A number of successes have been achieved following the first round of the Infrastructure Investment Programme for South Africa (IIPSA); however, moving forward, areas that still need work include creating an environment conducive for greater private sector investment and de-risking the space to enable private sector to play this role without fear.
This was the general message from speakers during a IIPSA webinar, titled ‘Long-term infrastructure financing in an emerging market’, held by the National Treasury and the Development Bank of Southern Africa (DBSA), on September 30.
The IIPSA receives funding support from the European Union to enhance sustainable economic growth and the delivery of key services affecting development in South Africa and in the Southern African Development Community (SADC) region.
Using financial leverage as a key principle, the IIPSA aims to address the constraints to infrastructure development in South Africa and in the SADC region.
IIPSA provides financing, involving the blending of EU grants with loans from participating development finance institutions.
Speakers, meanwhile, further noted that the country was still contending with very basic challenges with regard to infrastructure development.
This included significant underinvestment in infrastructure by local government, which impacted on the “very essence of economic growth and development” and which hindered progress in addressing unemployment, inequality and poverty.
Moreover, speakers highlighted that, even with existing public infrastructure, especially at a municipal level, there was a high level of underinvestment in maintenance and renewals, which undermined investment in new infrastructure.
Therefore, speakers noted that the IIPSA programme raised the question about how the country could use this transitional intervention to address the weaknesses in the underinvestment in maintenance and renewal of existing infrastructure.
Also, speakers were generally in consensus that the country neeed more interventions such as IIPSA, such as round two of the programme, as well as through other avenues.
Speakers said the IIPSA had demonstrated that the country could take advantage of the willingness of the international funding community, which sought to put its money in a space that was safe and could be managed.
EU deputy ambassador to South Africa Raul de Luzenberger reiterated the EU’s support for South Africa in improving the situation to the benefit of the population.
He expressed his gratitude to the National Treasury and the DBSA for the “excellent” cooperation on the IIPSA programme.
Luzenberger said the EU was supportive of the country placing infrastructure development at the core of its socioeconomic recovery.
He added that the EU was using this initiative to further blended financing solutions to try to crowd in private and other investments, so that its money could be multiplied and applied more effectively.
He said that, through the IIPSA, the programme had contributed to projects with high socioeconomic returns, by enhancing feasibility and project quality and reducing risks associated with the projects.
Most importantly, he said, it had enhanced knowledge on blending financing, showing the catalytic difference that EU grants, combined with private sector funding, could make.
Luzenberger also emphasised the importance of ensuring sustainable municipal finances, saying it was critical for infrastructure developments in the country.
He said that stabilising municipal finances was identified as a significant and growing source of risk in the country, according the recent National Development Plan review report.
Luzenberger said improper municipal financial planning impacted efficient and reliable service delivery.
Therefore, the need for longer-term financing of municipalities and longer-term financial planning was critical, he stressed.