Transcript Slide 1
Public & Private Partnerships
for Infrastructure Development
in SA
A Prerequisite for SA’s Sustainable Growth …
Meet the Team
Reena Govender
-
Mercantile Bank Limited
Reuben Matlala
-
Development Bank of SA
Vivian Khumalo
-
First Rand Group Limited
Yougan Moodley
-
Nedbank Limited
Research Objective
Problem Statement
In the past decade(s), SA has been challenged with the provision
and maintenance of key infrastructure to meet the needs of its
people and to be globally competitive…
Research Question
Is PPPs’ the solution and pre-requisite for the delivery of such
infrastructure to ensure sustainable growth and development
in SA?
Outline of Presentation
Introduction
Economic Overview of SA
PPPs’ in SA
PPPs’ in UK
Key Findings
Recommendations
Introduction
Current stats on basic services (Community Survey 2007):
80% of households in SA use electricity for lighting
88.6% of the population enjoyed access to piped water
60% of households in SA have access to flushed toilets
Over burdened and limited transportation network
More than R400bn was budgeted by Government for
infrastructure development
To date, a limited amount of this budget has been spent,
either through PPPs’ or other procurement methods
Private Sector participation in infrastructure development in
SA is not a new concept
Overview of SA Economy
Economic growth rate of 5.1% (2007), YTD 2.1% (first quarter 2008)
Unemployment rate – official (23%) & expanded (40%)
Inflation (CPIX) of 13.00% (Aug 08)
High interest rate environment (Prime lending rate of 15.5%)
Low consumer confidence
SA economy needs to grow by at least 6.0% per annum. SA must
make significant investment in infrastructure to achieve a stable and
growing economy.
The Need for Infrastructure
“For Africa to continue on its anticipated growth trajectory, vital
infrastructure and services are needed, and the private sector
will need to play an increasing role in the provision of this
infrastructure if it is to be delivered at the rate required”.
(Engineering News, 30 May 2008).
Research Methodology
SA & UK:
Literature review
Interviews
Research areas covered:
Extent of PPP’s undertaken
Financing models
Regulatory frameworks governing PPPs’
Private Sector appetite to participate in PPPs’
PPPs’ in SA
Regulatory Environment governed by SA National Treasury
Investment in Infrastructure though PPPs’ began mid 1990’s
and gained momentum early 2000’s.
PPPs’ in UK
Regulatory Environment governed by HM Treasury and EU
Procurement directives
Investment in Infrastructure through PPPs’ gained momentum
in the 1990’s.
PPPs’ in UK cont …
Significant investment in PPP infrastructure over the past 5
years to 2007
Sectors receiving greatest focus were Health, Education and
Defense.
The Costs and Benefits of not Investing
in Infrastructure in SA
Costs
Limitations on economic growth
Depletion of existing infrastructure
Reduced access to basic services
Increased unemployment
Political instability
Benefits
Stable and growing economic environment
Stable social environment
Risk management
Promotes efficiency in procurement and ongoing asset operations.
PPPs’ are Not Without Risk
Not providing value for money:
Quality vs. Costs
Not offering operational efficiency
Financially inefficient
Risk
Financial risks not adequately transferred to Private Sector
Projects not completed and delivered on time
Procurement
Lengthy and costly tender processes
Complex and/or inflexible structures
Key Findings
Strong opinion expressed by Banks, Research Institutions
and Advisors on the Need for PPPs’
Positive past experiences, even with lengthy and
cumbersome bidding processes
Government & Private Sector are comfortable with the current
regulatory frameworks. However, Banks in SA have
suggested the PPP approvals processes requires
streamlining
Key Findings cont …
Private Sector has continued appetite for PPPs’
PPP models:
SA Banks indicated that their appetite would intensify if processes are
streamlined and transactions values increased
UK Banks have expressed interest to pursue PPPs’ in emerging markets
in view of increased competition and high bidding costs in the UK PPP
market
Traditional Partnerships
Strategic Partnerships:
LEF Education (eg. BSF)
LIFT Health
Funding
Historically high levels of gearing (debt levels going in excess of 90%)
Increased appetite from equity financiers (emergence of a secondary
market for refinancing + emergence of new equity infrastructure funds)
Recommendations: The Case for PPPs’
SA must accelerate the implementation of PPPs’
SA could apply both the Traditional and Strategic Partnership
PPP models
SA must ensure proper planning in the implementation of
PPPs’ to minimise the risks identified in PPP models
Government and Private Sector should consider establishing
a Project Preparation Fund to assist with high bidding costs
Upfront communication and education with stakeholders,
especially the public (i.e PPPs’ must be understood to avoid
criticisms against perceived PPP shortcomings)
Thank you …
Questions ?