Out-Law Analysis | 21 Sep 2021 | 9:40 am | 4 min. read
The NIP identifies four critical network sectors – energy, freight transport, water and digital communications – but there needs to be consideration of how it will achieve and implement the infrastructure development that it envisions and promotes.
There is currently a large public focus on infrastructure development and the potential economic recovery benefits which could flow from a large-scale infrastructure project. Organs of state have also been taking initiatives in moving towards sustainable infrastructure development.
The NIP’s publication and its stated aim of reducing South Africa's reliance on coal-fired power stations has already been followed by the announcement by state-owned energy company Eskom that it will close several coal-fired power stations in the coming months and years, and seek to reduce coal-fired power generation by up to 12 GW by 2031.
It will be interesting to see whether South Africa takes advantage of the increasing global trend toward modern industrialised construction methods and philosophies
Patricia de Lille, the minister for public works and infrastructure, also recently announced that a number of infrastructure projects are in development. Additional infrastructure projects that are part of the government's national infrastructure plan include a digital infrastructure initiative and a number of transport, energy and water projects. These coincide with the four critical network sectors identified by the NIP.
The NIP boldly asserts that capacity will be in place to sustainably fund and finance infrastructure build and maintenance, thereby placing sustainable financing as a core element in achieving various NIP visions. The idea is to promote private sector infrastructure investment, with an efficient procurement framework that delivers both on-budget general government procurement, as well as public-private partnerships (PPPs).
The NIP identifies a negative trend in spending by general government on infrastructure which supposedly indicates pressure on budgets and capacity shortages in the public sector. Between 2015 and 2019, this spending fell from 3.5% to 2.7% of GDP, while spending on state-owned enterprises fell from 3.8% to 2.7%.
To ensure sustainable financing, the NIP proposes various strategic elements. The concept of a full life-cycle planning approach to infrastructure projects is seen as a strategy to show the "real costs weighed against the multi-decade benefits of a potential project".
A reform of the PPP framework is also proposed to reduce costs and complexities, with the overall goal of engendering public sector engagement to maximise value. The concept of a life cycle approach is popular globally, as it examines environmental impacts over a project’s entire lifetime.
Another element that the NIP proposes is the minimisation of risks through project designs. Finance risks are to be tailored on a project specific basis, with government "absorbing low probability risks to ensure projects are bankable".
Operational risks are attributed to the private sector, and demand risks to either the private or public sector. This element will undoubtedly require institutions to take care when drafting requests for proposals, and later, for parties to contracts to carefully consider the drafting of the contracts in infrastructure projects in order to ensure risk allocation in line with the NIP.
It will be interesting to see, as time progresses, whether these stated objectives take advantage of the increasing global trend toward modern industrialised construction methods and philosophies which contemplate new and innovative approaches to offsite modular fabrication of components and a shift from full on-site construction activity.
As the NIP is framed as a long-term plan to ensure infrastructure development, it clearly states that the development of capacity and systems to drive its implementation will be on an ongoing basis. An obligation is placed on Infrastructure South Africa (ISA) to monitor the NIP's implementation.
At the outset, the NIP notes that South Africa is not currently inclined to make infrastructure-related information available to the public. Unsurprisingly, this makes it difficult for organs of state to be held accountable to the public, and to enable the infrastructure sector to make informed decisions on capital in planning, design and delivery stages.
This lack of readily accessible information could also be tied into the fact that the NIP aims to promote the concept of PPPs to stimulate engagement – there is not enough information available for the public to see the benefit of PPPs generally.
To achieve the goal of monitoring and maintenance, the NIP proposes to establish a 'publicly accessible single database' managed by ISA.
The information in the database will be provided at a high-level, mission critical basis and contain details on the development and implementation of the NIP. This will include "critical institutional reforms, capacity development and major infrastructure projects, in particular strategic integrated projects (SIPs)".
ISA is to develop guidelines on the information required by government agencies which they will be obligated to 'report into' the database. The NIP said this information will be limited to that which organs of state are already producing as part of existing reporting requirements.
Additionally, ISA will be guided by legislation in developing these guidelines. The NIP makes a clear attempt to avoid burdening government agencies by clarifying that ISA will use existing performance reports to collect information.
It is clear that the main goal in establishing the database is to make the information that it will contain accessible to the public. As the information will be 'high-level', it will be interesting to consider if it will be readily interpretable by the public.
ISA will be required to report quarterly and annually, on the development and implementation of the NIP. The NIP indicates that ISA will also be empowered, by what seems to be a large extent, to "act on major areas that require course correction". It is not yet clear what this could entail or how ISA would evaluate which areas or projects require 'course correction'.
Construction experts Natalie Keetsi and Aliyah Ince of Pinsent Masons, the law firm behind Out-Law, contributed to this article
23 Aug 2021