Treasury speed bump to be removed to speed up infrastructure projects

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Minister of Public Works and Equipment Patricia de Lille.

  • Projects currently have to be approved through the Treasury’s Infrastructure Budget Facility (BFI), but this has caused delays.
  • A new “exemption” is being considered to circumvent the BFI process.
  • The Infrastructure Fund will now be listed as a budget item and will be subject to a vote.

More and more red tape is being removed to speed up the implementation of infrastructure projects.

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Public Works and Infrastructure Minister Patricia De Lille and the Head of Infrastructure South Africa (ISA), Dr Kgosientsho Ramokgopa, provided an update on Tuesday on the progress of the investment plan in infrastructure. They addressed issues such as project funding and efforts to overcome delays.

Investment in infrastructure is essential to stimulate economic growth and job creation, as outlined in the economic reconstruction and recovery plan. It includes 62 projects across the country – which are at various stages and are being implemented by different ministries and public companies. The Ministry of Public Works and Infrastructure (DPWI) and ISA are the coordinators of the plan and are working to raise funds outside the fiscus.

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The government has committed 100 billion rand over 10 years to the Infrastructure Fund, which is housed within the Development Bank of Southern Africa (DBSA). The provision of public finance reduces project risk and makes it attractive for further private sector investment.

Over the next three years, R24 billion has been allocated to the Infrastructure Fund, for blended finance projects.

Currently, the Infrastructure Fund receives bids for projects that require blended finance, Ramakgopa explained. These submissions are evaluated by the Infrastructure Investment Committee, chaired by De Lille.

The committee includes private sector actors and chief executives of key departments such as human settlements, national treasury, mineral resources and energy. The committee reviews projects and approves them for blended funding – from the Infrastructure Fund and the rest to be raised from the private sector.

But even after this process, projects still have to go through the National Treasury’s Infrastructure Budget Facility (IBF) for approval for public financing from the Infrastructure Fund.

Among the projects submitted to the BFI are four student accommodation infrastructure projects – with a cost of over R3 billion. The BFI has approved R900 million from the Infrastructure Fund for these projects, over two financial years. The R1.1 billion social housing scheme was also considered by the BFI, which approved R304.5 million over two years.

The R4.5 billion Lepelle Northern Water project has been approved for R1.4 billion over three fiscal years.

De Lille said the BFI process had caused a lot of delays:

“Towards the end of last year I started making noise. I took it to Cabinet, I took it to the new finance minister and I said, ‘This is not the case”. This delays implementation and gets blended funding from the private sector. .”

As a step towards a solution, Finance Minister Enoch Godongwana agreed to list infrastructure as a separate line item. There will be no need for these strategic infrastructure projects to go through the BFI to save time and speed up their implementation, De Lille said.

Ramakgopa then unveiled the significance of the change. He explained that the BFI meets in August each year and that projects are subject to the “same level of scrutiny” to which they were subjected under the Infrastructure Investment Committee process. It is essentially a duplication.

Although R100 billion is available on paper through the Infrastructure Fund, it is subject to the BFI process, he said. “Our view was to create a special waiver so that there would be a dedicated budget vote for the Infrastructure Fund,” Ramakgopa said.

He added that the BFI is not abolished; social projects for example, can still go through the process. The aim is to ensure that infrastructure projects are considered for blended finance as they are ready – instead of waiting until August each year. “In this way, we are able to accelerate the [project] gas pipeline,” Ramakgopa said.

Ramakgopa said details of how the funding will be made available are still being determined. Options include having the funds as a credit with the treasury. So, when the infrastructure investment committee approves projects for blended finance, the Treasury can be approached to make an allocation from the earmarking. The other option is to have a DBSA allocation set aside for this purpose, he explained. The legal ramifications of either option are under consideration.

Until the new waiver takes effect, it is proposed in the meantime that the BFI will not have to wait until August to review the projects, Ramakgopa said.

De Lille said it had been a “sharp learning process”. “If you want blended finance, the private sector won’t sit back and wait for the budget facility to come together once a year. They’ll take their money elsewhere. That’s part of cutting red tape and bureaucracy. in government,” De Lille said.

De Lille added that the impact of this change will contribute to faster implementation of infrastructure projects by helping them to obtain blended finance more quickly.

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