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Projects in Progress (Second Edition)
Creamer Media, Aug 2010, Pages: 76
This publication gives readers a sense of the current state of South Africa’s project economy and provides an outline of the projects that are under way. It is published at a time of interesting viewpoints regarding Africa’s public project economy, and also the revelation by gold major AngloGold Ashanti of its excitement around gold projects in South Africa’s Vaal River and the West Wits, which will probably require an investment of “more than US$1-billion in each area”, should they go ahead.
While it is acknowledged that the regulatory response to the recent global financial crisis is poised to create new constraints for the involvement of commercial banks in African and other emerging market infrastructure projects, the comment of Development Bank of Southern Africa (DBSA) executive Admassu Tadesse, of a “sea change” in Africa, is interesting.
Tadesse – who made the observation at the Project Finance Conference 2010 in Johannesburg – detects that some African countries are in a better position to make equity contributions into projects that would otherwise be left stranded. He points to a recent example in Lesotho, where a R1,2-billion private healthcare project was unlocked through the combination of a R400-million equity contribution from the Lesotho government and DBSA funding of R800-million, which enabled Netcare and its partners to proceed with the construction, upgrading and operation of a hospital at Bots'abelo, in Maseru.
The International Project Finance Association’s Anthony Sykes – who addressed the same conference – cautions, however, that post-meltdown regulatory tightening will have consequences for the future availability of private finance for African infrastructure projects, notwithstanding the continent’s large infrastructure backlog that will require a yearly investment of $93-billion to close.
While Tadesse agrees that the shortage of capital has deepened and that projects sponsors will have to contend with higher prices for capital and shorter tenures, he finds that governments in the Southern African region are not as cash-strapped as they were in the past, and notes that the “role of the sovereign” has emerged as an important “new dimension”.
Sykes advises, however, that future projects need to be prepared in line with “best practice principles”, and be relatively more attractive. He also advocates that public-sector officials who have been capacitated to negotiate complex public–private partnership ventures, should negotiate the projects.
South Africa itself, while remaining committed to spending on public energy, transport and communications infrastructure, had, at the time of going to press, still not announced its 20-year integrated resource plan for new power-generation capacity, as well as clarity for the participation of independent power producers.
Also, dire warnings about the urgent need for investment in water infrastructure in South Africa have still not resulted in significant new water project announcements. While pressure on South African municipalities to improve the provision of water, sanitation, electricity, waste management and roads continues, implementation remains limited.
The R1-billion guarantee fund to incentivise the private banking and housing sector to develop new housing products to meet the demand for accommodation and the setting aside of more than 6 000 ha of public land for affordable housing is still awaited. Staying at the forefront of the private sector’s project programme are fully funded gold, platinum, iron-ore and coal projects, many of which are well into their project cycle.
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