Financial Mail : 2020-07-09

JSE TOP STOCKS : 48 : 48

JSE TOP STOCKS

Guest Column Government can use Public-private Partnershi­ps to boost the economy Ğ/ ĞŶĚŜ Ğ ŝ Ś ŮŽŶŐ Ğ ŵ ĂĪŽ Ěăďŝůŝ he COVID-19 pandemic hit the South African economy in the wake of other T Using the Gautrain rapid rail link concession as an example, it is clear that the long-term Ğ Ğ Ğ ŚŽĐŬ Ŷ ŚĞ Į Ă Ğ of 2020, the downgrade of South Africa by ĞĐŽŶŽŴŜĐ ĎĞŶĞĮ Ž ĞŜŐŚ ŚĞ ŝŷŝ Ăů Ğ/ ĞŶĚŜ Ğ ŝ Ś Ă Ž Ăů ĐŽŶ Đ ŽŶ Őůžďăů Ă ŶŐ ĂŐĞŶĐŜĞ Ž ďğůž ŝŷ Ğ ŴĞŶ grade added to the bleak outlook. These shocks have highlighte­d the structural issues in the economy and exacerbate­d the issues cost of circa R31 billion, a study conducted by Hatch in 2019 showed that for every ĂŶĚ 01 2 ĞŶ ŝŷ ĐŽŶ Đ ŽŶ Ă Ž/ŝŵă Ğů Ž Ś ŽĨ ĞĐŽŶŽŴŜĐ ĎĞŶĞĮ ŚĂ ĎĞĞŶ ŽĨ ůž Ğ ŝ Ő Ž ĞŶ Ś ŶĞŴ ůž ŴĞŶ ŝ Ś ĞĐŽŶŽŴŜ ŜŶĞ Ăůŝ ĨŽ ĞĐĂ ĂŶĚ ŶŐ delivered over the last 10 years. A 2014 study by KPMG showed that the Gautrain project created 34 000 direct and 87 000 indirect nominal GDP growth to be between -7.2% and ! ĂŶĚ ŶĞŴ ůž ŴĞŶ Ă "# ! ŝŷ ŚĞ Į Ă Ğ ŽĨ ŚĞ ĞĂ ŝ ŝ ĨĂŜ Ž Ă ŚĂ ŚĞ $% ĞĐŽŶŽŴ ĐĂŶ ďğ ŮŜŬĞŶĞĚ Ž Ă Ă ĞŶ ŝŷ ŚĞ ĐŽŶ Đ ŽŶ ũžď ĂŶĚ Đŝ ĐĂ # 4## Ěŝ ĞĐ Ž Ğ Ă ŽŶ ũžď ĂŶĚ ŚĂ 02 5 ŵŝůůŝžŷ ŽĨ ŚĞ ŝ ĂŶĚĂ ŇĂ ŚĞŮ ĞŶŜŽ ŶĨ Ă Đ ĂŶĚ Ğ ĐŚĂŶ Ă Ğ ĂŶŬ intensive care unit who is merely surviving on life support. R3.2 billon of household income generated ŜŶĂŶĐĞ ĂŶ ĂĐ Ž Ă Ĩ Žŵ +Ă ĐŽŶ ŝď ĂŜŶ6 Ž Ğ Ă Ğ Ž Ž Ğ ŽŶĂŮ Ğ/ ĞŶĚŜ Ğ Ăůůğ ŝă ŽŶ ŝŷ +Ă ĞŶŐ There is acknowledg­ement from the government and the private sector that only seems the government was on the right track at the outset and should focus on re-aligning Another example is the Renewable Energy Independen­t Power Producer Programme Ś Ž ŐŚ Ěğůŝďğ Ă Ğ ĐŽŮŮĂĎŽ Ă ŽŶ ŝůů ŚĞ Žů ŽŶ Ă ŝ Ğ &ŚĞ ŐŽ Ğ ŶŴĞŶ ŚĂ Ă ĞĚ ŚĞ ĞĐ Ž ŽĨ ĨŽĐ ŝ Ś ŶĂ ŽŶĂŮ ŝž ŝ Ğ ŚŜĐŚ Ăů ŚŽ ŐŚ ŶŽ Ă ĂĚŜ ŽŶĂŮ ... ŽŐ Ăŵŵğ ŚĂ Ă7 ĂĐ ĞĚ ŵž Ğ ŚĂŶ 01## that infrastruc­ture developmen­t is one way to revive the ailing economy. Given the $ŜŶĐĞ ŝ ŜŶĐĞ ŽŶ ŜŶĚŜĐĂ ŽŶ Ĩ Žŵ ŚĞ ' billion of private sector investment and socio- in this regard have been promising. In seeking ĞĐŽŶŽŴŜĐ ĚĞ ĞŮŽ ŴĞŶ ĐŽŶ ŝď ŽŶ ŽĨ 0554 Į ĐĂŮ ĐŽŶ ĂŜŶ ŚĞ ŐŽ Ğ ŶŴĞŶ ŝ ĨĂĐŜŶŐ Ž ĂĚĚ Ğ ŚĞ Ğ/ŝ ŶŐ ŜŶĨ Ă Đ Ğ ĎĂĐŬŮŽŐ million as at December 2018. it seems that public-private partnershi­ps (PPPS) may just be the appropriat­e tonic. The Presidency has already establishe­d the the IIO has set up a Strategic Infrastruc­ture Developmen­t Symposium (SIDS) in June 2020, The vast majority (84%) of PPPS were Ž ŜĚŜŶŐ Ă ŮĂ<Ž ŵ ĨŽ ďůŝđ ĂŶĚ ĞĐ Ž Ă Đŝ ĂŶ Ž ĞŶŐĂŐĞ ŽŶ Ă ŝ Ă Ğ ŽŨĞĐ ŽĐ ĞĚ ŝŷ ŚĞ Į ĚĞĐĂĚĞ ĂŌĞ ŚĞ ŶĨ Ă Đ Ğ Ŷ Ğ ŴĞŶ 'ĸĐĞ ) '* ŚŜĐŚ establishm­ent of the framework, however the use of PPPS as a mechanism to deliver infrastruc­ture has slowed over the last decade with only 6 projects procured and completed aims to coordinate all of the government’s infrastruc­ture undertakin­gs and create direct dialogue with the private sector for project pipeline in key sectors. The SIDS launched a pipeline of 276 projects which are under Ğ Ăů Ă ŽŶ ŝ Ś Ă Ž Ăů ŝŷ Ğ ŴĞŶ Ăů Ğ ŽĨ 01 " ŝůůŝžŷ ĂŶĚ Ă Ĩ ŶĚŜŶŐ ŐĂ ŽĨ 0;#1 Ğ Ă Ă ŽŶ ĂŶĚ ŝž ŝ Ă ŽŶ +ŝ ĞŶ ŚĞ ŝŷ Śŝ ŵğ % Ě ŝŷ 1# 9 Ś Ž ŚĞ Ŝ:ĞĚ numerous discussion­s around infrastruc­ture procuremen­t as a means to address not only the economic recovery but also the structural billion. Government seeks to crowd in private sector investment to close this funding gap that too few projects have been procured using this framework and “in sectors that are not considered to be ideal” as a result of ĂĐ Ž ĂŶ ĞĐ Ž ŝŷđů Ž ĂŐ ŝđ ů ĚŜŶŐ, Ś ŴĂŶ Ğ7ŮĞŴĞŶ Ğ Ă Ğ ĂŶĚ ĂŶŜ Ă ŽŶ ĞĨŽ ŵ Ž ŚĞ ĞĐŽŶŽŴ ŝ ŝ Ă ŐŽŽĚ ŵğ Ž Ă Ŭ ŚĞ Ğ ŽŶ, ŚŽ ĞĪĞĐ Ğ ŚĂ Ğ ... Đ ŵďğ ŽŴĞ ůğőŝ ůă ŽŶ 'ŶĞ ĐŽ ůě Ă Ő Ğ ŚĂ and energy. the number of projects already successful­ly been in delivering infrastruc­ture in SA? ŽĐ ĞĚ ŝ Ğ ĂŴĞŶ ŚĂ ŚĞ ůğőŝ ůă Ğ =Ž ŝ Ś ĂŶĚŜŶŐ ĂŶ Đ ŝ Đŝ ŵ ŝ ŝ ĐŮĞĂ ŚĂ framework works. But what is key is the speed The South African PPP Framework was establishe­d in 1998 as the government sought to rebuild the economy and address poverty the PPP framework provides transparen­t parameters within which large-scale infrastruc­ture can be procured, and if expedited could deliver projects rapidly and reliably. PPPS have a strong track record of ŽĨ ŽĐ ĞŴĞŶ ĂŶĚ Ğ/ĞĐ ŽŶ ĂŶĚ ŚĞ ĞĐ Ž within which these projects are procured. ĂŶĚ ŜŶĞ Ăůŝ ŜŶŐ Ă ŵŝ/ ŽĨ ďůŝđ ĂŶĚ . ŽŨĞĐ ŝŷ ŚĞ Į ĚĞĐĂĚĞ Ğ Ğ ŚĞĂ ŝů private sector funding for large infrastruc­ture projects. Since then 34 PPPS have been procured through this framework with a total value of R90 billion, with only R30 billion contribute­d by the government. This shows weighted in favour of the transport (9 projects), healthcare (8 projects) and tourism (4 projects) sectors. These sectors have Ěğůŝ Ğ ŜŶŐ ŽŨĞĐ ŽŶ ŵğ ĂŶĚ ŝ ŚŜŶ ď ĚŐĞ So, to use the medical analogy, it seems that government does not need to create a new ĎĞĞŶ ŚŽ Ŷ Ž ŚĂ Ğ Ă ĞĪĞĐ ŽŶ ŚĞ ĞĐŽŶŽŴ ŜŐŶŜĮĐĂŶ ŵ ů &Śŝ ŝ ŝŷ ĐŽŶ ůŝğ ĞĂ ŴĞŶ ĨŽ ŚĞ >? Ă ĞŶ ŝ ũ ŶĞĞĚ ŝž ŝ Ğ ŚĞ Ă ŜŶŐ ŽĨ ŚĞ ŝ Ăů Ž ŐĂŶ Ž Ă Ž Ğ Ž Ğ ŚĞĂŮ Ś Ž ŚĞ ĞĐŽŶŽŴ @/ ĞĚŜ Ž Ěŝ ĞŶ Ă ŽŶ ŽĨ ŚĞ ĞĂ ŴĞŶ ŝůů ďğ Đ ŝ ĐĂŮ ĨŽ ŚĞ Ă ĞŶ 6 ĞĐŽ Ğ Ž Ă ŚĂ ŜŐŶŜĮĐĂŶ ŝ Ă Ğ ĞĐ Ž ŝŷ Ğ ŴĞŶ to projects procured in the last decade can be crowded in using PPPS and arguably ŚŜĐŚ Ă Ğ ĞŜŐŚ ĞĚ ŵž Ğ Ž Ă Ě ŽĸĐĞ ĂĐĐŽŴŴŽĚĂ ŽŶ ); ŽŨĞĐ * ŚŜĐŚ ŚĂ Ğ ůğ ŽĨ Ă ŵ ů ůŝğ ĞĪĞĐ ŝ Ś Śŝ ŝŷ ĨŽĐ ŝ Ğ ĞŶ ŵž Ğ ŽĨ Śŝ Į ĐĂŮ ď ĚĞŶ ĐŽ ůě ŚĂ Ğ been shouldered by the private sector as government seeks to balance upfront capital

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