National Infrastructure Plan 2050 leans heavily on private sector to close R2tr finance
Infrastructure South Africa head Dr Kgosientsho Ramokgopa
16TH MARCH 2022
BY: TERENCE CREAMER
CREAMER MEDIA EDITOR
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The first iteration of the updated National Infrastructure Plan 2050 (NIP 2050) points to a substantial finance gap of at least R2-trillion that will have to be closed if South Africa is to build the economic infrastructure required to deliver the growth and social objectives outlined in the National Development Plan (NDP).
Gazetted last week by Public Works and Infrastructure Minister Patricia de Lille, the document focuses exclusively on energy, water, freight transport and digital communications infrastructure, with a second iteration to follow focusing on distributed infrastructure and related municipal services.
The 80-page document states that meeting the infrastructure goals outlined in the NDP will cost R6.2-trillion between 2016 and 2040, with transport and energy accounting for over 72% of the investment required.
“As of 2021, the finance gap that needs to be closed is estimated at R2.15-trillion,” the document states.
In a briefing on the plan, Infrastructure South Africa head Dr Kgosientsho Ramokgopa said the capacity of government and State-owned companies to secure the required finance had been “significantly undermined” in recent years and that it would, thus, need to lean more heavily on alternative financing models to crowd in private finance.
The document states that the public sector will partner with the private sector and development finance agencies to secure about one-third of the amount that needs to be invested until 2050.
“Ultimately, infrastructure can be funded only by two sources: taxes and user payments.
“While finance can be raised from multiple sources, its availability and cost depend on the reliability of funding plans to service and ultimately repay any finance,” the document states.
The plan envisages the building of government-wide capacity to design and launch partnerships and alliances with the private sector, including public–private partnerships (PPPs), which are described as an “underutilised opportunity to raise private investment in public infrastructure”.
Besides continuing with the Renewable Energy Independent Power Producer Procurement Programme, the NIP 2050 envisages partnerships emerging across most, if not all, of the 62 Strategic Integrated Projects that have been Gazetted for expedited development in terms of the Infrastructure Development Act.
In addition, the infrastructure procurement framework will be revised “to require public institutions to consider partnering with private sector partners as an optimal procurement option”, while the PPP regulations will be revised to simplify approval processes, standardise models for certain types of infrastructure, and speed up the time from initiation to procurement.
The document also states that the approach, rules and regulations for partnerships and alliances will be widened with the intention of deepening and expanding the opportunity for finance, build and operation.
There is also an intention to apply lifecycle planning to all infrastructure, with full budgets determined upfront and measured against lifecycle benefits.
Meanwhile, it is envisaged that the R100-billion Infrastructure Fund will deliver a robust pipeline of projects through blended finance models with significant participation from the private sector.
Ramokgopa said it would be essential to build capacity at all levels of the public sector to design bankable projects and manage them through to completion.
Capacity should also be built at national and local government level to issue specialist green finance instruments such as green bonds.
De Lille said the NIP 2050 aimed to ensure that there was the necessary long-term view of infrastructure to drive economic and social transformation in line with the NDP.
“There is a pressing need for a shared long-term vision and a robust institutional platform to enable sustained and continuous improvement in public infrastructure delivery,” she added, arguing that the ISA was providing government and its partners with a bird’s eye view of the opportunities.