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Crisis in the plastic pipe manufacturing industry

The plastic pipe industry in South Africa, a key infrastructural and critical asset of South Africa, is facing a crisis which is threatening not only the industry as whole, but key infrastructural sectors in South Africa, such as mining and water supply.

The cause of the current crisis is solely a result of the South African Bureau of Standards (“SABS”) failing to perform in terms of its mandate as well as its obligations prescribed in the Standards Act 2008.

Amongst others, the SABS has:

  • Failed to renew licenses which have expired to plastic pipe manufacturers without providing any indication when the licenses would be renewed;
  • Unilaterally and without any consultation, decided in July 2015 to disallow partial testing of products manufactured by players in the industry;
  • Failed to ensure that testing facilities and laboratories needed to conduct testing on products are adequate and that those persons responsible for the testing are competent.

    The Southern African Plastic Pipe Manufacturers’ Association (“SAPPMA”) is a voluntary, non-profit organisation that represents almost 90 % of all certified manufacturers of HDPE and PVC plastic pipes being made in Southern Africa. One of its primary objectives is to improve product quality in the whole value chain of the plastic pipe industry in order to ensure the long-term viability of piping systems used in infrastructure through its representatives.

  • “Directly as a result of the SABS’s failure to perform in terms of its mandate, local manufacturers of plastic pipes are no longer able to use the SABS Certification Mark,” said Jan Venter, Chief Executive Officer of SAPPMA.

Venter said that these developments have, and will continue to have, dire consequences for the manufacturers, the industry and the country including:

  • A diminishment of product confidence in the market place;
  • No measurable improvement in product and service quality;
  • Disqualifying manufacturers from submitting their products for tender, as manufacturers are hindered in the sale and distribution of their products without the SABS mark of approval.

Several years ago and as early as May 2006, SAPPMA had warned about the potential for the actualization of the crisis and attempted to address the numerous issues with the SABS in regard to its testing facilities.

Despite numerous warnings issued in this regard by and attempts made by SAPPMA to address this issue over the past ten years, the SABS has failed to take heed of these warnings or implement any programme to avoid the present crisis.

“On the 29th of March 2016 SAPPMA has, through our attorney David Swartz of Phillip Silver Swartz Incorporated, again called for an urgent meeting with the SABS in order to address the issues and the crisis at length. On 15 April 2016 the SABS responded to the letter from our lawyers and agreed to the request for an urgent meeting, the date of which is in the process of being finalised,” Venter said.

SAPPMA has given its members the assurance that they remains committed to finding the best solution for the industry and will continue to give regular feedback in this regard.  

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Metrofibre Networx partners with Link Africa

Metrofibre Networx, the local open access fibre network and broadband fibre provider, has announced that it has entered into a partnership with Link Africa, which will see the company replace all its fibre links for its core network over the next two years with its own fibre infrastructure.

Until now the company has leased the fibre links for its core networks, however, due to the high volumes and demand being experienced by the company, it has taken a strategic decision to replace the links and roll out its own fibre in a co-build agreement with Link Africa.

The project will kick off in April 2016 and is expected to take two years to replace all Metrofibre’s current leased fibre infrastructure with two major routes being completed in this calendar year.

“When Metrofibre first started we leased our fibre infrastructure from a fibre service provider, however, it was always our intention to eventually roll out and own our own fibre infrastructure,” states Steve Booysen, Chief Executive Officer at Metrofibre Networx.

“Now with the expansion of our network, our growing footprint in the FTTH arena (fibre we already own), and our need to scale more rapidly in order to better service our clients we have taken the decision to fast track the rollout of our own fibre infrastructure.”

The company will leverage its existing partnership with Link Africa, an open access layer 1 fibre provider, through a co-build agreement where the parties will share the costs of shared routes, however, both will independently own the fibre they place along it. According to Booysen, Metrofibre selected Link Africa as its partner because of the cost effective patented technologies it uses to lay fibre. This includes technology whereby it can leverage “real estate” in storm water drains and sewerage pipes wherever possible – cutting costs of traditional trenching down to a minimum.

“Link Africa is excited to enter into co-build and swap agreements with Metrofibre Networx and views this as one way of reducing deployment costs. We believe that the project will ultimately benefit the end users,” states Terence Moodley, CEO at Link Africa.”

Metrofibre says that by deploying its own fibre it will not only be able to expand and increase its own network coverage, but will also gain the capacity to serve more customers by providing new and existing customers with a wider coverage area. The Metrofibre core network in Gauteng currently comprises approximately 250km of fibre routes and connects nodes in all the main data centres including: Teraco, Hetzner, JINX/IS, Vodacom, MTN, Neotel and many more.

Booysen adds that the project will follow a phased approach, where in 2016 the first phase will see it replace a number of leased links in Midrand, and the in the second phase also scheduled for completion in 2016, will replace the leased fibre in its northern network ring running through Centurion.

“By owning our own fibre infrastructure and nodes we will be able to deliver reliable and cost-effective services, as well as provide better access to our FTTH rollout programmes and our corporate customers, by giving us the flexibility we need when scaling up our network capacity,” ends Booysen.

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Installation of fibre-optic cables no pipe dream

The City of Cape Town’s Council on Thursday 31 March 2016 approved the installationof fibre-optic cables in the municipality’s sewer and storm water pipes.

This was the final step in the approval process and should silence the many sceptics who believed this was merely a pipe dream. Link Africa, a telecommunication network service provider, can now to proceed with the installation of fibre cables in the municipality’s pipes. 

“I am pleased that this request was approved by Council. This innovative way of installing fibre-optic cabling will have far reaching benefits, not only for the City but more importantly for our residents and businesses. The granting of the long-term rights will contribute to the accelerated roll-out of telecommunications infrastructure that is essential for economic development in Cape Town,” says City’s Mayoral Committee Member for Corporate Services and Compliance, Councillor Xanthea Limberg.

The draft agreement brokered between the two parties protects the City’s rights as the owner of the infrastructure and will ensure that the City is indemnified in the event of Link Africa’s fibre-optic cabling being damaged or claims arising by third parties. 

The granting of these long-term rights (up to 15 years) to Link Africa (Pty) LTD will be in accordance with certain conditions: 

  • It will be at a market-related rate that will escalate after three years if no Council tariff is set before then
  • The agreement will have to comply with any statutory requirements
  • Municipal services will be protected at all times and no buildings or permanent structures may be constructed over the municipal services
  • In addition, any alterations to municipal services will be carried out at Link Africa’s own cost and the infrastructure is to be made available (on an open access basis) to all electronic communication service licence- holders.

The City is committed to playing its role as an enabler in partnership with the private sector to bridge the digital divide. Such partnerships will ensure that the City’s vision of becoming the most digitally inclusive city in Africa is realised.

During the public participation process a concern was raised about a possible increase in blockages in these municipal pipes. However, an investigation by the City’s engineering department and an independent consulting engineer concluded that the risk was within a tolerance level that was acceptable to the City. The proposed agreement ensures that the City will be able to fulfil its obligation to deliver municipal services should a blockage occur.

The installation of fibre-optic cables in pipes will help to reduce the negative impact of open trenching on our built environment and municipal infrastructure such as roads and pavements.

“As a smart city that embraces innovative technologies, the City is working with many service providers to extend the availability of good telecommunications infrastructure throughout the city. These efforts are supported through our own investment in fibre-optics, which makes backhaul opportunities available to the private sector.”

“The access to associated infrastructure will not only address the availability and the speed of existing services, but will also help to reduce the cost of telecommunication services in Cape Town which will create greater access and opportunities for smaller businesses within this sector,” said Councillor Limberg.

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Africa is still a growth story with a billion-strong young market

  • Published in News

Despite Africa’s slowing growth on the back of global financial conditions, there are still economic opportunities for long-term sustainable investment in property and the broader built environment for investors with a savvy understanding of local economies on a continent with a billion-strong consumer market.

With the current global deterioration in emerging markets, African economies, too, have been affected. But, “there are pockets of glory,” particularly in East Africa, and investors need to do their homework before venturing in.

These were some of the key fillips to come out of discussions at the Royal Institution of Chartered Surveyors’ (RICS) 2016 Africa Summit in Sandton Central, Johannesburg last week. Opportunities and challenges in the real estate sector and broader built environment of Sub-Saharan Africa were thrashed out by speakers and delegates at the conference, attended by key property and investment players, as well as academics and government representatives from across Africa.

Speakers and delegates zoned in on Sub-Saharan Africa’s current shift in economic growth and the impact of sustainable investment, market credibility and the winning of business.

Kganya Kgare, an economist at Stanlib, said the IMF predicts that Sub-Saharan Africa would grow around 3.7% in 2016. While this is lower than the growth of around 10% between 2004 and 2013, it is still positive growth, driven by good growth expected in East Africa in countries like Kenya, Ethiopia and Tanzania.

“These countries are benefiting from not being commodity reliant. Kenya, Tanzania and Ethiopia have done a lot right on the infrastructure investment side in terms of deliberate planning and execution of planning. And, this is paying off with higher economic growth expected,” said Kgare.

“The African growth story is still there, but the best opportunities are in East Africa,” he added.

In addition, there were opportunities in the real estate market around private finance initiatives and public-private partnerships.

Anthony Lewis, a director at Jones Lang LaSalle said the availability of local-currency leases in East Africa, as well as plenty of real estate in private hands and an established platform for investors also helped, nothing that uncertainty around US dollar leases was a primary concern for markets in West Africa.

“While the African narrative now seems quite negative from afar, this is a wider emerging markets problem. It is noteworthy that even in centres such as Lagos, with a slightly uncertain office market, there are great assets up for grabs,” says Lewis.

Rand Merchant Bank Africa analyst, Neville Mandimika, said while the reality was that “pain will be felt, the fundamentals are there in the long term,” adding that “Africa is not a short-term play – you need to get in there boots and all.”

Nnema Byrd of Stanlib’s Africa Direct Property Development Fund said although Sub-Saharan economies have seen significant headwinds, she believed this was temporary and there was a case for long-term investment. She pointed out the importance of specialised training, transparency and data to “connect the dots”, make predictions and provide a level of comfort to investors.

Byrd said unlocking the value of land contributed hugely to the GDP of economies and, to achieve this in Africa, countries needed to create something desirable to invest in. She said organisations such as RICS could help to promote standards and transparency.

Strong messages emerging from the interactive discussions at the RICS Summit on challenges in land and the natural environment included that developers investing in Africa often found it hard to access information regarding ownership. Land rights and tenure were major challenges and there was no one-size-fits-all solution.

Mark Walley, RICS Regional Managing Director, EMEA, pointed out that, like Europe, Africa is not homogenous, with differing levels of maturity and challenges. However, the key to success was having proper standards in place, with governments acting as enablers. Sustainable and innovative solutions were becoming more important.

“Standards backed by effective regulation will give confidence to the markets," says Walley, adding that, “those who help build the capacity of the youth will win.”

RICS chief executive Sean Tompkins said it was important to create an environment where government, regulators and professional bodies hold one another to account. He stressed that Africa had a competitive advantage in its young population – “its greatest asset.”

“There is a role for professional bodies such as RICS to set the competencies to ensure that we’re creating the workforce for the future,” says Tomkins.

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