Government banking on the private sector to save the day in South Africa- BY SETH THORNE

[Nat Quinn]

Government banking on the private sector to save the day in South Africa- BY SETH THORNE

In National Treasury’s first budget vote of the seventh administration, Finance minister Enoch Godongwana has revealed that a priority of the department is to fast-track private sector investment into struggling sectors.

Presenting the ministry’s R33.2 billion budget vote speech on 17 July 2024, Godongwana said that like the private sector investment that began pouring into the energy sector as a result of legislative reforms in the previous administration, the same wants to be done for both water and transport in the current.

“While these reforms continue, National Treasury is working on signing memoranda of agreement, similar to the agreement that governs the Independent Power Producers Office, in the transport and water sectors,” said Godongwana.

“The aim is to fast track, in a programmatic way, private sector participation in these sectors,” he said.

The push for forms of Private Sector Participation (PSP) has categorised much of President Cyril Ramaphosa’s tenure.

“Since the partnership began, the private sector has contributed more than R170 million of direct support and has mobilised over 350 technical experts,” said Ramaphosa in a written newsletter just before the elections.

“More than 130 CEOs of the country’s leading companies have pledged their support,” in helping solve various woes in the energy and logistics sector, he added.

Godongwana explained in his budget vote speech that “one of the pillars of the macro-fiscal strategy is to improve the efficacy of public infrastructure investments.”

“Various policy and regulatory reforms in the energy, transport and water sectors build the foundation to increase infrastructure investments,” added the minister.

The ball is already rolling

This policy is seen to be already set in motion.

Looking at the Department of Transport, new minister Barbara Creecy said that her department wants to adopt the same strategies and methods used with Eskom to bring the private sector on board to assist in solving “current and future logistics challenges.”

During her budget vote speech in the National Assembly on 15 May 2024, Creecy revealed that one of her department’s plans is to create a private sector participation (PSP) unit, after seeing the opportunities that emerged from similar initiatives in the electricity sector.

Its primary objective would be to identify suitable areas for private sector participation in rail and ports.

Looking at the Department of Water, the new administration plans on going full steam ahead in creating the South African National Water Resources Infrastructure Agency (NWRIA) as a significant public entity and state-owned company (SOC).

The SOC will own all the national water resource infrastructure assets and obtain the revenue streams associated with those assets.

However, to do this requires a hefty injection of funds. Thus, the department’s aim in the creation of the entity is “to attract private investment.”

The minister of Water and Sanitation, Pemmy Majodina, expects to complete the establishment of the agency significantly funded by the private sector by May 2025.

So is the case for the Department of Communications and Digital Technologies, where minister Solly Malatsi said in his recent budget speech vote that “South Africa has the largest digital infrastructure in Africa. We must leverage this to unlock private public partnerships that can create jobs.”

Malatsi also mentioned that the department is keen on “opening the space for private investments and partnerships,” for the embattled South African Post Office.

These are just some of many examples of government increasingly looking to the private sector.

This is seen to appease business. Business Unity South Africa CEO Cas Coovadia previously told BusinessTech that their preference is for a government that “recognises the importance of partnerships between the private sector and government.”

BUSA said that government’s priorities need to be the continuation of economic reforms that begun under the previous administration to address the issues facing economy.

“The partnership between business and government on Energy, Logistics and Law and Order must continue,” said Coovadia.

Sparked by necessity, not desire

However, independent political analysts J.P Landman previously outlined that this push towards PSP in South Africa came more out of necessity than desire.

For well over a century, the South African government has always had firm control of infrastructure – from electricity to transport. However, Landman said the monopolistic control caused numerous pressing issues detrimental to the country’s economy, including that of the energy and logistics crisis.

Landman said that the load shedding crisis in particular prompted government to reassess this model as a whole.

After years of moving in a completely different policy direction and maintaining its monopoly, Eskom is now aligning with the White Paper on the Energy Policy by establishing separate entities for generation, transmission and distribution while encouraging private sector participation.

Landman referred to a throw-away comment made by Godongwana over two years ago, which indicated the government’s intention of moving towards a hybrid model, when he said, “what we’ve done with electricity, we are going to do in transport.”

This is exactly what is materialising.

“What is happening now is we’re moving away from that [monopolistic control, and] that movement started in electricity,” said Landman.

“That is exactly where we are now – we are moving from a dispensation where the state is the key player, to a dispensation where a hybrid model becomes the key player,” added the analyst.

[Author]

Posts