Few PPP Successes to be Excited About

Mike Moriarty, DA MPL

DA Gauteng Finance Spokesperson

I was interested to read in today’s Business Day (21 August 2012) that the Public Enterprises Minister is looking for innovative ways to finance infrastructure projects. In particular, I was drawn by the headline of the article, “Gigaba to give private sector role in state’s build plans”. The headline contradicted my experience of the ANC’s approach to what used to be known as “Public-private partnerships” or PPPs. Indeed, the record of government has not been a good one on balance. This is because the ruling party has proved itself to be schizophrenic on this issue.

In the Gauteng Provincial Legislature, Gautrain has been hailed as an example of a successful PPP. There are many members of the public that would echo that sentiment. But then the list sort of ends there as far as the record of successes goes.

In the province’s Finance Portfolio Committee we are informed of 9 major projects earmarked for PPP, including a large extension to the Chris Hani Baragwanath Hospital. The DA has consistently supported these. However, we have been receiving reports on the hopelessly slow crawl towards calling for proposals for years. Department officials state that these are being impeded by a lack of political will. Needless to say, we are very disappointed.

One also recalls the attempt by the Department of Correctional Services to build new prisons using the PPP mechanism. However, these were terminally stalled when a new Minister took over. There was a clear indication that the new Minister was opposed to the projects for ideological reasons.

But then I found the content of your article was at variance with your headline. The Minister has two ideas in mind when it comes to financing infrastructure:

Firstly, he wants to follow the Finnish model where 15 years of electricity are purchased up front. This is interesting. I wonder how many firms have an appetite for such a risk in the current confused South African policy environment. Those willing to take such a risk will surely discount the unit price heavily. The firm may get a bargain but the public purse will suffer a great loss.

Secondly he uses the term “Public-public partnerships”. Say what? So it’s goodbye private capital and hello IDC and DBSA. However, my experience has been that these agencies have tended to be even more risk averse that private banks. But Minister Gigaba doesn’t seem to care. All he wants to do is to pacify divisive people in his ranks. He is willing to do so at the expense of opportunity and service delivery.

We need the DA to take over. If that were to happen there would be a competent selection and implementation of financing options. There would also be a speeding up of infrastructure development and service delivery.

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