Sustainable infrastructure development to the fore in South Africa

The government set up a new body, Infrastructure South Africa (ISA), last year to lead revised institutional arrangements for infrastructure development. ISA’s establishment was part of the government’s goal of attracting participation and funding from the private sector through presenting a pipeline of bankable infrastructure projects.

At a recent symposium to provide updates on ISA’s progress on bringing projects through to bankability and securing funding for pipeline projects, the government also presented a series of new pipeline projects, provided more information on the National Infrastructure Plan (NIP) 2050 and also announced key changes in the infrastructure sector based on lessons learned since ISA’s launch event in 2020.

Legislative reforms

One of the notable interventions announced by President Cyril Ramaphosa at the symposium was a two-fold legislative amendment programme which the government intends to implement within the following year. The need for these amendments has arisen from a general fragmentation of the policy and legal framework relating to infrastructure development and procurement in South Africa.

The president said there would be an amendment to the Infrastructure Development Act. Although the nature of the amendments was not explicitly mentioned by Ramphosa, it seems likely these would be aimed at addressing a disconnect between the current act and the creation of ISA, implementation of the new ‘SIDS methodology’ for project evaluation, and the various infrastructure funding mechanisms such as the newly operationalised Infrastructure Fund.

These institutional and funding mechanisms are not represented in any way within the provisions of the act at present. Instead, the legislation is centred around the creation of the Presidential Infrastructure Coordinating Commission (PICC) and its secretariat, the body responsible for promoting and facilitating infrastructure development in South Africa; and the mechanisms for declaring infrastructure projects as Strategic Integrated Projects (SIPs), which are priority projects that are able to access certain benefits including assistance with expedited approvals.

As it stands, ISA has taken over the administrative and implementation tasks of the PICC Secretariat and the act needs to be updated to reflect the new infrastructure development paradigm.

President Ramphosa also referred to an amendment to Treasury Regulation 16 of the Public Finance Management Act, which deals with public private partnerships (PPPs). At a separate session, minister of public works and infrastructure Patricia de Lille identified the “suffocating” effect of the onerous PPP project development requirements from conceptualisation and feasibility through to procurement in the current Treasury Regulation 16, which she termed “too long and painfully slow”.

Combined with an erosion of the skills and capacity base in the public sector mentioned by several speakers at the event, this has made it incredibly difficult for viable PPP projects to be brought to market.

According to the NIP 2050 the proposed reforms would “improve functioning and efficiency of PPP and other procurement mechanisms and improve attractiveness for private investment”.

De Lille also said ISA had been working with the team preparing the long-awaited Public Procurement Bill in order to have infrastructure removed from being subject to the Bill’s processes.

This is a concerning move, especially given the goal of the bill to reduce fragmentation in public procurement frameworks; removing infrastructure from the purview of the bill will simply perpetuate this issue. As the bill is still undergoing a public consultation process, there is an opportunity for stakeholders to voice concern and for this to be corrected.

New focus for 2021-22 projects

Members of the National Planning Commission and the national executive spoke about the future direction of ISA’s infrastructure push. The first of these is a greater focus on social infrastructure in the 2021 project pipeline.

Kgosientso Ramokgopo, head of ISA, identified social infrastructure as a deficiency in the pipeline. Ramokgopo highlighted in particular a massive backlog in the education sector, requiring the private sector to plug the gaps for around R193 billion in total schools expenditure. The health sector was also identified as something that would receive greater attention as part of an accelerated social infrastructure delivery goal.

National Planning Commission commissioner Miriam Altman said the NIP 2050 was only the first of a two-part approach to infrastructure planning under the new paradigm. Its focus on the development of bulk network infrastructure, institutional skills and capacity will be followed in the next six to eight months by a plan focused on distributed infrastructure, including municipal services and commuter transport.

Altman identified these as being “harder” to solve given the proliferation of public sector institutions involved, a heightened need for public input, and an even greater skills and capacity gap, thus requiring more time to develop a robust plan.

The way forward

ISA has achieved positive results in the past year, with R119 billion of private sector funding being secured across 29 of the 50 projects presented to the market in 2020 and numerous institutional and funding structures being operationalised.

However, “big ticket” infrastructure, especially in network services as represented by ISA’s Operation Vulindlela projects, has been slow to launch despite government calls for urgency.

Until legislative reforms, particularly in respect of procurement and PPPs, take place to allow for a simpler process that is less vulnerable to corruption and abuse, and until the government has rebuilt some of its institutional capacity as contemplated in NIP 2050, it will be difficult to achieve the kinds of results needed to deliver widespread infrastructure development rather than isolated wins.

Although the government’s infrastructure planning seems to be heading in the right direction, the next year will be a crucial period to achieve some meaningful results as part of the post Covid-19 recovery.

Co-written by Reuben Cronjé of Pinsent Masons, the law firm behind Out-Law.