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President Cyril Ramaphosa: Infrastructure South Africa Project Preparation Roundtable and Marketplace

3 Nov 2020

Remarks by President Cyril Ramaphosa at the Infrastructure South Africa Project Preparation Roundtable and Marketplace, Gallagher Estate, Midrand

Minister of Public Works and Infrastructure, Ms Patricia de Lille, 
Ministers and Deputy Ministers,
Leaders from government, business and development finance institutions,
Distinguished Guests,
Ladies and Gentlemen,

I wish to welcome you all to this roundtable, which is taking place at a critical time.

South Africa is working to rebuild our economy after the devastating effects of the coronavirus pandemic.

Before the outbreak of COVID-19, South Africa was already experiencing slow growth and rising unemployment. 

The pandemic worsened an already dire situation, severely disrupting economic activity and putting numerous investments on hold.

Our priority now is driving the implementation of South Africa’s Economic Reconstruction and Recovery Plan. 

This plan, which is underpinned by the agreements between social partners, outlines key interventions to kickstart our economy.

Among other things, we are prioritising economic reforms to unlock investment and growth, fighting crime and corruption, driving industrialisation with a focus on growing small businesses, improving the capability of the state, and creating jobs through mass public employment programmes.

Another key priority intervention is promoting aggressive infrastructure investment and supporting its delivery.

These include large-scale build projects, community and social infrastructure, and infrastructure maintenance. 

Throughout, our focus is on catalysing job creation and ensuring that local businesses benefit.

Over the next four years we hope to unlock R1 trillion in infrastructure investment.

A significant vehicle for achieving this is our national Infrastructure Fund, which has recently been operationalised. 

It is a blended financing instrument aimed at de-risking projects to make them attractive for private sector participation. 

It is significant, and most welcome, that the multilateral development banks, pension funds and commercial banks have agreed to participate in the governance structures of the Infrastructure Fund. 

It is critical that our Infrastructure Investment Plan is grounded in a credible project pipeline. 

These projects should be ready and bankable for both investment and implementation.

The inaugural Sustainable Infrastructure Development Symposium – or SIDS – that took place in June this year was a huge boost for our infrastructure build plans. 

This was a tremendously successful event. 

Working with the private sector, we were able to identify 276 projects with a total investment value of more than R2.7 trillion.

We have since gazetted 50 of these Strategic Integrated Projects with a value of R340 billion. We also listed an additional twelve special projects. 

The projects are in the areas of water and sanitation, energy, transport, digital infrastructure, agriculture and agro-processing, and human settlements.

Each of these areas is vital to the rejuvenation of our economy, reducing the cost of doing business and improving the country’s competitiveness. 

The Reconstruction and Recovery Plan emphasises that project preparation is necessary to unlock private sector funding and high impact capital funding. 

Attention must be given to improving the state’s technical, project preparation and financial engineering capabilities, including by drawing in private sector skills and expertise.

It was evident during the SIDS process that not all of the projects were well-prepared, and that additional funding and capacity support would be required. 

Project preparation is a costly exercise, but absolutely necessary.

The Global Infrastructure Hub, a G20 initiative, estimates that infrastructure project preparation costs in developing countries can range from 5 to 10% of the total project investment, with African governments covering most of these costs. 

This is compared to the 3 to 5% of project costs in developed countries, where project funds and facilities are willing to take the risks to fund projects. 

Clearly, there needs to be more coordinated engagement between governments and the private sector and other players in the infrastructure financing space. 

This roundtable is the beginning of a more dedicated and structured approach to project preparation. It paves the way for greater private sector participation in this crucial stage of the project life-cycle. 

The South African government is committed to financing project preparation.

Budgetary allocations for this process have been made to the Development Bank of Southern Africa, the Government Technical Advisory Centre and the Presidential Infrastructure Coordinating Commission’s Technical Project Management Unit. 

But these represent a small portion of the actual funding required to develop both our economic and social infrastructure. 

A recent survey identified more than 120 facilities providing funds for the early stages of the project preparation in Africa. 

We are looking to this roundtable discussion to assist in our engagement with these facilities.

In addition to bolstering project preparation, we are working on introducing innovative project financing instruments such as green infrastructure bonds, project bonds and performance bonds.

The recent establishment of Infrastructure South Africa will also go a long way towards streamlining the preparation and implementation process. 

It is a step towards creating an enabling environment for financiers and a one-stop shop where projects can be unlocked.

Through Infrastructure SA we will be investing in building state capacity in the areas of project technical and financial engineering skills. 

I want to express my appreciation to the multilateral development banks, the Association for Savings and Investment South Africa and the commercial banks who have seconded personnel with such skills to work closely with Infrastructure SA.

Despite the daunting challenges we face, the post COVID-19 reconstruction and recovery phase is alive with possibility. 

For South Africa, it is an opportunity to establish ourselves as an investment destination of choice, with a ready and able workforce.

In just the past month, I have attended the launches of a number of exciting projects that give me great encouragement that we are on the road to recovery. 

Despite the difficult business climate, infrastructure developments are going ahead. 

A number of the projects outlined in the Economic Reconstruction and Recovery Plan are already being implemented. 

To move ahead, we must ensure that the ground work is done efficiently, effectively and thoroughly.

Anchored by Infrastructure South Africa, I have no doubt that the compact we are building between the public and private sectors will be further strengthened and deepened during this Roundtable. 

With these words I wish you well in your deliberations.

I thank you.

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