As government garners public comment on key proposed amendments to legislation governing public-private partnerships (PPPs), Infrastructure Finance Advisory Institute director Bongani Mankewu says the framework reform is the right course of action but needs to be free of “bureaucratic clumsiness”.

Simplification and reforming the PPP framework to crowd in private investment into sectors such as water, transport, and human settlements is the correct path, he states, as public finance in this regard has proven to be cumbersome.

To establish a PPP with the optimal structure, the government must demonstrate high levels of expertise and a real commitment to governance, Mankewu states.

Conversely, privatised Keynesianism – which has the primary objective of lessening the government’s overall economic responsibilities – would result in the absence of government. 

With the primary objective of privatised Keynesianism being to remove the government from the management of the economy, Mankweu explains, in an unequal society such as South Africa, the economy then becomes import-driven when government hegemony is sublimated to the private sector.

In this regard, PPPs serve as channels for the importation of industrial components, and the government is left with the debt incurred in setting up the special purpose vehicle for the execution of, for example, mega infrastructure projects.

Legislation, therefore, must be enacted to support the PPP framework and ensure localization and industrialisation happen.

Mankewu elaborates that, similarly, to ensure the flexibility of negotiations and the effectiveness of project execution, the PPP framework needs to be improved to remove any bureaucratic clumsiness.

He believes mega infrastructure projects, which South Africa is in dire need of, need to be insulated from politics. To this end, infrastructure funds, combined with other instruments, offer the most effective insulation against political interference in executive large-scale infrastructure projects.

Therefore, Mankewu explains, to facilitate the financing of the riskier phases of large-scale greenfield infrastructure projects, development banks ought to be included to lend their expertise and flexibility.

He says institutional and other private investors must be provided with governance assurances, with Singapore an excellent example that good governance can be achieved.

Mankewu highlights Singapore as an example of State-driven development and a country that has lean operating government-owned companies, with lower expense-to-sales ratios, which make them very profitable.

The governance-driven development of Singapore illustrates the importance of excluding any possibility of government hegemony being displaced by the private sector, Mankewu states.

In addition to removing politics from the project preparation process for mega infrastructure projects, institutions such as the Development Bank of Southern Africa (DBSA) need to be given new direction and a renewed mandate to treat this area of infrastructure development with the gravity required.

In response to some stakeholders wanting to establish a new infrastructure finance and implementation support agency to oversee PPP development, Mankewu suggests this idea is illogical as the recently formed Infrastructure Fund’s reason for being is still unclear and the project preparation facility at DBSA is “elusive”.

It is important, however, to recognize that PPPs are not a cure-all for a country’s infrastructure development, he adds, stating that all available tools must be used appropriately, including bonds that are being misapplied to support failing State-owned enterprises.

Fundamentally, Mankewu states, that infrastructure must be viewed as an asset class that can be financed by future cash flows under cautious governance-structured PPPs or concessions.

To stimulate the economy, South Africa’s fiscal and monetary policies need to redirect available financing instruments towards these assets, Mankewu concludes.