Improving public-private partnership deal flow for infrastructure delivery in South Africa : the role of National Treasury

ENGLISH ABSTRACT: The traditional form of delivering infrastructure and services by government is fraught with problems. These include cost overruns, time overruns and neglect of maintenance resulting in dilapidated and aged infrastructure. Public-private partnerships (PPPs) are emerging as an alternative form of delivering infrastructure, not necessarily as a solution, but as a procurement option.PPPs have not been without problems either and one of them is deal flow. In this research deal flow is referred to as a rate at which PPP projects move in the pipeline from initiation to conclusion of the contract. Initiation means registration of the project by a sponsoring institution with the National Treasury of the Republic of South Africa and conclusion of the contract means financial close. Financial close is the last stage of the project when financial institutions are ready to disburse borrowed funds. It follows immediately after contractual close, i.e. the stage when parties to the agreement (government department and private sector) signed the contract.The main objective of the research was to identify factors that lead to a slow deal flow. As discussed in the research this movement takes place at a rate of two deals per annum in South Africa presently. This is not good if compared with countries such as the United Kingdom which closes deals at a pace of around 50 per annum. However it is recognised that South Africa is a developing country and is not at the same level of development as other European countries. This comparison is therefore done for benchmarking purposes.The other objective of the research was to find out where the occurrences of the blockages are in the project life cycle with the aim of removing or mitigating their impact. Finding answers to some of these questions will not only help the National Treasury but the whole country in delivering infrastructure. The motivation for this is that infrastructure development contributes to economic development, economic growth and poverty reduction and the creation of a better South Africa for us all.The main findings of the research are that a great amount of time is spent during the inception phase, that is from registration of the project to Treasury Approval 1 for the feasibility study. Contrary to literature which suggests that more time is always spent in negotiations, that does not seem to be a problem in South Africa. Therefore an aggressive push at inception phase is necessary. Lack of clear government objectives and commitment is a problem. Poorly defined sector policies and poor risk management are problems too. There is a lack of mechanisms to attract long-term finance at affordable rates. This research has proved that other phases in the cycle, i.e. Treasury Approvals 2A to Treasury Approval 3, are not a problem. In other words, the phase of inviting, evaluating, appointing and negotiating with bidders is not a problem and therefore a slow deal flow problem can be solved if initiatives are taken right from conceptualisation to feasibility.