Concern over decrease in public- private partnerships

Friday, August 19, 2022

Finance Minister Enoch Godongwana has expressed great concern at the continued decrease of value of public- private partnerships (PPPs) over the past 10 years.

Delivering a keynote address at the Consulting Engineers South Africa Infrastructure Indaba, at the Indaba Hotel Spa And Conference Centre, in Fourways, the Minister told delegates that the value of PPPs had steadily declined from an estimated R10.7 billion in 2011/12 to R5.6 billion in 2019/20.

This, he said, was partly due to onerous approval processes, especially for small projects, and the poor capacity of departments to estimate risk‐sharing with the private sector.

He said: “At the same time, lack of clarity regarding the user‐pays principle affects the cost of state guarantees. A PPP review concluded by the National Treasury has emphasised the need to simplify approval and compliance requirements, and reform the policy framework to assess and prioritise PPPs.”

To address this, he said the National Treasury aimed to create a centre-of-excellence for PPPs, as well as introducing an expedited approval process for projects below a predetermined value.

“This centre-of-excellence will be a direct interface with private financial institutions for investments in critical government infrastructure programmes,” he said on Thursday.

The Minister said years of the infrastructural decline in the country alongside prolonged and slow economic growth was a recipe for social instability and even further economic stagnation.

“The added challenge of the accelerating impact of climate change necessitates a multi-stakeholder response, pairing policymakers with experts in the field, in order to come up with workable and sustainable solutions.

“Consulting engineers and other experts in the field of construction are therefore vital to our infrastructure drive. You have the experience and expertise needed for the country to identify and take advantage of the opportunities in infrastructure as well as prepare for the inevitable obstacles,” he said.  

Ramping up infrastructure delivery

Civil engineers, quantity surveyors and construction project managers, he said, were amongst the scarcest skills in the country.

“This is at a time when we are looking to significantly ramp up the volume of infrastructure delivery and broaden our productive base. Your role in every level of the process, from project identification and preparation to completion and maintenance, is undeniable,” he said.

In the current three-year medium- term expenditure framework (MTEF) starting April 2022, allocations for public sector infrastructure spending are estimated at R812.5 billion. This compares to R627.2 billion that was allocated in the three-year MTEF ending March 2022, which is a 30% increase.

Godongwana said this was an important step towards moving closer to the NDP targets.

He said: “It is an important signal to investors and the industry and society that government is committed to ramping up infrastructure delivery.”

To support the accelerated provision of infrastructure on a large scale, he said the National Treasury was working with provinces to allow them to front-load their multi-year grant funding and use it to finance their infrastructure requirements. Development finance institutions like the Development Bank of Southern Africa (DBSA) are at the frontline of these initiatives, he said.

Project pipeline

To overcome under-spending by government institutions, he said government needed to ensure that there was a viable project pipeline, and that the sponsor institutions had the requisite skills and support in project preparation and planning.

He said: “On project preparation and planning, the Infrastructure Fund (currently housed in the DBSA) was introduced to create the capacity and capability in government to assist sponsors to develop project proposals that are suited to blended finance and to bring these to a financial close within a reasonable timeframe.

“National Treasury has also initiated the development of a government-wide guideline to improve the process of appraising and selecting public projects. The guideline provides project sponsors with simple methodologies to prepare and appraise infrastructure investments.” – SAnews.gov.za

 

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