Details of R340bn infrastructure and energy project pipeline

Government has identified the first Strategic Integrated Projects (SIPs) and a methodology to speed up their implementation, with the aim of accelerating delivery of infrastructure investment to assist with economic recovery

On 27 July ​2020, the Minister of Public Works and Infrastructure (Department), Patricia de Lille (Minister), announced that 50 infrastructure projects and an additional 12 special projects had been gazetted as SIPs in terms of the Infrastructure Development Act No. 23 of 2014, as amended (Act). The gazette can be viewed online here.

This note provides key takeaways on the background, summary and implications of those SIPs.

Background

In May 2019, government was reconfigured, and the function of infrastructure co-ordination was assigned to the Department of Public Works, now called the Department of Public Works and Infrastructure.  This restructure resulted in the Department assuming coordinating responsibility for all public infrastructure development, in addition to its existing responsibilities.  This is also consistent with South Africa's Economic Growth Strategy, which asserts that infrastructure-led economic growth is the most effective and significant path to growing the economy, while responding to socio-economic needs.

On 18 February 2020, President Ramaphosa convened a meeting with commercial banks and development finance institutions to assess progress in intensifying infrastructure investment. At this meeting, which was held in preparation for the Sustainable Infrastructure Development Symposium South Africa (SIDSSA), three opportunities were addressed. These were: (i) identifying a credible project pipeline of infrastructure projects that are ready and bankable for investment and implementation; (ii) developing a comprehensive, focused infrastructure plan; and (iii) addressing the fragmentation of infrastructure delivery. A Sustainable Infrastructure Development System (SIDS) methodology was formulated to review proposed projects against the opportunities tabled at the meeting.  On 23 June 2020, the inaugural SIDSSA was held, where it was announced that 276 infrastructure projects had been reviewed against the SIDS methodology. Only 55 projects and 12 special projects were considered to be compliant.

On 27 July, the Minister addressed the nation, noting that South Africa, like many other nations, is in the process of managing a recession due to the Covid-19 pandemic, the effects of which are being felt hardest by the construction sector. The pandemic, coupled with the recession, has created an urgent need to invest in and develop infrastructure and generate jobs.  The first 50 projects emanating from the SIDS process and an additional 12 special projects were gazetted on Friday 24 July 2020 as SIPs, in terms of section 8(1)(a) read with section 7(1) of the Act.

The Impact of Gazetted SIPs

The development and implementation of any project is expedited once it is gazetted as a SIP in terms of the provisions of the Act.  Section 7 of the Act provides that a project or group of projects qualifies as a SIP if they comprise one or more installations, structures, facilities, systems, services or processes relating to any matter specified in Schedule 1 of the Act or added to it, as the Council1 may decide and has published by notice in the Gazette.  It must also be of significant economic or social importance, contribute substantially to any national strategy or policy relating to infrastructure development, or be above a certain monetary value determined by the Presidential Co-ordinating Commission (Commission).  A SIP may include infrastructure which is not public infrastructure, provided the owner consents.

According to SIDS methodology, once a project is gazetted as a SIP, the department, province, municipality or state-owned enterprise can utilise the expedited mechanisms in the Act and the Commission’s structures will be required to facilitate the process to expedite delivery.

The Gazetted SIPs were divided into six sectors:  (i) Water and Sanitation, (ii) Energy, (iii) Transport, (iv) Digital Infrastructure, (v) Agriculture and Agro-processing and (vi) Human Settlements. They are detailed below:


  • Strategic Integrated Project No 19: Water and Sanitation: a total of 11 water and sanitation projects were gazetted, with an estimated value of ZAR 106 billion, spanning all provinces, with the potential to create 5 000 jobs. One of the gazetted Water and Sanitation SIPS, Phase 2A of the Mokolo Crocodile Water Augmentation Project ("MCWAP-2A") in Limpopo, will increase water supply in the Lephalale region. The water provided by the MCWAP-2A will be used as a second source for the Medupi and Matimba Power Stations, which will also help to meet the growing demand for water in Lephalale Municipality.
  • Strategic Integrated Project No 20: Energy: a total of three energy sector projects were gazetted, with an estimated value of ZAR 58 billion and the potential to create 6 000 jobs. The projects include (i) the IPP Office's emergency power programme involving the development, installation, and operation of a total aggregate of up to 2 000 Megawatts (MW) of new generation capacity from independent power producer projects; and the (ii) GCF-DBSA Embedded Generation Investment Programme (“EGIP”) which will facilitate the provision of credit support for private renewable energy projects backed by non-sovereign offtakers, up to a capacity of 330 MW, consisting of 280 MW of solar PV and 50 MW of wind.
  • Strategic Integrated Project No 21: Transport: a total of 15 projects in the transport sector were gazetted, with an estimated value of ZAR 47 billion and the potential to generate 50 000 jobs.
  • Strategic Integrated Project No 22: Digital Infrastructure: a single project was gazetted for the digital sector, with an estimated value of ZAR 4 billion and the potential to create an estimated 700 jobs. The space infrastructure Hub for National Development will allow for the development of satellite infrastructure, satellite-based augmentation systems, and earth observation satellites.
  • Strategic Integrated Project No 23: Agriculture and Agro-processing: two projects were gazetted in the agriculture and agro-processing sector, with an estimated value of ZAR 7 billion and the potential to create an estimated 4 000 jobs.
  • Strategic Integrated Project No 24: Human Settlements: 18 projects were gazetted in the human settlements sector, with an estimated value of ZAR 138 billion and the potential to create an estimated 190 000 jobs.  An example of the proposed human settlement projects is the Mooikloof Mega Residential City Project, one of the few coming straight from the private sector, demonstrating the ability of the SIDS process and methodology to deal with projects from both the private and the public sectors.

In addition to these projects, the 12 special projects intend to create much-needed jobs and assist in skills development for many of the most vulnerable communities which were the hardest hit by the economic impact of the Covid-19 pandemic.  The Minister emphasised that these SIPs are intended to be rolled out at grassroots level and that stakeholder and community ownership will be required at the outset of the process.

Designation and implementation of SIPs in accordance with the Act

Sections 8 and 17 and schedule 2 of the Act set out the general processes for implementing SIPs.  Section 8 provides that if the Commission2 designates a SIP, it must determine whether the state has the capacity to implement the project or whether all or part must be put out to tender or procured in line with the Public Finance Management Act no 1 of 1999 (as amended).  Once the Commission confirms that a SIP must be implemented and put out to tender, the minister responsible for the relevant portfolio will be obliged to request the relevant accounting officers to do so.  The request to the relevant accounting officer must be made in consultation with the Members of Cabinet responsible for the portfolios under which the infrastructure components fall.  We expect that many of the SIPs will be developed on a public private partnership (PPP) basis or at least in accordance with PPP principles.

Any processes relating to the implementation of a SIP, including processes relating to any application for any approval, authorisation, licence, permission or exemption and processes relating to any consultation and participation required by the relevant laws must, as far as possible and in order to expedite the matter, run concurrently. The Minister cautioned that many of the projects will be implemented over more than one financial year.

Schedule 2 of the Act details the framework and timeline for the implementation of any SIP as follows:


  • Step 1: the applicant will have 7 days in which to submit an application and project plan, measured from when it was approved by the steering committee.
  • Step 2: there will be a 30-day period for public consultation on the application and project plan.
  • Step 3: there is a 52-day period for application and project plan to be amended and submitted to the relevant authority for consideration and approval.
  • Step 4: there is a 60-day period for submission to the relevant authority of a detailed development and mitigation plan based on an approved project plan.
  • Step 5: there is a 44-day period for public consultation on the development and mitigation plan and its review by the relevant authority.
  • Step 6: there is a 57-day period for relevant authority to consider and assess the development and mitigation plan and make a final regulatory decision.

In addition to the requirements of the Act highlighted above, the Minister advised that the Presidential Infrastructure Coordinating Commission (PICC) secretariat approved the establishment of a single steering committee, which will ensure that all approvals, authorisations, licences, permissions and exemptions are expedited within shortened, concurrent timeframes.  The details of this process will be discussed at the proposed inaugural PICC meeting on Thursday, 30 July 2020.  The Minister said that SIP co-ordinators have been identified and they will, together with the private sector, be expediting the implementation of these infrastructure projects, which have now been gazetted as SIPs.

Conclusion

We hope that the process of gazetting the first SIPs will prioritise implementation and help to unblock the mechanisms, whether technical, financial, legal or administrative, that have hindered efficient infrastructure delivery in the past.  A key consideration for the private sector will be how the relevant Government stakeholders will expedite delivery of a PPP project, once the plan for the project is approved. Approvals may be expedited, but the timing associated with making robust and commercially-sound decisions will still be one of the key determining factors in making these projects a success.

It is encouraging that all the SIPs will be monitored in accordance with the Act, ensuring that there is visibility and accountability in the implementation process.


1 Council of the Commission.

2 Presidential Infrastructure Co-ordinating Commission