The funding of the Transnet project in Empangeni - Nkwalini

Abstract

Infrastructure projects are implemented by different State Owned Enterprises in most countries around the world, in the African continent and in South Africa. State Owned Enterprises across the world fund infrastructure projects using different funding models. The funding theories that will be explored in this research paper are: • Self-funding model; • Public-Private Partnerships funding model; • Government funding model; and • Aid or donations funding model. Transnet as a State Owned Enterprise embarks on many infrastructure projects with the view to drive development and stimulate economic activity. Transnet follows prescribed evaluation criteria that emphasise the profitability requirements for projects to be undertaken or funded. Those projects that have a greater return on investment, higher profitability or higher Net Present Value tend to get more support or funding from Transnet. This means that most projects are funded using a self-funding model. Most projects that have a negative profitability index but which have potential to create jobs, boost local economies and create sustainable small to medium businesses in a substantial way tend to be overlooked because of the return on investment requirements. The Empangeni-Nkwalini branch line is a case in point. This project has been unable to obtain funding from Transnet due to its lack of profitability. The basis of the study was to establish the most suitable funding model among the four models for the Empangeni-Nkwalini branch line. The Rational Comprehensive Model was used to prescribe a new funding method for the Empangeni-Nkwalini project. The research used the qualitative research method in responding to the research question, since the research that is conducted is exploratory in nature and a qualitative approach is best suited to this type of research. Data that is analysed in order to gain an understanding of the phenomenon under investigation, in this case existing funding models, was collected through interviews and document assessments. The findings of the research suggest that self-funding, Public-Private Partnership, and a Government funding model can all be suitable for Empangeni-Nkwalini project funding requirements, providing that certain conditions are met under each model. The findings also suggest that the Aid or Donations funding Model is not suitable for the Empangeni-Nkwalini project funding requirements.