronin, were handed a poisoned chalice. True, Cronin, in particular, has been consistently critical of the tolling concept, as with the Gautrain idea. Even before taking up his current position, Cronin expressed serious misgivings about Gauteng’s transport trajectory, which he felt was skewed in favour of private motorists and lacked a comprehensive mass-transit dimension.

That said, both individuals have not covered themselves in glory over the past few years in their handling of the e-tolling issue, while their treatment of the South African National Roads Agency Limited (Sanral) and its executives has been inappropriate in the extreme. Surely, if they were that unhappy with the way the project was unfolding, it was within their power to intervene decisively. Instead, they have simply kicked the can down the road and created more anxiety and uncertainty than was ever necessary. Worse yet, they have undermined one of the few agencies developed during the democratic era that has a record of delivery.

It may not be popular to say so, but an unemotional analysis of Sanral’s performance throws up the reality of a technically competent entity that not only talks about service delivery, but also actually implements. Under CEO Nazir Alli, Sanral has even found ways around its serious funding shortfalls – a far cry from the situation in several other agencies, State-owned companies and national delivery departments that tend to hold up their hands and surrender when taxpayer funds are not forthcoming.

In fact, the entire e-tolling project has its genesis not in the minds of a few ‘rogue’ engineers. Instead, it is a direct response to the fact that the National Treasury indicated, quite soon after 1994, that there would be no additional resources for national roads. In other words, Sanral had the choice to either pursue a ‘user pays’ model and build the infrastructure it felt was required, or simply maintain what it had – which, by now, would have been the continent’s biggest parking lot. It also only moved ahead once it had gained all the necessary policy, legal and political mandates required to enable it to start raising money on the bond markets.

Perhaps there was a lack of political and economic foresight. Without doubt, the public relations could have been better handled. But it is simply unfair to present Sanral as some out-of-control technocratic fiefdom. Undermining the entity, as government has, is a disservice to the country, particularly when we sorely need implementation bodies that are actually capable of delivering. The political solution is also not that hard to achieve. First, agree on the principles: we need the infrastructure and we need to pay for it. Then, interrogate the payment methods through the prism of South Africa’s most pressing challenge: the need to stimulate job-rich economic growth.

The outcome of that analysis could show that the objective is best achieved by leaning on the general tax base. It could show, however, that the user should bear most of the burden. Either way, it will be unpopular. But once the decision is made, Ndebele and Cronin need to have the political courage to communicate the decision, and communicate it unequivocally. In my own view, the funding could be met through a hybrid model, whereby e-tolling is implemented, but at far more affordable rates, while the balance is secured through the fuel levy. Indeed, why not make the temporary increase instituted to pay for Transnet’s fuel pipeline permanent, and divert the proceeds to Sanral become due, is it not reasonable for a rating agency to begin adding this to the country’s debt ratios?

Lastly, Gauteng has guaranteed ridership levels on the Gautrain. Its models assumed toll fees would encourage more motorists to switch to the train. Without the tolls, the subsidy could last many years beyond the projected three years. So Gauteng would likely need some financial help as well. Finance minister Pravin Gordhan has said government has taken over the financial running of Limpopo to ensure that SA’s hard- won credibility in the international financial markets is not compromised. Unfortunately, if cabinet does not find a sustainable plan to finance infrastructure projects , Limpopo will be the least of his problems.

The Mercury reports that the shutdown of Durban's Sapref refinery for unexpected maintenance is set to exacerbate SA's shortage of bitumen, which is used to produce asphalt for road surfacing.

Bitumen shortage has affected about 35 SA National Roads Agency Ltd (Sanral) projects, in addition to other major road construction projects, including the John Ross Parkway upgrade in Richards Bay and highway construction in Durban.

Transport Minister S'bu Ndebele said recently that more than R1 billion worth of work would not be able to be completed Sanral contractors in the 2011/12 financial year because the agency "is severely affected by the shortage of bitumen." "Sapref's shutdown is certainly going to have an impact and will make the current bitumen supply situation worse," said Saied Solomons, chief executive of the SA Bitumen Association (Sabita).

A by-product of oil refineries, bitumen is used to produce asphalt for road surfacing. There have been bitumen shortages since the World Cup construction boom. With high demand and both planned and unplanned shutdowns of oil refineries the situation worsened.

"The Enref (Engen) refinery in Durban also only recently came back on line after the fire and maintenance shutdown late last year. However, there is very little new bitumen coming onto the market at the moment," Solomons said. "The situation is dire and is significantly impacting on the industry. It is not just big construction and asphalt companies that are being affected but small companies too, which is having a ripple effect on other business sectors."

A costlier alternative was to import bitumen, and some construction and asphalt companies had banded together to import about 4 500 tons recently. In comparison, "South Africa uses roughly 420 000 tons of bitumen annually," Solomons said.