The promise of private-public partnerships

As much as the arresting of loadshedding in early 2024 was met with a huge collective sigh of relief by companies and consumers, South Africa continues to be hamstrung by its large infrastructure challenges. Years of underinvestment in economic infrastructure have led to a massive infrastructure gap. According to a joint report by the Development Bank of South Africa and the World Bank, South Africa needs to spend between R1 trillion and R1.5 trillion on transport infrastructure between 2022 and 2030, to close its Sustainable Development Goal gap in the sector.

Given the current high government debt levels amounting to about 75% of GDP and limited fiscal wiggle room, the government is keen to attract private sector funding and expertise through private-public partnerships (PPPs) to boost infrastructure investments.

PPPs are not a new approach to roping in private sector funding and expertise for infrastructure developments. In the late 1990s, the South African government set up a multidisciplinary team to explore the viability of partnering with the private sector to enhance infrastructure development and reduce infrastructure backlogs. However, an erosion in trust between the government and the private sector in subsequent years reduced the latter’s willingness to invest in public infrastructure, further tightening infrastructure bottlenecks.

Fortunately, we have seen a change in sentiment, among businesses in recent years and there seems to be an increased willingness to participate in public-private partnerships again. This change in sentiment has been driven by various factors including changes in regulation and a harder stance against corruption and fraud. Furthermore, measures taken to have the Financial Action Task Force’s greylisting lifted and return South Africa to an investment grade rating are seen as steps in the right direction that have increased the attractiveness and viability of PPPs.

The government’s active engagement with organised business through bodies such as Business Unity of South Africa and Business Leadership South Africa through Operation Vulindlela is also a welcomed change that is starting to yield positive results. The establishment of the National Energy Crisis Committee (Necom) which relies on the collaboration between public and private sector stakeholders has led to the suspension of loadshedding in March 2024. Necom serves as an example of how strengthened collaboration between public and private sector players can assist in addressing the country’s infrastructure challenges.

Given the importance of infrastructure for economic development and poverty alleviation, it is encouraging that government sees PPPs as a strategic vehicle to address infrastructure backlogs and is making strides towards creating a favourable regulatory environment for private sector’s involvement in PPPs as seen in the recent review of Regulation 16 and Municipal Regulation 309.

Through the G20 presidency, South Africa has been presented with an opportunity to fast track efforts in infrastructure development by leveraging the G20 and B20 collaboration which covers finance and infrastructure as one of the focus areas.

Going forward, to extract maximum value from initiatives such as the G20 and B20 and to ensure PPPs are successful, government needs to also focus on the efficient and timely implementation of its plans. Such successful implementation will, however, depend on political stability and the commitment of the GNU to collaborate with private sector stakeholders.