Public Private Partnerships.

Where are we?


Communities are screaming out for service delivery. We receive reports almost every day of service delivery protests. Many of these service delivery protests have turned violent and destructive.  In all the protests community leaders advise that requests for service delivery have escalated to demands and then to protests as local government has for years ignored their calls for service delivery. The standard response from municipalities is that they are waiting on resources or that their budgets are depleted. Unless a solution is found these service delivery protests will spread and we could see it spiral out of control. The irony is that government has created a solution but it appears as though the political
will to implement the solution is still to be ignited.

What is this solution?

Public Private Partnerships. (PPP)

What is a PPP?

Our law defines a PPP as a contract between a public sector institution/mun icipality and a private party, in which the private party assumes substantial financial, technical and operational risk in the design, financing, building and operation of a project. Two types of PPP’s are defined namely:

  1. Where the private party performs an institutional/municipal function.
  2. Where the private party acquires the use of the state/municipal property for its own commercial purposes.

A PPP may also be a hybrid of these two types.

Payment in any scenario involves one of three mechanisms.

  • The institution/municipality paying the private party for the delivery of the service, or
  • The private party collecting fees or charges from the users of the service, or
  • A combination of these.

A PPP is not

  • A simple outsourcing of functions where substantial financial, technical and operational risk is retained by the institution/municipality.
  • A donation by a private party for a public good
  • The commercialization of a public function by the creation of a state –owned enterprise
  • Does not constitute borrowing by the state.

We are presently experiencing declining growth and this has spawned a serious economic downturn. Yet we have a strong capital market and a competitive private sector. The stock exchange is evidence of a thriving business sector. It has been reported that the private sector is cash flush but is hesitant to invest due various factors such as economic (political) uncertainty, the ANC leadership contestation etc. It is therefore necessary for us all to focus on the solutions required to reverse the climate of declining growth by turning our attention to the development of small business and emerging entrepreneurs and engaging with large businesses and persuading them to invest in brand South Africa.
We should further pay more urgent attention to the creation of new jobs and make a concerted effort to improve service delivery.

In view of the above and at this
stage of our economy it is critical and essential that we explore all avenues allowed by government policy and our laws to address these problems. Although efforts have been made to implement PPP and there are many examples of successful PPP projects it is evident that much more is required to explore this avenue and increase projects related to PPP. Our law defines a public private partnership as a contract between
a public sector institution and a private party, in which the private party assumes a substantial financial, technical and operational risk in the design, financing, building and operation of
a project.

The private sector has much to offer in terms of financial resources, skills and experience as an investment in public infrastructure and services. It is through PPP that the parties can both achieve their goals to benefit the communities throughout South Africa. This will bring certainty, improved efficiency, affordability, reduced risk perception and thus better delivery costs. This can be possible by leveraging private sector finance and expertise aimed at enhancing service delivery. Although the government has implemented a large number of infrastructure delivery programmes that have contributed significantly to increased access to services, a huge backlog still exists. This is evident by the many service delivery protests that are occurring.

Government needs to be serious about not only addressing this problem but also clearing this backlog failing which we will see an increase in service delivery protests.

In the next edition we will explore some successful PPP projects.