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Feb 07, 2014

Infrastructure Bill’s aims embraced, but questions raised about its proposed methods

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EBRAHIM PATEL This Bill acknowledges weaknesses and challenges in implementation, but provides the legal tools to overcome them, so that we can do more to achieve our national goals
Photo: Duane Daws
EBRAHIM PATEL This Bill acknowledges weaknesses and challenges in implementation, but provides the legal tools to overcome them, so that we can do more to achieve our national goals
ANDREW ROBINSON The Bill may be regarded as ‘facilitation’ legislation, as it aims to provide legislative structure for government’s goal of focusing on infrastructure development
ANDREW ROBINSON The Bill may be regarded as ‘facilitation’ legislation, as it aims to provide legislative structure for government’s goal of focusing on infrastructure development
LAURRAINE LÖTTER A key question is why the relevant legislation cannot be implemented in a more efficient manner, instead of introducing additional layers of bureaucracy
Photo: Duane Daws
LAURRAINE LÖTTER A key question is why the relevant legislation cannot be implemented in a more efficient manner, instead of introducing additional layers of bureaucracy
CLAIRE TUCKER A member of the steering committee has the ‘authority to make decisions on behalf of the organ of State he or she represents’, which may have financial consequences and seems to flaunt established financial and procurement rules
Photo: Duane Daws
CLAIRE TUCKER A member of the steering committee has the ‘authority to make decisions on behalf of the organ of State he or she represents’, which may have financial consequences and seems to flaunt established financial and procurement rules
DAM CONSTRUCTIONThe Bill should rather assist municipalities to implement their IDPs, where Sips are included, as opposed to creating an additional layer of bureaucracy
DAM CONSTRUCTIONThe Bill should rather assist municipalities to implement their IDPs, where Sips are included, as opposed to creating an additional layer of bureaucracy
INFRASTRUCTURE NECESSITY Sips will be of economic or social importance or facilitate regional economic integration and ensure that infrastructure development is given priority in planning, approval and during implementation
Photo: Duane Daws
INFRASTRUCTURE NECESSITY Sips will be of economic or social importance or facilitate regional economic integration and ensure that infrastructure development is given priority in planning, approval and during implementation
Photo: Duane Daws
 
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Construction|Africa|Economic Development|Education|Norton Rose Fulbright|PROJECT|Projects|Resources|Africa|Authorisation Applications|Law|Legal Tools|Services|Environmental|Andrew Robinson|Busa|Claire Tucker|Ebrahim Patel|Infrastructure|Kgatlaki Ngoasheng|Pietman Roos|Salga|South Africa
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The Infrastructure Development Bill has been introduced with the laudable aim of overcoming delays, bottlenecks and shortcomings in the integrated planning and implementation of infrastructure projects. But there has also been broad-based criticism of the proposed legislation, the first to be proposed by Economic Development Minister Ebrahim Patel. Critics believe it conflicts with existing legislation and could lead to overcentralisation, while business organisations have raised genuine concerns about the proposed scope of the Bill and its aim to regulate some private-sector projects.

The Bill effectively seeks to empower the Presidential Infrastructure Coordinating Committee (PICC) to designate so-called Strategic Integrated Projects (Sips). Its objectives include identifying and implementing Sips of economic or social importance, or which facilitate regional economic integration, and ensuring that infrastructure development is given priority in planning, approval and during implementation.

“The Bill may be regarded as a ‘facilitation’ Bill, as it aims to provide legislative structure for government’s goal of focusing on infrastructure development and of providing a source of work, as well as the necessary facilities to prevent conflicting projects being pursued,” says law firm Norton Rose Fulbright director Andrew Robinson.

The idea is to create steering committees to provide technical support and oversight, and institute procedures to ensure that infrastructure development is not undertaken in a transactional manner, but in an integrated and consistent man- ner. It also intends to advance national development goals, including local industrialisation, skills development, job creation, youth employ- ment, small-business and cooperative development, broad-based black economic empowerment and regional economic integration.

“The Bill enables Sips to be designated through the National Development Plan (NDP). Sips combine hundreds of separate construction projects to enable better integration of connected projects and improve the management of infrastructure during all life-cycle phases,” Patel avers.

“This Bill acknowledges the many weaknesses and challenges we face in implementation, but provides the legal tools to overcome them so that we can do more to achieve our national goals,” he adds.

The idea is to provide a long-term planning framework for infrastructure that extends beyond the work of a single administration.

“This ensures that we move beyond the stop-start pattern of infrastructure; it also enables universities and tertiary colleges to produce the skills that will be needed for the next 20 to 30 years and it gives investors the certainty that they need to commit to long-term investment in the domestic economy,” Patel says.

But, while business and civil organisations support the intentions of the Bill to put a cap on the delays in infrastructure projects and to integrate planning, they question the Bill’s adherence to existing legislation and regulations, including environmental-assessment regulations and public management legislation, besides others.

Business Concerns
Business organisation Business Unity South Africa (Busa) says the proposals in the Bill will not improve the processes for mobilising private-sector investment.

“Acknowledging that the current authorisation processes are a constraint on development, which, therefore, need to be addressed, is welcomed. However, a key question is why the relevant legislation cannot be implemented in a more efficient manner, instead of introducing additional layers of bureaucracy, which is what the Bill appears to do,” Busa economic policy adviser Dr Laurraine Lötter and economic policy director Kgatlaki Ngoasheng assert.

The Bill assumes that all authorisation applications for infrastructure projects can be submitted simultaneously, but this is not practical, as some depend on prior authorisations for the projects, while no provisions are made for the rejection of applications, they warn.

Further, conflicting policy considerations are lumped together, such as infrastructure development, economic transformation, local procurement, community development and education. These broad objectives may make the smooth implementation and development of Sips difficult and will lead to the projects becoming increasingly expensive, says South African Chamber of Commerce and Industry policy consultant Pietman Roos.

“Particular care must be taken in sectors where there are private and public investors – it is important that the Bill, with regard to the promotion and protection of investment, guarantee equal treatment for foreign and domestic investors, in addition to the same approaches being adopted for public and private investments,” say Ngoasheng and Lötter.

“The Bill must also ensure that implementation does not risk diverting scarce resources for approval processes to focus on public projects.”

While legal experts aver that the Bill does not seem to aim for the regulation of private-sector projects, business organisations call for the clari- fication of the Bill’s impact on private-sector projects in the areas where Sips will take place and for the removal of specific clauses in the Bill that cause uncertainty in this regard.

The explanatory memorandum confirms the intention to restrict the Bill’s application to the implementation of public projects, but this position is not sustained, as a list of Sips includes private-sector projects, and Schedule 1 of Section 7 includes a wide range of potential private-sector projects, says Busa.

The organisation calls for the removal of Schedule 1, “which is a significant cause of con- fusion”, the inclusion of a clear process to develop the NDP and designate projects, and a clarification of the provision for the exploitation of synergies with private-sector projects.

“At this stage, the perception of the Bill is that government aims to intervene in or regulate private-sector infrastructure projects. This causes uncertainty for investors and may reduce investment,” says Roos.

Overcentralisation
The Bill enables the President to nominate members of Cabinet, Premiers and local-govern- ment representatives for the coordinating structures in the PICC. This will ensure that all three spheres of government are part of the commission and that all the main executive authorities across the public sector are mandated to meet on a regular basis to drive the implementation of infrastructure projects, states Patel.

“The steering committee seems to be the key structure, as it is this body that will determine the role any private-sector interest will play where a Sip is to be built or operated by the private sector,” says Robinson.

The steering committees must identify opportunities for localisation, including local job creation and the local procurement of goods and services, to ensure that the Sip contributes to the objectives of the Act and the NDP, the Bill states.

Localisation targets may inflate project costs and increase delays, as local training and skills development will have to be done to ensure adherence to civil construction regulations and other relevant regulations, such as fiduciary and environmental regulations, says Roos.

The Bill contains clear mechanisms to avoid conflicts of interest between decision-makers and the underlying projects as part of government’s anticorruption drive. It provides for tough penalties for corruption, including imprisonment for up to five years, says Patel.

However, it is unclear how the Bill’s intention to align and dedicate ‘capabilities and resources’ will be achieved in municipal spaces outside municipal Integrated Development Plans (IDPs) and budgeting processes. The Bill should rather assist municipalities to implement their IDPs, where Sips are included, as opposed to creating an additional layer of bureaucracy, says the South African Local Government Association (Salga).

“Most of the objects of the Bill can be accommodated within initiatives that strengthen the capacity of municipalities to prepare and implement their IDPs. The Bill should focus on how development of infrastructure that is identified as strategic infrastructure can be accelerated within the existing legislative framework, such as the National Environmental Management Act (107 of 1998) and the recently promulgated Spatial Planning and Land Use Management Act (16 of 2013).”

Such an approach will ensure that the assessments and approvals of Sips are not undertaken in a manner that subverts the role of other organs of State or undermines the sustainability of the Sips, says Salga.

Further, no specific mention is made of public– private partnerships, but these partnerships may be determined by the steering committees using the powers conferred on them by Section 14 of the Bill, notes Robinson.

While it is positive that government has acknowledged the difficulty of implementing infrastructure projects, it must address the broader question of what it foresees for the economy and whether this would include government direction of infrastructure projects or whether it would tap private-sector capabili- ties to accelerate the delivery of the projects, highlights Roos.

Correct Instrument?
While the Bill seems to be aimed at engendering cooperation between different government departments, this should rather be achieved politically on a policy basis, or by amending legislation that is regarded as creating bottlenecks, says law firm Bowman Gilfillan director Claire Tucker.

“To the extent that existing legislation is believed to stand in the way of implementing Sips, this legislation should be amended to clear the way for these projects. The vague, broad-brush approach suggested for this in the Bill is likely to lead to more disputes than what it avoids,” she says.

While the Bill makes it clear that the relevant accounting officer, government department or agency remains accountable, it does have the potential to create conflicts between the steering committee and the fiduciary and accounting responsibilities of the accounting officer or authority, as stipulated in the Public Finance Management Act No 1 of 1999.

“In particular, it is difficult to see how Section 12 of the Bill will be implemented in practice. It gives a member of the steering committee the ‘authority to make decisions on behalf of the organ of State he or she repre- sents’. Such decisions may have financial consequences and seem to flaunt established financial and procurement rules, for example, by National Treasury for proper financial controls,” she concludes.

Patel has given the assurance that he and his department are taking account of the 30 submissions that have been made on the Bill and has promised that changes are being introduced to strengthen its constitutionality and reduce ambiguity.

Edited by: Martin Zhuwakinyu
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