http://www.engineeringnews.co.za
  SEARCH
Login
R/€ = 14.01Change: 0.00
R/$ = 10.67Change: -0.04
Au 1287.51 $/ozChange: 0.01
Pt 1424.50 $/ozChange: -1.50
 
 
Note: Search is limited to the most recent 250 articles. Set date range to access earlier articles.
Where? With... When?








Start
 
End
 
 
And must exclude these words...
Close Main Search
Close Main Login
My Profile News Alerts Newsletters Logout Close Main Profile
 
Agriculture   Automotive   Chemicals   Competition Policy   Construction   Defence   Economy   Electricity   Energy   Environment   ICT   Metals   Mining   Science and Technology   Services   Trade   Transport & Logistics   Water  
What's On Press Office Tenders Suppliers Directory Research Jobs Announcements Contact Us
 
 
 
RSS Feed
Article   Comments   Other News   Research   Magazine  
 
 
Aug 21, 2012

Hybrid funding approach needed for infrastructure projects

Back
Finance Deputy Minister Nhlanhla Nene discusses the challenge of funding infrastructure development projects in South Africa and how this can be overcome. Camerawork: Nicholas Boyd, Editing: Darlene Creamer.
Construction|Johannesburg|Maputo|Africa|Housing|PROJECT|Projects|Resources|Water|Africa|Mozambique|South Africa|Energy|Equity Finance|Logistics|Mezzanine Finance|Services|Transport|Infrastructure|Jacob Zuma|Nhlanhla Nene|Water
Construction||Africa|Housing|PROJECT|Projects|Resources|Water|Africa||Energy|Logistics|Services|Transport|Infrastructure|Water
construction|johannesburg|maputo|africa-company|housing|project|projects|resources|water-company|africa|mozambique|south-africa|energy|equity-finance|logistics|mezzanine-finance|services|transport-industry-term|infrastructure|jacob-zuma|nhlanhla-nene|water
© Reuse this



Many infrastructure projects in South Africa have a social and commercial component, and therefore required a hybrid financing approach, Deputy Finance Minister Nhlanhla Nene said at the third Banking Summit, held in Johannesburg on Tuesday.

“The optimal financing structure needs to be tailored on a case-by-case basis to fit the specific nature of the infrastructure project,” he stated, adding that the same applied to the repayment model.

Nene said that although infrastructure projects would remain heavily reliant on public funding, government had limited capacity to pay for everything, necessitating the role of the private sector.

“Government expenditure is limited by how much tax revenue it can collect without hurting economic growth, and how much debt we can borrow.”

He explained that these abilities were being constrained by the weak global economic conditions.

“We need to think out of the box, the potential exists for equity finance, mezzanine finance, ‘build-operate-transfer’,” Nene noted.

Further, he told the summit that South Africa’s R3.3-trillion infrastructure plan, announced by President Jacob Zuma in his February State of the Nation address, created significant opportunities for banks, which would have to take on a long-term vision by offering long-term lending.

Government has identified 17 strategic integrated projects in sectors such as energy, transport and logistics to schools, hospitals and nursing colleges to be constructed between now and 2020.

Nene said a conversation between banks and government would have to be initiated. “We should talk constructively and openly about the challenges of growth and what we should do to build the kind of South Africa that is envisioned in the National Development Plan [NDP].”

Last week, the National Planning Commission handed over its final report to the President in Parliament.

Nene emphasised that infrastructure development was important in raising South Africa’s potential growth rate. By some estimates a one percentage-point increase in infrastructure investment would raise long-run gross domestic product (GDP) by about 1.3% and employment by about 0.7%.

Further, the Minister said that projects of which the costs could be covered equitably, and those that were implementable, would have to be prioritised, as resources were limited.

“For social infrastructure, this would mean prioritising backlogs, for example housing, basic services, over-crowded classrooms. For economic infrastructure, it means unblocking the largest supply constraints, of which the symptoms include traffic congestion, rising property prices, increasing input prices and inability to fulfil export orders,” Nene stated.

Also addressing delegates, Banking Association South Africa MD Cas Coovadia warned that without significant intervention, infrastructure spent as a percentage of South Africa’s GDP would drop from the current 9.1% to 8.1% by 2013.

He said government’s lack of capacity to implement projects, as identified by the NDP and the New Growth Path, would have to be overcome.

Coovadia pointed out that spatial mapping and cost determination, carried out by the Presidential Infrastructure Coordinating Commission, reiterated the need for private sector equity in project funding.

However, he expressed concern that real engagement between public and private sectors was lacking.

Coovadia said the financial sector would have to be considered as a strategic partner in enabling the sustainability of infrastructure projects.

“We need sustainable funding models for these projects…engagement must take place earlier, before the costing and funding models are determined.”

He added that the financing parties would have to compile combined hybrid (public and private) financing models before approaching the government.

Meanwhile, Coovadia was optimistic about the adoption of a regional infrastructure master plan by Southern African Development Community (SADC) leaders, which was approved during a summit in Mozambique’s capital, Maputo, at the weekend.

The plan, which will be implemented over a 15-year period, is aimed at advancing regional trade through the construction of cross-border infrastructure that will connect all SADC states in areas of energy, water, information and communication technology, as well as transport.

Edited by: Mariaan Webb
© Reuse this Comment Guidelines (150 word limit)
 
 
 
 
 
 
 
 
 
Latest News
The pump prices of both grades of petrol and wholesale diesel, as well as the maximum retail prices of illuminating paraffin and liquefied petroleum gas (LPG), are set to decrease from September 3, the Department of Energy said on Friday. Petrol would drop by 67c/l,...
The amount owed to municipalities for services has continued to rise, reaching R94-billion by June, compared with the R93.3-billion recorded in December. Households still accounted for the bulk of the aggregate municipal consumer debts; however, this had declined...
More
 
 
Recent Research Reports
Road and Rail 2014: A review of South Africa's road and rail infrastructure (PDF report)
Creamer Media’s Road and Rail 2014 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail network, the funding and maintenance of these respective networks, and the push to move...
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
Real Economy Insight: Automotive 2014 (PDF Report)
This four-page brief covers key developments in the automotive industry over the past 12 months, including an overview of South Africa’s automotive market, trade figures, production and the policies influencing the sector.
Real Economy Insight: Construction 2014 (PDF Report)
This five-page brief covers key developments in the construction industry over the past 12 months. It provides an overview of the sector and includes details of employment in the sector, infrastructure and municipal spending, as well as insight into companies’...
Real Economy Insight: Electricity 2014 (PDF Report)
This five-page brief covers key developments in the electricity industry over the past 12 months, including details of State-owned power utility Eskom’s generation activities, funding and tariffs, independent power producers and prospects for the sector.
Real Economy Insight: Road and Rail 2014 (PDF Report)
This six-page brief covers key developments in the road and rail industries over the past 12 months, including details of South Africa’s road and rail network and prospects for both sectors.
 
 
 
 
 
This Week's Magazine
South African State-owned defence industrial group Denel has announced its fourth consecutive year of profits. The group's results for the financial year 2013/2014 were recently announced at its head office in Centurion, south of Pretoria. Revenues grew by 17%, net...
There is little opportunity for JSE-listed infrastructure company Group Five to grow shareholder value in the domestic market, says CEO Mike Upton. He says value can still be found in the private sector, in the renewable and industrial power sector, as well as in...
The National Association of Automobile Manufacturers of South Africa (Naamsa) has announced the event dates of the 2015 Johannesburg International Motor Show (JIMS). The event will take place from October 14 to October 25, 2015, at the Johannesburg Expo Centre, Nasrec.
UK engineering support services provider Babcock is set to deliver the largest order of global truck manufacturer DAF’s truck tractors in Southern Africa to bulk carrier road-based logistics company Ngululu Bulk Carriers (NBC), with 133 trucks to be delivered in...
Digital radio communications in the African local government space can open up the world, but have many challenges to overcome, notes integration and migration of legacy radio communications infrastructure with digital mobile radio company Emcom Wireless head of...
 
 
 
 
 
 
 
 
 
Alert Close
Embed Code Close
content
Research Reports Close
Research Reports are a product of the
Research Channel Africa. Reports can be bought individually or you can gain full access to all reports as part of a Research Channel Africa subscription.
Find Out More Buy Report
 
 
Close
Engineering News
Completely Re-Engineered
Experience it now. Click here
*website to launch in a few weeks