Public Private Partnerships Workshop 22 FEBRUARY 2010 INTERNATIONAL CONVENTION CENTRE DURBAN - KWAZULU-NATAL - SOUTH AFRICA

Transcription

1 Public Private Partnerships Workshop 22 FEBRUARY 2010 INTERNATIONAL CONVENTION CENTRE DURBAN - KWAZULU-NATAL - SOUTH AFRICA

2 Public Private Partnerships PPPs in South Africa Regulatory Framework

3 QUOTE The diverse interests of different sectors can in fact, be harnessed for the collective good. This is what PPPs are about. The public gets better, more cost-effective services; the private sector gets new business opportunities. Both are in the interests of the nation. Finance Minister, Trevor Manuel, August 2004

4 Contents What What is is a PPP? PPP? South South African African Regulatory Regulatory Framework Framework for for PPPs PPPs PPP PPP Projects Projects in in Progress Progress Successes Successes and and Challenges Challenges Project Project Development Development Assistance Assistance

5 1. Legal Definition of a PPP A PPP is defined in South African law as: A contract between government institution and private party Private party performs an institutional function and/or uses state property in terms of output specifications Substantial project risk (financial, technical, operational) transferred to the private party Private party benefits through: unitary payments from government budget and/or user fees

6 Output Specifications Degree of Risk Transfer Degree of Risk Transfer Outsourcing Outsourcing Capitalisation is for the Capitalisation is for the Government Account Government Account Government buys specific Government buys specific services but retains risk services but retains risk Fixed and movable assets Fixed and movable assets typically belong to typically belong to Government Government Privatisation Privatisation State assets sold State assets sold State liabilities dispensed State liabilities dispensed Government has Regulatory Government has Regulatory function only function only PPPs PPPs Private Party: Private Party: Finances (whole or Finances most) (whole or most) Designs Designs Builds Builds Operates Operates Government purchases Government purchases complete service and/or complete service and/or enables business enables business Fixed assets belong to Fixed assets belong to Government Government

7 What is a PPP? Conventional Government procurement and maintenance of a building Govt Payment Overruns Capex Delays Opex: Budgeted vs. Actual Time (years)

8 What is a PPP? Unitary Payment example: Govt Payment Construction period No payment Operational period Payment against delivery Time (years)

9 What is a PPP? Generic Project Finance Structure for PPPs Government Government PPP PPP Agreement Agreement Equity Equity Shareholding Shareholding Private Private Party Party (Special (Special Purpose Purpose Vehicle) Vehicle) [SPV] [SPV] Loan Loan Agreements Agreements Debt Debt Subcontracts Subcontracts Subcontractor Subcontractor e.g. e.g. Construction Construction Subcontractor Subcontractor e.g. e.g. Operations Operations

10 2. South Africa s Regulatory Environment for PPPs The South African Constitution provides: When an organ of state contracts for goods or services, it must do so in accordance with a system which is fair, equitable, transparent, competitive and cost-effective. Public Finance Management Act Municipal Finance Management Act

11 Regulatory Environment for PPPs From 1997: decentralised budgeting by each sphere of govt From 1998: 3-year rolling spending plans and 7-year forecasts 1999: Public Finance Management Act: Reduced micro budget management by Treasury National and provincial departments accountable for value-formoney decisions and delivery National Treasury maintains budget oversight, guidance 2000: Treasury Regulation 16 for PPPs; PPP unit established 2003: Municipal Finance Management Act: Consistent financial accountability system for local sphere Provides for municipal PPPs and requires treasury view and recommendations on their feasibility March 2005: PPP regulations for municipalities effective

12 Key PPP Regulatory Features Three tests for a PPP: Affordability Value for money Appropriate risk transfer Applied in a set PPP project cycle: Inception Feasibility Procurement PPP agreement management

13 BEE in PPPs A Code of Good Practice for BEE in PPPs Issued in terms of the PFMA To be issued in terms of the BBBEE Act BEE scorecard in each PPP project, with targets for BEE in private party's Equity Management and employment Subcontracting Local socio-economic impact

14 Contents of National Treasury s PPP Manual Module 1: South African Regulations for PPPs Module 2: Code for BEE in PPPs Module 3: PPP Inception Module 4: PPP Feasibility Study Module 5: PPP Procurement Module 6: Managing the PPP Agreement Module 7: Auditing PPPs Module 8: Accounting Treatment for PPPs Module 9: Introduction to Project Finance

15 3. PPP Projects in Progress

16 4.Successes and Challenges Success Factors Political commitment Clear PPP law, robust project cycle Strong feasibility study standards Clear terms for PPP agreements Early good projects, training, communication BEE impact Strong financial markets, competitive private sector Challenges Increase deal flow Build public sector capacity Strengthen BEE Delegate treasury approvals to provinces Grow municipal PPPs Develop sector-specific toolkits

17 5. Project Development Assistance Project Development Facility- transaction costs of PPP procurement (Feasibility Study) National Treasury and DBSA Facility- transaction costs of Feasibility Study, Procurement and Project Manager

18 Contact Details THANK YOU! Lindokuhle Hlatshwayo National Treasury PPP Unit 240 Vermeulen Street Pretoria South Africa Tel: Fax: