Collective Wisdom Conference 2022

Collective Wisdom showcases mining and energy landscape with a glimpse into the future

Uncertainty is making unimaginable fortunes for mines and simultaneously stopping investment in South Africa, according to Henk Langenhoven, Chief Economist for the Minerals Council SA.

Speaking at MDA Construction Attorneys’ 9th annual Collective Wisdom conference recently, Langenhoven said, “Mining companies are doing well financially but that is just half the story. Mines operate on both sides of South Africa’s energy debate, providing coal while consuming huge amounts of electricity, which is in short supply.”

Additional uncertainty is being created on the back of unpredictable cost increases, logistics challenges and pervasive crime. “Aside from illegal mining and physical security costs necessary at mines, the theft of infrastructure plays havoc with logistics.”

Clyde Mallinson, consultant and energy advisor to the Minister of Public Works and Infrastructure, unpacked his view that reliable electricity supply in South Africa is feasible through a combination of energy storage, and wind and solar power. “My model indicates that if we build progressively until 2035, we could have a massive surplus of 155 TW in South Africa, which is 1,67 times the amount of electricity we currently consume. The capital cost is attractive when you consider that the health costs of non-renewable energy are actually higher than the current cost of electricity generation. By making good strategic decisions now, South Africa has an opportunity to build a steady power supply at lower cost,” he said.

MDA associate, Keenan Perry, unpacked CPG (contract participation goal) requirements on SANRAL and other public projects. “The objectives and obligations are fairly well known, and contractual obligations are stipulated in the conditions of contract. However, the tools and mechanisms provided in the associated legislation and regulations – which are necessary to fulfil those obligations – are being overlooked,” he said. Perry compared the conditions of contract with the CIDB standard for CPG and highlighted areas of concern to be raised at tender stage, at the point when the contract is awarded and in the event of community unrest.

MDA Attorneys director Euan Massey discussed the importance of commercial management in achieving project success. “Generally, parties contract for certainty, but in construction, they contract for uncertainty amid complexities like licencing, guarantees, collective bargaining and local community engagement,” he said.

Fellow MDA Attorneys director, Natalie Reyneke, focused on risk management, emphasising that risks should ideally be identified at the tender phase to avoid costly mistakes. Contractors may find it prohibitively expensive get tenders qualified by attorneys but glossing over the details could be detrimental later on. “As specialist construction attorneys, we have developed a mechanism for setting out high level qualifications that won’t break the bank but ensure that contractors can amend contract terms once they are preferred bidders,” she said.

“Successfully avoiding disputes requires deep contract knowledge as well as how to manage the requirements of the contract, as almost anything can give rise to a dispute,” said MDA Attorneys director, Michelle Kerr, whose practice is built on a commercially astute approach to disputes and avoiding them.

Collective Wisdom’s goal is to promote the future of the South African construction industry through constructive dialogue. The 2022 Collective Wisdom event included over 150 online attendees, in addition to those who physically attended the event.

Speakers responded to questions from the floor and via Zoom Q&A.