National Treasury director-general Dr Duncan Pieterse says the reforms being proposed to facilitate greater private sector investment into infrastructure could obviate the need to introduce a policy of ‘prescribed assets’, whereby pension funds would be required to direct a specified level of resources towards government-selected assets.

Pieterse made the statement in response to a question posed during a virtual event hosted by PSG regarding government’s position on prescribed assets, which the governing African National Congress has included in its election manifesto as an instrument it could consider introducing to stimulate infrastructure investment and industrialisation.

“From our perspective, part of the reforms that we are introducing in the infrastructure space is precisely to allow the private sector to invest in infrastructure provision, without us having to require any form necessarily of prescription.

“So, for example, if you start delivering the kinds of instruments that we were talking about in the Budget last week – [such as] infrastructure bonds or special vehicles through which the private sector can participate in government investment – then you will achieve the objective of greater leverage of pension-fund and other assets without having to resort to having to prescribe it, which is why there was such an emphasis in the Budget on these unique infrastructure instruments that we'll be introducing in the coming months.”

Pieterse highlighted the proposals made in the Budget to simplify and reform the public-private partnership (PPP) framework to crowd-in private investment into areas such as water, transport and human settlements that have hitherto been dominated by public finance.

“Then, of course, we have the broader reforms that we've been working on over the last few years in electricity, freight logistics, and other parts of the network industries, because these are the key sectors that have been dampening our growth prospects,” he added.

In his Budget speech, Finance Minister Enoch Godongwana said that the proposed PPP amendments would seek to reduce procedural complexity, create capacity to support and manage PPPs, formulate clear rules for managing unsolicited bids, and strengthen the governance of fiscal risk.

It was also confirmed that an infrastructure finance and implementation support agency would be established to coordinate the planning and preparation of large projects.

The agency would incorporate the functions of project preparation, PPP technical support and data management, and departments, as well as public entities and municipalities, would be able to use its services to prepare, plan and execute projects.

A document released as an annexure to the Budget Review also indicated that legislative amendments would be proposed later in the year to create two pathways for PPPs: one for high-value projects and a simplified version for projects valued below R2-billion.

“We are reviewing institutional arrangements and governance for catalytic infrastructure. The intention is to create clearer mechanisms for accountability, cooperation and coordination,” the Minister said, adding that the intention was to fast-track delivery, particularly of blended-finance arrangements.  

He also confirmed that several new financing instruments would be introduced, including infrastructure bonds and concessional loans.

“As part of this, a flow-through tax vehicle for specific infrastructure projects, similar to trusts and other investment vehicles, is being considered.

“A new funding window for proposals under the new dispensation of financing instruments will be opened to public institutions shortly,” he added.