As South Africa’s prospects of attracting adequate capital to invest in catalytic infrastructure hits speed bumps, President Cyril Ramaphosa is to address the Sustainable Infrastructure Development Symposium (SIDSSA) in Cape Town on Tuesday.
The 2024 SIDSSA conference, which started on Sunday and runs to Tuesday, looks to kick-start infrastructure development agreements and projects by the government and the private sector. South Africa has been dealing with immense infrastructure needs in various sectors for years.
The VBGE consortium report into the state of Eskom’s coal power fleet released earlier in March said Eskom’s coal power plants — responsible for much of the state-owned power utility’s electricity production — need urgent refurbishment and maintenance, even if it means implementing high levels of load-shedding to conduct it.
Water supply challenges have also dogged some of the country’s largest cities. While the City of Cape Town managed to avert “Day Zero” by introducing restrictions on water use in 2016, the City of Johannesburg now faces its own water supply crisis.
According to the 2023 Blue Drop National Report by the water and sanitation department, out of the 958 water supply systems in the country 467 or 49% achieved excellent microbiological quality, 49 or 5% had good microbiological quality, and 442 or 46% had unacceptable microbiological water quality.
There are also hiccups on the financing side of infrastructure development as 2022's amendments to regulation 28 of the Pension Funds Act raised the threshold for the offshoring of investments by pension funds, long-term insurers and portfolio managers.
On the other hand, the asset management sector has warned that the ANC’s election manifesto pledge to introduce prescribed assets as a way of driving private sector funds to state infrastructure projects could have a chilling effect on the investment appetite of investors outside South Africa.
Ramaphosa will open SIDSSA 2024 at the Century City Conference Centre on Tuesday at an event which will see captains of industry throughout the infrastructure value chain and government and state-owned enterprises officials meet to discuss all things relating to infrastructure.
“Some of South Africa’s largest infrastructure projects will be explored during SIDSSA 2024. These include the R640m Musina ring road — a transportation project launched to facilitate greater economic activity between South Africa and neighbouring countries — and the transformation of the N3 into a smart freight corridor aimed at positioning the country as a freight and logistics hub for Africa.
“The Musina ring road was completed in 2022, connecting the country to the rest of the Southern African Development Community while development for the N3 is progressing steadily,” said an invite from SIDSSA.
“We’ve gone beyond the stage of just the word disposal because there are other types of public-private partnerships (PPPs). For example, some of the government buildings have entered into PPPs to construct those offices."
— Public enterprises minister Pravin Gordhan
Finance minister Enoch Godongwana proposed during his budget speech in February that R943bn be invested in infrastructure to refurbish existing infrastructure and undertake projects to deliver new infrastructure.
Speaking at a briefing in parliament recently, public enterprises minister Pravin Gordhan said government has been mulling a framework for the disposal of state assets which considered a variety of joint ventures and other mechanisms to leverage assets in the context of limited fiscal resources and mobilisation of private capital.
“We’ve gone beyond the stage of just the word disposal because there are other types of public-private partnerships (PPPs). For example, some of the government buildings have entered into PPPs to construct those offices.
“If you look at the South African National Roads Agency (Sanral) they use another variety which you might see a lot more frequently now, which is the build-operate-and-transfer variety. So a concession is given for the toll road for 20 or 30 years, tolls are charged, profits are accrued and after that government or Sanral needs to decide what they do with the partner they’ve accompanied with.”
Gordhan said these configurations will free the state of the burden of finding money up front for an asset and over a long-term period all entities invested in an asset will be able to recoup their investment and an agreed-upon margin of profit. He mentioned joint ventures as another option, such as Rheinmetall Denel Munition joint venture in Somerset West.
“You are going to see a lot more creative options begin to come forward so we can get the assets moving and infrastructure installed on the ground. There have been long negotiations, for example, with the asset managers and insurance people through the Association for Savings and Investment in South Africa about how R2-trillion or R3-trillion or so can be used for infrastructure.
“We must prepare ourselves for that. This framework question, I am not familiar with in terms of the old and what is current at this time. This is a dynamic environment we find ourselves in. It requires innovation on one hand, partnership with the privates sector on the other hand and we also need to protect public interests,” he said.
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