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PPPs in South Africa

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Currently 300 000 cars per week day in Pretoria-Johannesburg traffic corridor ... It now also succeeds in accelerating the pace at which PPPs are created ... – PowerPoint PPT presentation

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Title: PPPs in South Africa


1
PPPs in South Africa
  • Philippe Burger
  • University of the Free State
  • South Africa

2
Overview
  • A brief history of PPPs and the PPP unit in South
    Africa
  • The role of the South African dedicated PPP unit
  • The Gautrain project
  • Conclusion

3
Intro
  • After 1st democratic election in South Africa in
    1994 reform of the approach of government
    towards the management of state assets.
  • Did this in a manner that represent a move from
    government to governance.
  • This approach towards state assets is broader
    than just privatisation and included PPPs

4
A brief history of PPPs and the PPP unit in South
Africa
  • Apr 1997 Cabinet approved appointment of
    interdepartmental task team
  • From 1997 to 2000 Six pilot project
  • SA National Roads Agency N3 and N4 toll roads
  • Department of Public Works and Correctional
    Services Two maximum security prisons
  • Two municipalities Water services and
  • SA National Parks Tourism concessions

5
  • Framework for PPPs endorsed in Dec 1999
  • National Treasury issued PPP regulations Apr
    2000.
  • Mid 2000 PPP unit established in Nat Treasury.

6
  • Legislative framework
  • National and provincial PPPs Treasury Regulation
    16, issued 2004 to PFMA (1999).
  • National Treasury PPP Practice Notes that
    constitute the PPP manual of the PPP unit
  • Municipal PPPs Municipal Public-Private
    Partnership Regulations, issued 2005 to Municipal
    Finance Management Act (2003)

7
  • Since 1997 average of 2 PPPs per annum
  • Between Mar 2000 and Sept 2006 13 projects
    signed
  • Acceleration in the number of projects signed
  • Between Oct 2006 and Oct 2007 5 more signed
    thus, total of 18 signed
  • Relatively slow roll out due to lack of skilled
    staff capacity in individual departments and
    provinces

8
  • A significant proportion of projects never
    reached the contract signing stage and were
    deregistered.
  • Main reason
  • Not so much that proposed projects failed the
    tests of affordability, VFM or insufficient risk
    transfer,
  • Rather the absence of capacity in departments and
    provinces.
  • Issue is addressed by PPP unit as can be seen by
    the higher roll-out of projects since 2006/7

9
  • Projects in the pipeline at end of October 2007
  • 16 in national government departments
  • 17 in the provinces
  • 8 in public entities
  • 14 in municipalities

10
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11
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12
  • In SA the Net Present Value (NPV) of benefits to
    government for 6 of the 11 projects for which
    this data is available, is lower than R100 mil
    (roughly Euro 1 R11).
  • Larger projects include
  • Gautrain project capital value of R23.09 billion
  • Chapmans Peak Drive toll road NPV equals R450
    mil,
  • The latest fleet management project of the
    Department of Transport NPV equals R919 mil.
  • Department of Education Head Office capital
    value of R513 mil
  • 11 of the projects have a unitary charge. The NPV
    to government range between R18.9 mil to R4.5 bil
    (only 2 have a value gt R1 billion).

13
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14
The role of the South African dedicated PPP unit
  • Main functions Ensure affordability, VFM and
    sufficient risk transfer
  • In line with international best practice
  • Main drivers of VFM risk transfer and
    competition
  • Prerequisite for VFM is affordability

15
  • PPP unit in Nat Treasury has two broad tasks
  • Provide technical assistance to government
    departments, provinces and municipalities
  • Provide Treasury Approvals during pre-contract
    phases
  • The life cycle comprises six phases
  • 1) Inception 2) Feasibility study
  • 3) Procurement 4) Development
  • 5) Delivery and 6) Exit
  • Treasury Approvals I, IIA,IIB and III

16
  • Feasibility study must pass three regulatory
    tests affordability, VFM and risk transfer.
  • Value assessment
  • Base and risk-adjusted PSC PPP reference model
  • Bidding process
  • Dept must demonstrate why preferred bidder
    fulfils criteria of affordability, VFM and risk
    transfer
  • Competition in bidding key element to ensures VFM
  • If only one bidder Competes with PSC
  • Contract meets criteria of affordability, VFM and
    substantial risk transfer

17
  • Management of agreement, once signed, rests with
    individual department or province
  • Not the responsibility of PPP unit
  • PPP unit still provides technical assistance
  • Length of the pre-contract period is roughly 8-18
    months (Gautrain one significant exception)
  • Environmental approvals

18
  • Future challenges
  • Pace at which contracts are concluded
  • Capacity constraints
  • Contract managers
  • Capacity, mechanisms and procedures of department
    is receiving attention pace accelerated
  • Health, education and infrastructure development
  • Initiative to setup such projects (less ad hoc)
  • Provincial dedicated PPP units
  • Provincial units mainly to provide Treasury
    Approvals National unit provides technical
    assistance

19
The Gautrain
  • The Gautrain is a high-speed train in the Gauteng
    province (Johannesburg/Pretoria area)
  • The Gautrain project is the largest
    infrastructure deal in Africa
  • Planning commenced in 2000
  • 7 Dec 2005 cabinet approved project
  • May 2006 Initial work commenced
  • 28 Sept 2006 signing of the Concession Agreement
    between the Gauteng Provincial Government and the
    Bombela Concession Company construction
    commenced

20
  • Project to be completed in 2010/11
  • Initial cost estimates R3.5 - 4 billion in 2000
  • Current capital value estimate R23.09 billion
  • Government contributes 87 of capital, another
    11 comes from debt issue and a further 2 comes
    from equity.
  • Environmental impact studies took time and caused
    some delays compared to initial envisaged
    roll-out plans

21
  • Bombela concessionaire (50 foreign owned/50
    local owned)
  • Bombardier 25
  • Bouygues 25
  • Murray Roberts 25
  • Strategic Partnership Group 25
  • RATPDéveloppement will operate and maintain it

22
  • Government expects Gautrain to cut the number of
    cars on the N1 (Ben Schoeman) highway
  • Currently gt 157 000 vehicles per day (traffic
    growth 7 per year).
  • Currently 300 000 cars per week day in
    Pretoria-Johannesburg traffic corridor
  • 20 cut number of road commuters expected
  • Gautrain will also attract airport passengers on
    the link to OR Tambo International Airport
  • Forecasts Initially 100 000 passengers per day.
    Expected annual growth 4.8 with more than 120
    000 passengers per day by 2010.

23
  • Length of network 77 kilometers
  • 10 stations, 3 underground
  • Connected to other public transport (taxis, buses
    and trains)
  • Gautrain consists of 24 trains, departing every
    12 minutes, with a maximum speed of 160km/h (42
    minutes to travel from Johannesburg to Pretoria)
  • Each train is made up with four linked cars

24
  • Stages of completing construction
  • The Sandton to OR Tambo International Airport
    link between Sandton and Midrand in 45 months, in
    time for the Soccer World Cup in 2010. 
  • Remaining 5 stations (links between Sandton to
    Johannesburg Park Station and Midrand to
    Hatfield) in 54 months, by 1 March 2011.

25
Conclusion
  • SA has come a long way in implementing PPPs,
    though the scale is still small.
  • The PPP unit approves PPP agreements and renders
    technical assistance in creation and maintenance
    of PPPs.
  • It has been successful in ensuring that potential
    PPP comply with affordability and VFM
    requirements.
  • It now also succeeds in accelerating the pace at
    which PPPs are created
  • Gautrain The largest PPP to date in SA (still in
    construction phase)
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