D Peters: National Council of Provinces Select Committee and Development
Bank of South Africa oversight visit

30 July 2007

Honourable Speaker of the Northern Cape Provincial Legislature
Honourable Chairperson of the NCOP Select Committee on Finance
Members of the National Council of Provinces
Members of the Northern Cape Provincial Legislature
Delegation from the DBSA
Ladies and gentlemen

I feel honoured to be invited to this session of the oversight visit of the
select committee on finance of the NCOP and the DBSA management. I sincerely
hope that your visit will not only benefit the people of our province but will
actually enhance your understanding of the complexities of the challenges that
face our government in pursuit of a better live for all.

As you explore the vast landscape of our province and interact with the
masses of our people in our different areas during this week you will most
certainly appreciate the real challenges of service delivery in a province like
the Northern Cape.

The Northern Cape Provincial budget is largely skewed towards the social
sector. A significant percentage of our budget is directed towards health,
education and social services. This leaves us with a very small allocation to
channel towards the economic sector and activities directed at stimulating
economic growth and development.

It is therefore important that our government in the Northern Cape and
development institution like the DBSA collaborate in efforts geared towards
economic growth and development.

We believe that the DBSA should also contributes to the quality and rigor of
our knowledge about the challenges ahead and how we should work together with
development financial institutions to overcome these challenges.

Continued investment growth is a critical pre-condition for broader and
deeper economic and employment growth, but it is not just about the numbers.
Investment needs to be well-targeted, which means it must rest on intelligent
and well-considered infrastructure plans and business proposals.

And so when we talk about improved investment performance, we are also
talking about improvements in the quality of planning better freight
management, better traffic modelling, forward-looking energy and water resource
planning, improved understanding of the pace and direction of technology change
in communications, materials processing, biotechnology, micro-electronics,
business information systems, etc.

It is particularly important, in an economy in which savings are low and
industry is predominantly capital intensive, that we should base our investment
decisions on sound plans and good analysis. The Development Bank has a special
role to play in this regard.

Its location within the public sector makes it peculiarly well-suited,
amongst lending and investing institutions, to respond to long-term public
interest investment considerations. But as an independent entity, with a broad
regional mandate and no special relationship with a particular province or
municipality or industry, it is also well-placed to promote dispassionate,
disinterested, analysis of options and assessment of risks and
opportunities.

A particular challenge for us in the Northern Cape is to find ways of
contributing to the financing requirements of municipalities, whose balance
sheets are weak and who cannot access finance on commercial terms.

Madam Speaker, this is about designing and arranging the mix of grants and
confessional lending that may be appropriate for smaller municipalities or
non-commercial development projects, and it is about managing and sharing risk
in appropriate ways. The DBSA is well-placed to take a leading role in this
area of financial reform.

A special challenge, for us again, relates to the planning and project
management capacity of both provincial departments and municipalities that
currently lack sufficient professional expertise. Successful project lending is
in part about appropriate support for project management and associated
capacity building at the local level.

The DBSA already plays a significant role in providing such support in many
of our municipalities, and is well-placed to become a leading centre of project
management and infrastructure planning expertise.

Ladies and gentlemen, on our partnership we believe that DBSA could draw the
design and throw the foundations and build the walls and put up the rafters
itself. But the building is so much stronger when there is a convergence of
minds and a sharing of expertise and resources before a project design is
completed. And so it is right that one of our strategic priorities should be to
increase the share of project funding that is matched by investments,
co-financing and partnership arrangements with others.

The DBSA's development partners include its clients, municipalities or
government agencies; for example, who share in the funding responsibilities
where this is appropriate. But partnerships also include co-financing with the
private sector and with international organisations.

These are arrangements that take time to negotiate and can involve complex
risk-sharing and difficult decisions about alignment of responsibilities, and
mobilisation of complementary resources or expertise. Well structured
partnerships are not straightforward what works in one structure may need
considerable modification in another.

One of the enormous challenges of our time is to, strengthen and deepen the
partnership agreements through which infrastructure investment and service
delivery can be accelerated towards 2014.

The Financial Sector Charter provides a framework of numbers, very
substantial financial commitments but the hard work is putting the deals
together that will make it possible to mobilise these resources
effectively.

There are immense investments required to make an integrated urban landscape
a reality, for example. There are public infrastructure requirements, but there
is also a large opportunity for private investment in housing improvements,
commercial and, industrial and recreational facilities etc.

This is what the Financial Sector Charter refers to as "transformational
infrastructure" investment that changes the quality of ordinary people's lives
the working class and the poor.

For municipalities, the regulatory environment has to be reformed in
important respects, and there are still planning gaps. You cannot expect
private investors and private capital to make transformational investments if
they are unsure about returns on their investments.

But the reconstruction of our towns in the Northern Cape is a collective
responsibility, and the role of private and development finance is recognised
in our new Municipal Finance Management Act. In this regard, it is imperative
that the structure of both public and private investment in the infrastructure
of our towns/cities should deepen considerably over the years ahead.

We also have to consider the rural landscape. It is a mistake to think that
developmental policies are either focused on promoting urban growth or on
agriculture and the rural poor. Productivity of the rural landscape is in fact
closely bound up with the efficiency and the economic needs; food, resources,
recreation of the city. The challenge of redressing a distorted and fragmented
landscape is even more severe in the rural heartland (kgalagadi rural
node).

There are also huge challenges in transport, energy and communication
infrastructure. This is of course why we should put considerable effort into
developing a robust programme of public private partnerships, which brings
private equity and non-recourse debt finance into selected areas of public
together as custodians of our nation's well-being and future.

We can galvanise the full wealth of our people's skill, our innovation and
our energy to eradicate poverty and drive development. The challenges are of
cause enormous the provision of quality health care for all; quality education
for all; safe water and sanitation for all; road, rail, communication
infrastructure that will stimulate growth; black economic empowerment; a
justice system that works; sport and cultural facilities that build pride; the
protection of our biodiversity heritage. And much more!

Therefore ladies and gentlemen, when we are confronted with the practical
matters of "what is to be done", it is not surprising that we look to the full
spectrum of our country's resources, both public and private. We do so rather,
with a sober understanding that the diverse interests of different sectors can
in fact be harnessed for the collective good. That is what public-private
partnerships (PPP) projects are about.

The public gets better, more cost-effective services; the private sector
gets new business opportunities. Both are in the interests of the nation.
Doubtless, it is a fine balance to strike in each deal. Doubtless, this is why
PPPs are tricky and require high levels of expertise. But it is also why we
should work very hard to get them right.

Our policy is to use diverse sources of funding for meeting our identified
infrastructure and service delivery needs, and in a manner that is
cost-effective and appropriately adapted to the circumstances of each
particular project.

To make the appropriate choice in each case requires careful assessment of
options and perhaps the most important signal of the expanding envelope of
opportunities for infrastructure and service delivery.

The Financial Services Charter targets that have been agreed for investment
in infrastructure, housing, empowerment, small business development and public
services can only be met through a rapid growth in well designed PPPs, in which
private and development finance is effectively mobilised, project by
project.

In this regard, the Ministry of Finance in our province is in the process of
developing a strategy on partnerships to effectively implement our mega
projects, identified in our Provincial Growth and Development Strategy as well
as in Accelerated and Shared Growth Initiative for South Africa (AsgiSA).

A perception may have been created that in the course of the realisation of
our goals, government has placed too much emphasis on the needs of the private
sector as a conduit for the developmental needs of our province.

Furthermore, this relationship, if you like, has also apparently
demonstrated an excessive sensitivity to the concerns of the private sector.
The degree of investment from the private sector in the public private
partnerships has not materialised as envisaged, nor have the partnerships
yielded the intended results to the extent that we would have wanted them
to.

Hence government now has to play a more central role in service delivery in
terms of its developmental agenda. To this end, the state should champion the
rights of the poor and marginalised, while simultaneously ensuring that growth
and prosperity attracts capital.

The state needs to meet the needs of a diverse and multi-cultural citizenry,
and in so doing, ensure redress for past imbalances. We also needs to address
the key question of the dual poles of the capitalist economy, ensuring the
redistribution of wealth without alienating the participants of the rich pole
of the economy or so called first economy.

This complexity requires a flexible, strategic state that is
unapologetically developmental, and increasingly sophisticated.

In conclusion, ladies and gentlemen we hope that we could amend our
memorandum of understanding with the DBSA so as to make provision for future
co-operation within the local government sector in line with the new mandate of
the bank. As far as our struggling municipalities are concerned we would like
DBSA to extend its support to district municipalities, especially in the case
of Pixley ka Seme, Namakwa, Siyanda and Kgalagadi until functional shared
services units have been established.

We believe if any of us had doubts in our mind about the solidity, strength,
maturity and vitality of what we have been able to build. These doubts have
been removed by what we have been able to achieve over the last thirteen years
or so.

Our hearts are now warmed by an unshakeable certainty which gives us courage
in the difficult but glorious struggle against underdevelopment and squalor: no
power in the world will be able to destroy our commitment to bring about a
better quality of live for our people in pursuit of the creation of an
egalitarian society, and we are happy to know that we can rely on our
colleagues in the NCOP and valuable partner like the DBSA.

Ke a leboga. I thank you.

Issued by: Office of the Premier, Northern Cape Provincial Government
30 July 2007