Government unveils far- reaching infrastructure reforms to boost private sector investment
|Published
Edward West
edward.west@inl.co.za
The government is implementing many and substantial reforms aiming to create conditions to attract greater private sector participation in the funding, construction and operation of infrastructure.
Finance Minister Enoch Godongwana said in his MTBPS speech yesterday that these reforms include mobilising significant private sector financing and technical expertise to augment the limited public sector capacity and capability.
Well known economist Dr Roelof Botha said the construction sector at large welcomed these reforms, as the “state capture years” and the Covid pandemic had robbed South Africa of more than a decade of investment in maintenance and new infrastructure investment, and in the meantime, South Africa’s infrastructure requirements had increased due to the energy transition, the bigger economy and population growth.
He said the likelihood of lower interest rate in November would increase the attractiveness of the financing infrastructure projects.
National treasury said in the MTBPS that public and private sector investment are the foundation for inclusive and sustainable economic growth, but in South Africa's case, this investment is only at 15% of the GDP compared with the National Development Plan target of at least 30%.
Beginning in 2025/26, National Treasury would combine project preparation support, transaction advice for public-private partnership projects and ring-fenced financing from government borrowings in a single structure.
Part of this would involve bringing together the PPP Office and Capital Project Appraisal Unit in the government's Technical Advisory Centre and the capabilities of the Infrastructure Fund which is located in the Development Bank of Southern Africa. The consolidation of functions would help large scale projects and programmes to reach financial close faster.
National Treasury said also that in its efforts towards making infrastructure an asset class, new Securities Regulations of the Banks Act were being considered to allow infrastructure loans to be pooled and traded as asset-backed securities, and also for the creation of infrastructure investment trusts.
"We are amending the PPP (public-private partnerships) regulations to simplify requirements for undertaking these projects. The amended Treasury Regulation 16 will be published before the end of November for implementation in 2025/26. The Municipal PPP Regulations 309 will be finalised by June next year," he said.
The Department of Water and Sanitation's Water Partnerships Office had listed two priority programmes for non-revenue water and recycling wastewater, that would require private investments.
Similarly, the Department of Transport, Transnet and the Passenger Rail Agency of South Africa were finalising a list of projects that would be issued to the market in 2025/26.
The resolution of the Gauteng Freeway Improvement Project had unlocked a R85bn project pipeline for the non-toll network over the next three years, he said.
In terms of improving the capital budgeting process, the Budget Facility for Infrastructure (BFI) was being reconfigured into a centralised gateway for all large infrastructure projects that required fiscal support to advance.
From 2025, the facility would have a continuous evaluation process, quarterly, instead of one window per annum. The National Treasury would, in January 2025, publish a circular to guide the submission of proposals.
The government was trying to increase the pool of funders to diversify public infrastructure financing through new mechanisms and instruments. These include build-operate-transfer (BOT) structures and other concessions.
"We are developing a blended finance risk-sharing platform that includes a credit guarantee vehicle that will help de-risk public-sector projects while reducing government's contingent liabilities," he said.
Fiscal support was proposed for the projects evaluated in the 2024 BFI window. This included two hospital projects, including a district hospital in Limpopo; and landside capacity expansions at the Cape Town Container Terminal.
Other BFI projects were capacity upgrades on the rail network from Waterloo to Gqeberha; rehabilitation of water infrastructure in eThekwini; and student housing accommodation at six higher education institutions.
Godongwana said a request for proposals would be issued this year for funders who were interested in supporting these projects, as well as projects for urban rail revitalisation, disaster relief and metropolitan trading services.
"Funding for these will be separated from broader sovereign borrowing and be accounted for separately," he said. The MTBPS statement said a request for proposals would be issued before the end of November 2024 for selected projects and programmes that could be financed by interested lenders.
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