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Godongwana Reaches Out to Private Investors

Better-managed PPPs can help South Africa avoid prescribed assets.

South Africa may very well be at the brink of a new era, where a greater focus on public private partnerships (PPPs) can help to address the country’s multiple challenges.

The ongoing energy crisis, a deteriorating and unreliable logistics system, failing infrastructure, and climate risks—solutions to these challenges require the technical and financial support of the private sector. With the state’s plans to launch unique infrastructure instruments, driving private sector participation may not necessitate prescribed assets legislation.

This was the sentiment following the reforms that Finance Minister Enoch Godongwana alluded to in this year’s National Budget Speech that will allow the private sector to invest in infrastructure provision without the need for any form of prescription.

Examples of this include infrastructure bonds and special vehicles through which the private sector can participate in government investment.

The finance minister always makes the point that we’ve spent about 10 years trying to fix Eskom, instead of fixing the electricity sector. If we consider the latest reforms, among which is the amendment of Schedule Two of the Electricity Regulation Act, the state is actively looking to attract private sector investment to drive a few important changes.

It makes sense for the private sector to answer this call—and from a balance sheet perspective, it makes sense for us to collaborate, whether it’s towards solving our transport issue or our need for energy generation.

There is also no reason why PPPs cannot be called on to contribute towards developments in areas such as human settlements or the health sector. As the finance minister announced, we’re calling for a ‘crowding-in’ of the private sector for this purpose.

Turning to the hotly contested topic of the National Health Insurance (NHI) Bill—and, more specifically, the R1.4 billion allocation to an NHI grant—the government will be taking a phased approach to its rollout. As a starting point, the focus for the government needs to be on using its resources to strengthen the broader health system in preparation for the health system that South Africa will need as a country in the future.

At a grassroots level—in hospitals and within the existing healthcare systems—the state needs to find ways to ensure that it can provide people with better value for money. Once this issue has been addressed, the National Treasury, in collaboration with the Department of Health, can progress to considering how to support the move to a national health system from a fiscal perspective.

We will need to look at the implications of NHI for the overall fiscal framework, and how to implement the various initiatives in a way that does not compromise what we envisioned through the budget. This will involve a lot of technical work and collaboration within inter-governmental departments and stakeholders.

The work is ongoing, but it is indeed well underway.

WRITTEN BY DUNCAN PIETERSE

Duncan Pieterse, director-general of the National Treasury.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.  Errors and omissions excepted (E&OE)

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