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Proposed reforms to PPP framework to accelerate infrastructure delivery welcomed

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Photo by Creamer Media

22nd February 2024

By: Terence Creamer

Creamer Media Editor

     

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There has been positive, albeit cautious, reaction to the reforms announced by Finance Minister Enoch Godongwana to improve infrastructure financing and delivery and attract private sector participation.

In his Budget Speech, the Minister highlighted amendments to the public-private partnership (PPP) regulatory framework, which were Gazetted for public comment ahead of his address.

“The amendments seek to reduce the procedural complexity of undertaking PPPs, create capacity to support and manage PPPs, formulate clear rules for managing unsolicited bids, and strengthen the governance of fiscal risk.”

It was also confirmed that, in 2024/25, an infrastructure finance and implementation support agency would be established to coordinate the planning and preparation of large projects.

The agency would incorporate the functions of project preparation, PPP technical support and data management, and departments, as well as public entities and municipalities would be able to use its services to prepare, plan and execute projects.

A document released as an annexure to the Budget Review also indicated that legislative amendments would be proposed later in the year to create two pathways for PPPs: one for high-value projects and a simplified version for projects valued below R2-billion.

“We are reviewing institutional arrangements and governance for catalytic infrastructure. The intention is to create clearer mechanisms for accountability, cooperation and coordination,” the Minister said, adding that the intention was to fast-track delivery, particularly of blended-finance arrangements.  

He also confirmed that several new financing instruments would be introduced, including infrastructure bonds and concessional loans.

“As part of this, a flow-through tax vehicle for specific infrastructure projects, similar to trusts and other investment vehicles, is being considered.

“A new funding window for proposals under the new dispensation of financing instruments will be opened to public institutions shortly,” he added.

In response, South African Institution of Civil Engineering (Saice) CEO Sekadi Phayane-Shakhane described the proposed amendments to the PPP regulatory framework, the review of institutional arrangements, and the introduction of new financing instruments as “crucial steps towards addressing the challenges faced by many sectors, including in infrastructure”.

Saice president Andrew Clothier added that PPPs had the potential to leverage private sector capital for construction, stimulating economic growth and job creation.

“Saice's proposal for a PPP funding solution, highlighted to National Treasury last year, advocates for the use of bridging loans to fund transaction advisor fees – where the loan is repaid on financial close of the project taken from project funding – and demonstrates our commitment to finding creative solutions to support infrastructure projects and working with the public sector,” he added.

Consulting Engineers South Africa (Cesa) CEO Chris Campbell also welcomed government's commitment to investing in infrastructure development.

“We recognise the importance of government spending on infrastructure as a catalyst for economic growth and job creation.

“However, it is imperative that these funds are utilised efficiently and effectively to maximise its impact on the nation's development,” Campbell said, adding that Cesa stood ready to collaborate with government to ensure that infrastructure projects were executed with transparency, accountability, and a focus on delivering value for money.

Edited by Creamer Media Reporter

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