IIO breathes new life into SA’S investment projects
Fifty-five viable, ’bankable’ initiatives are in the pipeline
ý Out of a potential 276 infrastructure projects being evaluated and developed, 55 of these are viable and “bankable”, announced the infrastructure & investment office (IIO) within the presidency at the Sustainable Infrastructure Development Symposium of SA held in June.
Headed by Kgosientso Ramokgopa, the IIO plans to breathe new life into the country’s infrastructure programmes as the government looks to infrastructure as a way of reviving the economy.
The office, tasked with the co-ordination of all stakeholders in infrastructure development, has been collaborating with experts, financial institutions and business associations to address challenges to infrastructure development.
The IIO has promised a new approach. Its role is not to act as implementer but rather to move identified projects to bankability and create a pipeline. The intention then is to move each project back to the respective government department or government entity.
What makes these projects different is that they have been co-designed by the private and public sector, says Ramokgopa. In other words, the private sector has been involved in scoping and project preparation, including decisions on feasibility, their ability to generate revenue, and their attractiveness to investors.
Both public- and private-sector projects that require government involvement have been included. These comprise housing projects, mixed-use development projects as well as projects in water, agriculture, energy, transport, and the digital economy.
Kgosientso Ramokgopa: New approach to projects is all about collaboration
The 35 planned water projects include an additional phase to the Lesotho Highlands Water Project, Umzimvubu Dam in the Eastern Cape and Musina Dam in Limpopo. Energy projects include converting Eskom’s two open-cycle gas turbine power stations from diesel to gas, and a solar project.
Part of the IIO’S role is working with the Infrastructure Fund set up by President Cyril Ramaphosa in 2018 to co-ordinate investments across municipal, provincial and national government, and to ensure spending is less fragmented and more efficient.
The fund, managed by the Development Bank of Southern Africa (DBSA), has a project pipeline with potential investment of R700bn over the next 10 years.
The DBSA has long recognised the need for better preparation on projects. At the symposium, DBSA board chair Enoch Godongwana said the government has allocated R100m to develop projects up to bankability stage.
The aim of the IIO is to grow investment into infrastructure from 16% of GDP to 30%, as per the requirements of the National Development Plan.
In addition to building the state’s capacity to successfully complete
Enoch Godongwana: The government has allocated R100m to develop projects projects, Ramokgopa said his office has institutionalised a new methodology of identification, consideration, approval and implementation of sustainable infrastructure. Most of the planned projects have a cost recovery stream and are sustainable. Given the state of the fiscus, the government would be looking to galvanise private-sector support from multilateral development institutions including the New
Development Bank, World Bank and IMF, as well as development banks such as the DBSA and Industrial Development Corp, commercial banks and asset managers. Projects will be funded via three mechanisms: commercially; a blended finance option mixing funding from the government, development finance institutions and the private sector; and via a fiscal allocation.
Speaking at the symposium, Ramaphosa said this approach represents a new beginning for infrastructure development which promises a better future for SA.
All of the 55 projects identified as bankable have confirmed financing without needing any contribution from the fiscus. They are mainly in energy, roads and ports as well as housing projects.
Public works & infrastructure minister Patricia de Lille said the scale of the economic crisis calls for a collective response which includes a comprehensive plan around infrastructure development to enable meaningful growth.
Investment envoy Jacko Maree urged speed, given the fact that SA is not the only country planning to use infrastructure investment to stimulate growth. The former Standard Bank CEO said the UK and US have announced such programmes and will also be looking for funding.
“We have to liberate the private sector and fast-track a policy framework for public-private partnerships,” he said. “Globally there is going to be a race for funds so we don’t have time to waste. SA needs to fast-track quick wins such as road projects and renewable energy projects, both of which are low-hanging fruit.”
Maree said he was concerned when he heard of long lists and urged the government to prioritise projects. “If we can announce around five projects in the next six months that will be a real win.”
He said it was conceivable that pension funds could be attracted to infrastructure projects. “Pension funds are hardwired to deal with long-term investments. However, projects must be bankable and able to show a return.”
The Covid-19 crisis represents a golden opportunity to establish a new relationship between the public and private sector, said Business Unity SA (Busa) vicepresident Martin Kingston.
In addition to more urgently implementing projects that are bankable and viable, he said SA would need to ruthlessly evaluate every single spending choice, root out corruption and malfeasance and strengthen capacity.
What makes these projects different is that they have been co-designed by the private and public sector