The Public-Private Partnership Law Review: South Africa
Public–private partnerships have been used as a means of procuring public infrastructure, fulfilling government and parastatal service obligations and generating energy in South Africa since the late 1990s. During the late 1990s and until 2010, the PPP model was used constantly in the national, provincial and even municipal spheres of government to develop capital intensive infrastructure, namely national and provincial toll roads, hospital facilities, prisons, government office accommodation and rapid rail transit systems. During this period, the Gautrain Rapid Rail System was undertaken as a provincial PPP; the Bakwena Platinum Corridor Toll Road and other toll roads were undertaken as national road PPPs and the Chapman's Peak Toll Road was undertaken as a provincial road PPP. Various government head office projects were undertaken as PPPs for serviced accommodation, such as the Department of Environment head office. PPPs in the prison sector were undertaken in the form of the Mangaung Correctional Facility and the Louis Trichardt Correctional Facility. PPPs were carried out in the hospital sector, such as Inkosi Albert Luthuli Central Hospital.
However, since 2010, the PPP model has shifted away from its previous focus on the sectors listed above to focus on the independent power producer (IPP) sector, with the primary focus being the Renewable Energy IPP Procurement Programme,2 which was launched in August 2011 and under which four separate procurement rounds have been conducted, resulting in the procurement of 64 projects, investment of US$14 billion by the private sector in these projects and the procurement of 3,922 megawatts (MW) of renewable energy.3
For the foreseeable future, the IPP sector will continue to be an area of PPP activity.
In addition, renewed activity is expected in respect of PPPs focusing on infrastructure during 2021 and 2022, with the National Treasury website listing a number of PPPs that are in various stages of procurement.4
The principles applicable to the procurement of PPPs of all forms are set out in Section 217(1)5 of the Constitution, which states that, when an organ of state in the national, provincial or local sphere of government, or any other institution identified in national legislation, contracts for goods or services, it must do so in accordance with a system that is fair, equitable, transparent, competitive and cost-effective (the five principles).6 These five principles are repeated in the two pieces of general legislation that govern the conduct of the three tiers of government, and the state-owned enterprises and agencies (SOCs) in the three tiers of government, namely the Public Finance Management Act,7 which governs the national and provincial tiers of government8 and the SOCs in those two tiers;9 and the Local Government: Municipal Finance Management Act,10 which governs the municipal or local tier of government and the SOCs in the municipal sphere.11
Regulations12 promulgated under the Public Finance Management Act (namely, the Treasury Regulations), set out, in Regulation 16 (called Treasury Regulation 16) thereof, the requirements and rules to be satisfied in respect of PPPs in the national and provincial spheres. These requirements and rules are mandatory and prescriptive. Likewise, the Municipal Public–Private Partnership Regulations13 set out the requirements and rules to be satisfied in respect of PPPs in the municipal spheres, which requirements and rules are also mandatory and prescriptive.
The government uses public procurement to drive forward its policy of broad-based black economic empowerment and the development of the local economy through the requirements to procure goods and services within South Africa (namely, localisation). This is particularly the case in respect of PPPs, in respect of which the requirements for black economic empowerment and the localisation can be greater that the requirements imposed generally on economic activities outside of PPPs. The legislation that drives forward this agenda comprises the Preferential Procurement Policy Framework Act14 and the Preferential Procurement Regulations15 promulgated in terms of that statute, and the Broad-Based Black Economic Empowerment Act16 and the various codes of good practice on broad-based black economic empowerment17 that are promulgated under that statute, including a code that is specific to PPPs.18
In addition to the legislation detailed above, sector-specific legislation may also apply to the relevant PPP. Often, this legislation sets out procurement requirements and principles that apply in addition to the requirements set out in Treasury Regulation 16 and need to be reconciled with the requirements of Treasury Regulation 16. Examples of this legislation are the Electricity Regulation Act19 (in respect of IPPs), the provincial legislation in respect of hospitals, the Correctional Services Act20 (in respect of prison PPPs), the provincial legislation applicable to roads and railway lines, and the legislation that creates and governs the various SOCs, such as Eskom SOC Ltd and Transnet SOC Ltd. In respect of municipal PPPs, the requirements of the Local Government: Municipal Systems Act21 (which sets out various processes that are applicable to the entry into contracts by municipalities that need to be reconciled to the Municipal PPP Regulations and the provisions of the Municipal Finance Management Act) will also need to be fulfilled.
The year in review
There were two main developments in the PPP sector in the past 12 months. The first was the announcement in March 2021 of the successful preferred bidders in respect of the Risk Mitigation IPP Procurement Programme (RMIPP PP),22 which seeks to procure 2,000MW of new generation capacity from a range of energy technology sources. Initially, eight preferred bidders were announced and subsequently, an additional three preferred bidders were announced. Initially, commercial and financial close required to be achieved four months after the announcement of the preferred bidders, in July 2021.23 This was subsequently delayed to September 2021 and is now expected to occur in the first quarter of 2022. Commercial and financial close have been delayed due to the launch of litigation proceedings in the High Court of South Africa by an unsuccessful bidder, challenging the disqualification of its projects and the award of preferred bidder status to the three projects successfully bid by Karpowership. The matter was argued in late November 2021 and judgment is expected to be handed down imminently. In addition, the Parliamentary Portfolio Committee on Energy has announced the launch of an enquiry into allegations of corruption and impropriety in the RMIPP PP. Neither this enquiry nor the High Court judgment are anticipated to delay the achievement of commercial and financial close in respect of the majority of the preferred bidders in the RMIPP PP during the first quarter of 2021.
The second main development was the launch of the Renewable Energy IPP Procurement Programme Round 5 (REIPP R5)24 in March 2021 for 2,600MW, with the bids being submitted in August 2021 for evaluation. REIPP R5 was limited in respect of technology to solar PV and onshore wind. The preferred bidders were announced on 28 October 2021, with 25 preferred bidders being announced25 for a total of 2,583MW. These projects are expected to achieve commercial and financial close in April 2022.
We are still awaiting the launch by the Department of Energy of the sixth round of the Renewable Energy IPP Procurement Programme for 2,600MW and the seventh round for 1,600MW. At present, there is no certainty as to when these rounds will be launched. There is also no certainty as to when the other IPP procurement programmes, namely the procurement of approximately 500MW of energy storage, done as IPP projects, and the procurements of 1,500MW of coal-fired power projects and 3,000MW of gas-fired power projects, as IPP projects, will be launched.26 There has obviously been slippage from the originally announced launched dates.
In addition, there seems to be movement in respect of the long anticipated PPP for various border posts in South Africa, with potential bidding consortia firming up and tentatively appointing transaction advisers. We await further developments on this PPP.
Progress has not been as swift in respect of the Kopanong Precinct Project PPP as originally expected, primarily due to the impact of the covid-19 pandemic and the lockdowns of various levels that have been imposed from time to time.
Further, we await further developments in respect of the draft Public Procurement Bill that was launched for public comment on 19 February 2020. Due to the impact of the covid-19 pandemic and the various types of lockdown that have been put in place from time to time, there has been an inevitable slowdown in the progress of this bill.
The PPP regimes continue to hold up well under the strain of the covid-19 pandemic, with affected PPP project companies continuing to be treated fairly and equitably by the relevant government institutions, when the PPP project companies seek relief under the relevant contractual regimes, and all parties to the PPPs continue to comply with the various contractual regimes, which are still proving robust enough to withstand the tests imposed by the covid-19 pandemic. As yet, the position remains that none of the PPP project companies have been driven into business rescue or liquidation as a result of the covid-19 pandemic.
i Types of public–private partnership
PPPs in South Africa can be divided into three broad categories:
- PPPs that are done by departments of national or provincial governments, by municipalities or by SOCs, all of which are required to comply with Treasury Regulation 16 or the Municipal PPP Regulations (traditional PPPs);
- major commercial enterprises that are SOCs such as Eskom, Transnet and SANRAL,27 which either have an exemption from compliance with Treasury Regulation 16 or are not required to comply with it in terms of the legislation (SOC PPPs); and
- IPPs, which, because Eskom is the buyer of the electricity generated, do not need to comply with Treasury Regulation 16, even though the Department of Mineral Resources and Energy conducts the procurement processes (IPPs).
The differences between these three broad categories can be further categorised as follows: differences in the procurement regime that has to be followed in terms of the legislation; the financial support available from the National Revenue Fund for the PPP; and the contractual form and terms used for the PPP agreement.
Traditional PPPs have to comply with the comprehensive and detailed processes contained in either Treasury Regulation 16 or the Municipal PPP Regulations. SOC PPPs have to comply with the supply chain management rules established by the company or agency concerned, which rules must comply with the broad perimeters of the five principles. Finally, IPPs have to comply with the procurement process contained in the New Generation Regulations.28
Traditional PPPs and IPPs benefit from financial support from the National Revenue Fund. SOC PPPs generally do not benefit from such support, relying instead on the balance sheet of the relevant state-owned company or agency.
Traditional PPPs have to comply as closely as possible with the contractual terms and form set out in the Standardised Public–Private Partnership Provisions (Standardisation),29 while SOC PPPs may use contractual terms and forms that are settled by the relevant SOC and IPPs use power purchase agreements that comply with international practices in respect of contractual terms and forms.
During the past 12 months, there have been no ground-breaking or seismic movements in the structures applied to PPPs, but there is a continual reconsideration of the traditional structures and manner of procurement to create greater flexibility and unlock greater values. Hence, we see the RMIPP PP documents build on and modify the renewable energy independent power producer procurement programme (REIPP PP) documents in an attempt to give developers of PPPs and IPPs more flexibility but also to lessen the burden on the National Revenue Fund.
ii The authorities
National Treasury (as the department or ministry of finance is called) is the overarching authority involved in all PPPs to a greater or lesser extent. In respect of traditional PPPs and IPPs, National Treasury is deeply involved in the PPP process and the final approvals, as the National Revenue Fund is bound to support the obligations of the relevant government department and SOC. In respect of SOC PPPs, National Treasury is involved to a far lesser extent and might not be involved at all in a PPP that does not seek any financial support from the National Revenue Fund. However, National Treasury has final financial oversight over all state-owned entities and, ultimately, it has knowledge of all SOC PPPs.
The PPP Unit, which sits in the Government Technical Advisory Centre,30 serves a regulatory and technical assistance function to public institutions throughout project feasibility, procurement and management. It is always deeply involved in all traditional PPPs and is often invited to participate in SOC PPPs by the relevant SOC. It is less involved in IPPs, although it is often consulted during the course of the conduct of the procurement of the IPPs.
The governmental department or state-owned entity that is undertaking the PPP (or both) has overall responsibility for the structuring of the PPP and the conduct of the procurement process and the operation of the PPP once procured. In the case of IPPs, both the Department of Energy and Eskom are involved in the structuring, procurement and operation of the IPP.
If a PPP is being conducted by a provincial government, the relevant provincial treasury will also need to be involved in the ultimate approval of the PPP and the consent to binding the National Revenue Fund in respect of that PPP.
iii General requirements for PPP contracts
There are no limitations on the financial value of the projects that can be undertaken as PPPs; nor are there generally any requirements as to the term of a PPP. Accordingly, the term of a specific PPP can be for a period that is appropriate financially and is acceptable in terms of the government's requirements. The one exception is in respect of PPPs for correctional services, which are limited to an operation term that does not exceed 25 years.31
It is fundamentally important that there is strict compliance with each stage of the procurement process and that all approvals that are required to be obtained at each stage are obtained before the next stage commences. It is not possible to go back and complete a stage or obtain an approval retrospectively, and failure to comply with each of the stages and obtain the requisite approvals in order of precedence will render the procurement and the resultant contract award and signature void.32 On the completion of each stage of the procurement of a national or provincial PPP in terms of Treasury Regulation 16 and at the municipal level in terms of the Municipal Public–Private Partnership Regulations, an approval is required to be issued, and the procuring institution may not move onto the next procurement stage until the required approval has been issued in respect of the previous stage.
The requirements in respect of all PPPs, regardless of their nature, is that a feasibility study is conducted to ascertain:
- whether the proposed PPP can be undertaken by the private sector;
- that it will provide value for money;
- that it will be affordable and that there will be appropriate technical, operational and financial risk to the private sector;33 and
- that the benefits of the private sector undertaking the proposed PPP outweigh the benefits of the public sector itself undertaking the proposed PPP.34
Often, a public sector comparator is required to determine if it would be more cost-effective for the PPP to be undertaken by the public sector.35
Prior to the procurement of any IPPs, the Minister of Mineral Resources and Energy has to issue a determination in terms of Section 34 of the Electricity Regulation Act, declaring that the new generation capacity will be procured and whether it will be procured from Eskom SOC Ltd or IPPs.36
In addition, if the National Revenue Fund or a provincial revenue fund is to be bound in respect of any PPP or IPP in respect of any future financial commitments, consents from the Minister of Finance (at a national level) or from the Member of the Executive Council for finance (at the provincial level) will be required in terms of Section 66 of the Public Finance Management Act. In addition, consent from the Minister of Finance in terms of Section 70 of the Public Finance Management Act is required in respect of any guarantees or indemnities that bind the National Revenue Fund or a national public entity. Furthermore, a SOC must obtain its board approval, in terms of Section 66 of the Public Finance Management Act, to bind itself to future financial commitments.
Bidding and award procedure
It is a general requirement of the five principles that tenders are competitive and transparent processes. Accordingly, usually the procurement of a PPP commences with a public invitation, published in the local and often the international press, inviting interested parties to participate in the procurement process. It is possible to deviate from the requirement for a public invitation in limited circumstances, for example, where there is a panel of suppliers (who themselves have to have been selected through a process thrown open to the public at large and worldwide) or there are limited suppliers of the goods or services being sought (such as the suppliers of second-hand trains that will fit the gauge of the existing rail system).
By virtue of the application of the five principles, the procurement of a PPP has to be governed by the legislation applicable to the procurement of PPPs (which sets out the general principles and requirements but not the finer detail of the procurement) and by the terms of the tender documents issued in respect of the procurement of the PPP. The tender documents have to set out in the greatest detail possible, to comply with the five principles, the following:
- the objectives and requirements of the procurer in respect of the PPP;
- the requirements that need to be satisfied in respect of the PPP to be successful;
- the terms of the procurement, how the procurement will be conducted, and the manner and format for the submission of bids;
- the evaluation criteria and how those criteria will be measured;
- how the evaluation will be conducted; and
- the criteria and measurement formula used for selecting the successful bidder.
The procurer has the flexibility to determine and structure all of the above elements as it requires in the context of the relevant PPP, provided that it complies with the five principles and the requirements of the legislation.
Usually, and certainly in all traditional PPPs and IPPs, the terms of the contracts that will be executed are included in the tender documents. Sometimes, in respect of SOC IPPs undertaken by specific SOCs or their divisions, the terms of the contracts are not included in the tender documents and the contracts are drafted and negotiated once the successful bidder is selected.
As a result of the five principles, it is not possible for the procurer to deviate from the tender documents that have been issued, other than by way of written briefing notes that are issued to all bidders and that are issued in sufficient time before the bid submission date so as not to prejudice any bidder.
i Expressions of interest
Once the invitation has been issued, the procurement process often commences with a request for qualification (RFQ) tender document. The purpose of this document is to invite interested parties to pre-qualify to participate in the procurement of the PPP. In the RFQ process, interested parties will be requested to submit details of their credentials, expertise and experience, showing that they would be able to fulfil the requirements of and execute the relevant PPP successfully. Those parties that are successful at this stage are pre-qualified to participate in the rest of the procurement, and they will be permitted to receive the request for proposal documents (RFP) and to submit a bid response in respect of the RFP.
Generally, it is not possible for one entity on its own to fulfil all the requirements for a PPP, and bidders usually take the form of a consortium comprised of a number of entities with complementary skills and who together satisfy the requirements. The RFQ stage gives interested parties the time to form such consortia.
Sometimes, the RFQ stage is jettisoned and the procurement process starts with the request for proposal stage. This approach has had mixed success, with the most successful example of this approach being the REIPP PP, which has been emulated in subsequent IPP procurement processes. In this process, the RFP is issued to all parties who request it (sometimes, after paying a fee to receive the RFP, which is aimed at winnowing out entities who do not have the financial resources to undertake the PPP).
ii Requests for proposals and unsolicited proposals
Once the RFP process has commenced, as outlined above, the persons who have received the RFP are permitted to submit bid responses in response to the RFP by the specified deadline.
The government does not look favourably upon unsolicited bids and generally discourages them. National Treasury has issued a practice note37 setting out how institutions are to deal with unsolicited bids. The practice note sets out when institutions presented with unsolicited bids should consider them and how an unsolicited bid should be taken forward. If the unsolicited bid provides a product or service that is unique, innovative and provided by a sole provider, the institution may enter into direct negotiations with the proponent outside of the normal competitive bidding process.38 In respect of all other unsolicited bids, if the institution decides to proceed with them, it is required to do so using the relevant competitive procurement processes, which is Treasury Regulation 16 in the case of an unsolicited PPP bid.39
For a while, SANRAL permitted unsolicited bids in respect of national toll roads, using a process that was substantially the same as the process set out in the practice note issued by National Treasury, but it would appear that it no longer accepts unsolicited bids.
iii Evaluation and grant
As stated above, the evaluation has to be conducted strictly in accordance with the written rules, terms and procedure set out in the tender documents, in respect of both the RFQ and the RFP stages. It is not permitted to deviate in any way whatsoever from the RFQ and RFP (as may be amended by briefing notes).
The evaluation rules, procedures and requirements in the RFQ and RFP are drafted so as to be completely objective and to remove all possible subjectivity from the process.
Usually, the evaluation is undertaken by the external transaction advisers appointed to advise the procurer in respect of the PPP procurement. Once the transaction advisers have completed their evaluations, they present their findings and recommendations to the procuring institution, who will have convened a bid evaluation committee (BEC), a bid adjudication committee (BAC), or both. Best practice is for the procuring institution to establish both a BEC, to whom the evaluators report, and then a BAC, to whom the BEC in turn reports and makes recommendations.
The purpose of the BEC and BAC is not to consider the report and recommendations of the evaluators and then substitute their own decisions and recommendations for those of the evaluators. The BEC's purpose is to test the evaluators' report and recommendations against the RFQ or RFP document (whichever is relevant) and the five principles to ensure that there is no deviation from any of those documents and principles in respect of the evaluation processes, outcomes and recommendations, and for the BAC to undertake the same testing of the evaluators' reports and recommendations and also of the BEC's recommendations to it. The BEC or BAC, or both, will, after further analysis and possible reworking of some aspects of the evaluation that might have gone astray, endorse the recommendations of the evaluators. At all times, the five principles are observed and upheld.
It is possible that negotiation of the PPP agreement will be permitted, specifically in traditional PPPs and SOC PPPs. If negotiation is permitted, it is strictly against the mark up of the PPP agreement that was included in the bid submission by the preferred bidder. The rules in respect of the mark ups that will be permitted are usually detailed and prescriptive. No additional points of principle or drafting that were not included in the bid submission will be allowed to be raised by the preferred bidder.
Generally, the agreements in respect of IPPs are not permitted to be marked up and are not subject to any negotiation at any stage of the procurement process.
There are two types of revenue and remuneration in respect of PPPs. The first type takes the form of a payment from the institution to whom the services or goods are supplied. This payment will take the form of a fixed unitary payment against the provision of services at the required standards, or payment for a good supplied at a fixed tariff per unit. There could be a mixture of these two forms of payment, for example in a baseload IPP.
The PPP agreement will set out a regime for deductions and penalties in situations where the services or goods are not provided at all or are provided late or are substandard. Where payment is for goods supplied, usually non-supply results in no payment being due.
The second type takes the form of the collection of revenue from end users of the infrastructure and services supplied as part of the PPP. These PPPs are generally found in the transportation sector, such as rail, toll roads and port facilities. In this second type, non-performance or unsatisfactory performance is usually penalised by the imposition of penalties by the procuring institution.
ii State guarantees
Generally, traditional SOCs and IPPs all benefit from some form of financial support from National Treasury and have recourse to the National Revenue Fund. In respect of IPPs, the Department of Energy issues a form of support for Eskom's obligations, which is not called a guarantee but is de facto a guarantee.
However, SOC PPPs generally do not have financial support from the national government; nor do they have recourse to the National Revenue Fund. The recourse for a SOC PPP is to the balance sheet of the SOC undertaking that PPP.
iii Distribution of risk
As stated above, a key feature of all PPPs is that there must be an 'appropriate technical, operational and financial risk to the private sector'.40 This principle is reflected in standardisation, and the public sector tends to take an aggressive view as to the risks that can be transferred to the private sector. For example, the definition of force majeure is very narrow (albeit it is somewhat wider in IPPs), with no compensation or payment during the duration of a force majeure or relief event, as the private sector is expected to manage the consequences of events outside its control. In addition, relief and compensation is only given for changes in law and governmental actions that are discriminatory against the PPP, with the private sector expected to manage all other general and sector specific changes in law.
iv Adjustment and revision
South African PPPs do not have any mechanism for the adjustment and revision of contract terms, including the remuneration regimes. There are regimes that allow for temporary relief from contract terms, such as the regimes in respect of force majeure and relief events, but these do not permit anything other than temporary relief and do not provide for revision of the terms.
v Ownership of underlying assets
In traditional PPPs, ownership in all the assets used and created as part of a PPP vests in the state. In the majority of SOC PPPs, the ownership of all PPP assets vests in the SOC (such as with toll roads). There are some exceptions to this rule, most notably in the port sector, where the assets put in place by the private sector belong to it, but the land belongs to the Transnet National Port Authority at all times.
In IPPs, the assets created by the IPP belong to the private sector (except for the transmission and distribution lines, which are handed over to Eskom). On termination for government default, the government has the option but no obligation to purchase the generation assets. In no other circumstances does the government have the option or obligation to purchase the generation assets.
vi Early termination
Premature termination of a PPP can be as a result of (1) prolonged default of the private sector against the performance regime; (2) prolonged force majeure; (3) corruption; and (4) default of the public sector.
In traditional PPPs and some SOC IPPs (where the SOC retains ownership of the PPP assets), there is a termination payment to the private sector in all termination scenarios, with the amount varying from covering only the debt ((1) and (3) above), to paying equity capital as well ((2) above), to paying out the full return ((4) above).
In most SOC PPPs and all IPPs where the private sector retains ownership of the PPP assets, there is only a termination payment on default of the public sector, which will cover the debt and some return to equity. However, the performance regimes are generally less onerous in this PPPs and there is a willingness to extend the term of the PPP for events outside of the control of the private sector, with the result that premature termination is less likely.
To date, no PPPs have terminated prematurely.
Most PPPs are financed with traditional forms of project finance. Sometimes, they may be financed with corporate finance, where the sponsors of the PPP raise financing on their balance sheets and on-lend it to the project company. Accordingly, most PPPs use the traditional project finance security mechanisms of direct agreements, extensive security over the assets and rights that belong to the project company, and technical support agreements from the parent companies and sponsors.
There has been limited use of project bonds, and these have yet to take off as a debt instrument in South Africa.
A challenge presented by most PPPs, specifically traditional PPPs and the SOC PPPs where the SOC owns the underlying assets, is the fact that the lenders cannot take security over the underlying PPP assets. This means that they need to take security over the project company's rights to its cash flow and the termination payments, and be comfortable that the government will pay any termination payments due.
The government will not incur liabilities in a currency other than the South African rand in respect of PPPs. This has meant that all PPPs have raised their debt in rands to date. Certain foreign development finance institutions have provided debt in respect of some IPPs, but this debt was converted into rands.
In addition, the equity investments of foreign shareholders have to be converted into rands. Generally, any hedging of exchange rate fluctuations will be done by the shareholder, as the public sector will not take exposure on currency hedges.
To date, the financial sector in South Africa has proven eager to lend to PPPs, with a large secondary syndication market provided by pension and life assurance funds. Accordingly, there has not been a need to seek funding from abroad as yet.
In 2021, a disgruntled bidder called DNG launched a challenge in the High Court of South Africa against the disqualification of its project and the award of preferred bidder status to the three Karpowership projects. The matter was argued in late November and early December 2021, and at the time of writing we await the handing down of the judgment, which should be imminent.
There is a vast jurisprudence of case law in respect of public procurement, which has explored the meaning and requirements of the five principles and the ambit of the procurement legislation (although not the legislation that is specific to PPPs). This case law has emphasised the extreme importance of the five principles and has struck down behaviour that has sought to subvert the law.
The position has not changed since 2021 in respect of PPPs, and it remains that PPPs (other than IPPs) have fallen into abeyance in the past 10 years, despite the successes of the SANRAL toll road concessions and the Gautrain Rapid Rail PPP and of the REIPP PP. The position remains that the full potential of PPPs for developing public infrastructure and strengthening the public sector's ability to deliver its services has never been fully explored and exploited.
Unfortunately, we have yet to see the fruits of the positive signals previously sent in 2020 and early 2021 of the revival of the PPP model, and the views expressed by the government in forums such as the Sustainable Infrastructure Development Symposium SA in June 2020 that the PPP model can and will be used to revive the South African economy and help it address the setbacks the covid-19 pandemic has created, have yet to find expression in any concrete actions by the government.
There has been silence in respect of government's review of the PPP model with the assistance of the World Bank, which was undertaken in 2019 and 2020. South Africa is still awaiting the outcome of that review. While a review of the current PPPs listed as being in development on National Treasury's website still gives rise to the hope and belief that the next 12 months will see a number of PPPs coming to market, that hope and belief has to be tempered and dampened by the fact that there have been no concrete developments in this respect during 2021.
1 Brigette Baillie is a partner and Biddy Faber is a consultant at Herbert Smith Freehills.
2 Known as REIPP PP.
3 BRICS South Africa 2018 'Good Practices on Public–Private Partnership Frameworks' Update 2018, page 35.
5 This Section is entitled 'Procurement'.
6 The full citation is the Constitution of the Republic of South Africa, 1996.
7 Act No.1 of 1999.
8 In Section 38(1)(a)(iii).
9 In Section 51(1)(a)(iii).
10 Act No.56 of 2003.
11 Section 120 and Part 1 of Chapter 11, especially Section 112.
12 GNR.225 of 15 March 2005: Amendment of Treasury Regulations in terms of Section 76.
13 GNR.309 of 1 April 2005.
14 Act No. 5 of 2000.
15 Issued on 20 January 2017.
16 Act No.53 of 2003.
17 Codes of general application have been issued, as well as codes that have particular application to a specific economic sector.
19 Act No.4 of 2006.
20 Act No. 111 of 1998.
21 Act No. 32 of 2000.
22 Popularly called RMIPP PP.
23 Tender No: DMRE011/2020/21 - Request for Qualification and Proposals for New Generation Capacity under the Risk Mitigation IPP Procurement Programme – Part (General Requirements, Rules and Provisions), clause 11.
24 Popularly called REIPP R5.
27 Full name being the South African National Roads Agency Ltd SOC.
28 GNR.399 of 4 May 2011: Electricity Regulations on New Generation Capacity, promulgated under Act No.4 of 2006.
30 GTAC is an agency of National Treasury and reports directly to the Minister of Finance. Previously, until 31 March 2013, the PPP Unit was a division of the Budget Office Division on National Treasury.
31 Section 103 of the Correctional Services Act.
32 See, by way of example, Section 68 of the Public Finance Management Act, Regulation 16.8 of the Treasury Regulations and Regulation 6 of the Municipal Public–Private Partnership Regulations.
33 See definition of public–private partnership in Regulation 16.1 of the Treasury Regulations; Regulation 5 of the New Generation Regulations, and Section 120(1) of the Municipal Finance Management Act.
34 See, by way of example, Regulations 16.4, 16.5.4 and 16.6.1(a) of the Treasury Regulations; Section 120(4) of the Municipal Finance Management Act and Regulation 2 of the Municipal Public–Private Partnership Regulations, and Regulation 5 of the New Generation Regulations.
35 See definition of value for money in Regulation 16.1 of the Treasury Regulations, Regulation 5 of the New Generation Regulations and Regulation 3 of the Municipal Public–Private Partnership Regulations.
36 Section 34 of the Electricity Regulation Act and Regulation 6 of the New Generation Regulations.
38 Paragraph 4.2.1 and Annexure A of said Practice Note.
39 Paragraphs 4.2.2 and 4.2.3 and Annexure 'A of said Practice Note.
40 See definition of public–private partnership in Regulation 16.1 of the Treasury Regulations; Regulation 5 of the New Generation Regulations, and Section 120(1) of the Municipal Finance Management Act.