South Africa’s National Infrastructure Plan sets out regional agenda for infrastructure

Out-Law Analysis | 05 Oct 2021 | 1:06 pm | 4 min. read

South Africa’s draft National Infrastructure Plan (NIP) 2050, published in August 2021, has outlined a focus on building a regional agenda for infrastructure.

The NIP (72-page / 1.67MB PDF) also outlines plans to strengthen institutions for delivery and highlights a need to rebuild the civil construction and supplier sector.

These proposals are aligned with the NIP’s aim of addressing institutional blockages and weaknesses that hinder long-term success, as well as enabling delivery on regional projects.

The regional agenda for infrastructure

With a vision of infrastructure cooperation in the Africa region, the NIP proposes to enable not only delivery on regional projects that are beneficial to broader regional development, but also those that are deemed critical to South Africa's needs.

The energy and water sectors are specifically identified as areas to drive this implementation in the near term, with the transport sector identified as an area for development in the medium term. It is acknowledged that, to date, the South African government has prioritised regional infrastructure projects such as the Inga III Hydropower project involving the Democratic Republic of the Congo (DRC), and the Lesotho Highlands Water Project Phase II (Highlands) – projects which are centred on the energy and water sectors.

Despite this prioritisation and global support from international bodies on the Inga project, the NIP emphasises that there are no confirmed offtakers nor committed creditworthy developers. The Inga project also faces various issues in relation to, among other areas, procurement and technical challenges.

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Jason Smit

Partner

The National Infrastructure Plan proposes to enable not only delivery on regional projects that are beneficial to broader regional development, but also those that are deemed critical to South Africa's needs

While the NIP acknowledges the success of the Highlands project, it is also not free from concerns, specifically in relation to the fact that it is running three to six years behind schedule and issues arising from complex engineering and the resulting risks.

In building a regional agenda, the NIP identifies certain conditions for achievement. These include momentum in the roll-out of critical projects and robust regional capacity in driving projects.

The NIP also says: "South Africa and its regional partners must optimise gains from China’s involvement in Africa”. In other words, the NIP aims to gain from foreign infrastructure and determine strategic partnerships with foreign investors in Africa, with more attention to China.

From this, it is clear that the NIP seems to have identified a critical area for opportunity and growth. What remains to be seen is how strategic partnerships will be approached and if the challenges identified at the entry levels will be overcome to achieve successful partnerships.

Strengthening institutions for delivery

A concern in infrastructure delivery is seen by the lack of institutional capability in driving progress. According to the NIP, there is evidence of a diminishing capability to plan, finance and implement critical infrastructure.

Amongst other issues impeding progress, the 2020 National Planning Commission identified significant under-expenditure against annual budgets; cost and time overruns; delayed implementation; ineffective maintenance of existing infrastructure; and a scarcity of bankable projects.

Particularly, there are concerns surrounding 'gaps' in the administrative and regulatory framework in procurement of major infrastructure projects. In addressing this, the NIP again identifies public-private partnerships (PPPs) as a route to development of a successful institutional framework, although this will depend on the ability to engender support for and engagement with PPPs.

From these findings, the NIP aims to develop capacity and an institutional framework in the areas of planning, procurement and execution systems, with the goal of "operating at the highest global standard". Obligations are placed on state institutions to effectively drive a project to implementation. This is justified by apparent reliance on the public sector and state institutions to raise finance and procure services.

Additionally, a strategic approach is envisioned to procurement with a specific focus on value for money, prioritised over lowest cost. Infrastructure South Africa (ISA) is empowered to a large extent to "initiate interventions and advise National Treasury to add conditionalities to budgets linked to the attainment of the Infrastructure Procurement and Delivery Management (IPDM) system milestones to ensure organs of state deliver and to address persistent underperformance in infrastructure procurement and delivery".

This is another example of the NIP attempting to introduce systems of accountability, and also the wide obligations placed on ISA.

Rebuilding the civil construction and supplier sector

The NIP acknowledges that proven anti-competitive and collusive behaviour has had negative effects on governments' role in the construction industry. The robust regulatory systems seen in the sector are also identified as a contributory factor to slow development – there are very strict and specific procedures prescribed in legislation that outline, for example, applications for licences and permits, including the process of review and eventual granting.

In addressing the various concerns on the current state of the construction sector, the NIP proposes building confidence in it through a "transparent and credible pipeline of projects and reformed procurement processes".

This again picks up on two important themes running through the NIP – the idea of transparency and accountability, and a reformed procurement process.

In rebuilding the sector, the NIP proposes that the aim should be to create certainty and confidence in the state by the operation of the IPDM. It is anticipated that there will be many obstacles to achieving this certainty and confidence due to various reasons that the NIP itself outlines.

It is not surprising that the NIP also hopes for a more 'streamlined' regulatory and eventual granting of permits or licences programme, with ISA again being tasked to further the "removal of red tape and work closely with legislative initiatives aimed at easing or reducing the cost of doing business".

In addition, ISA is to enable the development of what is termed a “pipeline of bankable projects”. It is not clear at this stage how bankability of projects will be assessed in practice.

This appears to be a theme of the NIP; there are vast obligations and functions placed on certain bodies but the practical aspect of implementation appears vague at times. Although the NIP itself notes that it is not meant to be comprehensive, the view then turns on the key players in the infrastructure and construction sectors and their promotion of the NIP in implementation and process – something that the NIP aims to monitor through ISA.

Natalie Keetsi and Aliyah Ince of Pinsent Masons contributed to this article.