IIO breathes new life into SA’S in­vest­ment projects

Fifty-five vi­able, ’bank­able’ ini­tia­tives are in the pipe­line

Financial Mail - - SPECIAL REPORT INFRASTRUC­TURE - Kgosientso Ramok­gopa IIO head

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

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