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Better managed Public Private Partnerships can help SA avoid prescribed assets

01 March 2024 PSG

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 requires the technical and financial support of the private sector. And, with the state’s plans to launch unique infrastructure instruments, driving private sector participation may not necessitate prescribed assets legislation.

This was the sentiment from Dr Duncan Pieterse, Director-General of the National Treasury, who was commenting on the reforms that Minister 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”.

Dr Pieterse was the most recent guest on the Think Big webinar, sponsored by PSG. The webinar is facilitated by award-winning journalist, Alishia Seckam, discussing the topic of PPPs and their role in supporting some of the key state-led initiatives mentioned in the 2024 Budget Speech.

As Dr Pieterse explained: “The Minister of Finance 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 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 Minister announced, we’re calling for a ‘crowding-in’ of the private sector for this purpose,” said Dr Pieterse.

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

At a grassroots level – in hospitals and within the existing healthcare systems, Dr Pieterse says that 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.”

As Dr Pieterse concludes: “We will need to look at what the implications of the NHI will be 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.”

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