State to make more use of PPP projects

THE GOVERNMENT plans to make increasing use of public private partnerships (PPPs) to deliver infrastructure projects.

The Budget review said despite the success of the PPP model in South Africa, the number of new project transactions had declined from an estimated R10.7 billion in 2011/12 to R4.8bn in 2016/17.

It attributed this to delays and cancelled projects in the health and security sectors.

The cancellation of planned PPPs in recent years, including the building of several prisons, has raised the ire of major construction groups, because of the high costs of preparing bids for the PPPs.

However, the review said that based on the projects currently at an advanced planning stage, PPP transactions were expected to increase to R5.9bn in 2019/20 from the R4.8bn in 2016/17.

The review said the projects would account for 1.7 percent or R16.5bn of the total R947.2bn planned public sector infrastructure spending over the next three years. It said the National Development Plan stated that infrastructure investment as a percentage of gross domestic product needed to grow from 21 percent in 2015 to 30 percent by 2030.

“This requires the public and private sectors to work together to fund and build infrastructure. Greater use of PPP financing can contribute to better decision making, discipline, accountability and rigour in the planning and assessment of infrastructure projects,” it said. The review indicated that 31 PPP projects valued at R65.3bn were undertaken and concluded since this type of partnership was first introduced in South Africa in 1998.

It added that the National Treasury was considering ways of streamlining the implementation of such partnerships to increase the PPP project pipeline, while at the same time reducing the time it took to complete project planning.

“In addition, the National Treasury has partnered with local and international development finance institutions to explore the development of alternative infrastructure funding, while diversifying sources of funding to encourage private sector participation,” it said.

The review said most of the PPPs under way were transport and accommodation projects, with a few in the health and correctional services sectors.

However, it said energy and municipal solid waste PPP projects were expected to play a larger role over the next three years.

The review contained a table of a pipeline of 22 PPP projects under review in various sectors, including solid waste, transport, office accommodation, health, energy and education.