The determinants of private sector participation in PPP projects for infrastructure development in South Africa

Abstract

Infrastructure projects have been key to South African economic growth and enhancement of service delivery.The backlog in essential infrastructure projects requires billions of rands and has a huge burden on public debt. The South African economy is constrained by inadequate investment, ineffective operations and inadequate maintenance of existing infrastructure. PPPs is crucial in upgrading the overall infrastructure in South Africa and private sector can play a more significant role in PPP infrastructure projects.This study seeks to investigate the factors motivating South Africa’s private sector participation in PPP projects as well as mechanisms for incentivising private sector engagement in PPPs.

The findings of the study indicate that there are specific factors that will motivate and accelerate private sector participation and investments for infrastructure development in South Africa. The key factors for motivating private sector participation include good PPP framework and regulations, Bankable PPPs, good Risk management and allocation, long-term approach to PPPs, Long term commitment and support from the South Africa Government and adequate & early consultations with key community stakeholders.

This research has more credence given the constrained South African budget fiscus and the infrastructure projects pipeline earmarked for PPPs within various sectors (e.g. transportation, health, water and energy) that will require large capital investments and therefore need to tap into private sector capabilities and potential to raise capital to achieve goals.