Reform coming to the Legislative Framework Governing Project Finance in South Africa

South Africa has a long history of success in the public-private project markets, having successfully undertaken PPPs in various industries including projects for transport infrastructure, healthcare, prisons, and various projects in the biosciences sectors, as well as several renewable energy IPP projects.

The project finance sector in South Africa is not regulated by a single codified statute which can make procuring finance for a PPP project quite a tricky undertaking. Further aggravating the situation are the differing requirements for approvals from authorities and processes to be followed for each individual project, depending on which type of infrastructure is being financed or procured and the respective sector it falls into.

The Public Finance Management Act 1 of 1999 (PFMA), which governs the provincial and national levels of government, and the Municipal Finance Management Act 56 of 2003, which governs the local or municipal level of government are the two overarching statutes that deal with Public Private Partnerships (PPPs) financing in South Africa. In general, if the project is procured or conducted by a government department or body, the PFMA applies to the project’s expenditures and the government’s security (among other aspects). Further can complications arise depending on the type of project being financed, as certain industries also have sector-specific legislation to contend with such as the Electricity Regulation Act 4 of 2006 and the Mineral and Petroleum Resources Development Act 28 of 2002.

However, industry role players are set to expect major changes to the legislative framework dealing with project finance in the near future. At a 2021 symposium, President Cyril Ramaphosa announced that government intends to implement a two-fold legislative amendment program in 2022. The reasoning for the necessity for these changes was found in the general fragmentation of South Africa’s legislative and regulatory framework for infrastructure development and procurement. The goal of these changes is to streamline the process for both applications and disputes relating to project finance.