In this week’s Infrastructure Policy Watch, how public-private partnerships can bridge the infrastructure gap, and South Africa’s credit guarantee plans.
Reforming public-private partnerships could help fill infrastructure gap
Reforms to public-private partnership (PPP) regulations can boost investment in infrastructure, a new World Bank report has found.
Countries that made major changes to their PPP frameworks saw an average increase of $488 million in infrastructure investment, the report estimates.
The report, Benchmarking Infrastructure Development, analysed PPP regulatory frameworks in 140 economies. It tracked them against internationally-recognised good practices, identifying areas for improvement.
Out of 140 economies, 45 strengthened their PPP regulatory frameworks between 2019 and 2022, with much of the transformation happening in the Middle East and North Africa (MENA).
Eight economies – Armenia, the Dominican Republic, Ghana, Montenegro, Panama, Qatar, Saudi Arabia, and Sudan – have introduced their first PPP laws.
What enables a successful PPP ecosystem?
Contract management is the greatest area of focus for reforms, and project preparation is the area with most room for improvement.
While PPP reforms drive investment in transport, energy, water, and information and communication technology, the report also highlights other factors that contribute to a successful PPP ecosystem:
- macroeconomic and political stability
- political commitment
- mature financial markets
- institutional capacity, including definition of roles and responsibilities
- strong infrastructure governance
- effective risk allocation
- stakeholder engagement
- a long-term vision
The landscape of PPP regulation is evolving, and many countries have room to further reform and refine their frameworks.
The report encourages governments to adopt best practices to boost infrastructure development.
The ICE’s view
The private sector can play a big role in financing, delivering, and operating infrastructure.
The ICE-convened Enabling Better Infrastructure (EBI) programme highlights that to secure private capital, governments need to clearly outline the terms of participation and establish stable and predictable legal and regulatory frameworks to enable it.
Government officials can benefit from training to better use models such as PPPs, as well as to take public projects to market.
South Africa launches credit guarantees for private investment
South Africa is launching a credit-guarantee vehicle (CGV) to encourage private sector investment in its ambitious infrastructure plans.
A CGV protects investors against potential losses. This reduces the financial risk associated with infrastructure projects, making them more attractive to investors.
The government of South Africa is working on the guarantee with the World Bank, Multilateral Investment Guarantee Agency (MIGA), and the International Finance Corporation (IFC).
The CGV will seek to improve the credit profile of projects by offering credit guarantees (which would cover debt if a loan can’t be repaid) or insurance products. This would mitigate risks that the private sector isn’t ready to take.
The government plans to launch the CGV in mid-2026.
Funding South Africa’s infrastructure
The South African government is prioritising investment to improve the country’s infrastructure. Private sector involvement is an important part of these plans.
According to the country’s 2024 Budget Review, over the next three years, the South African government will invest 943.8 billion rand ($53.96 billion) in infrastructure.
However, it’s estimated that it needs another 1.6 trillion rand ($91 billion) in public sector infrastructure investment and 3.2 trillion rand ($189 billion) from the private sector to achieve its infrastructure goals by 2030.
Private finance presents significant opportunities not only to raise the necessary funds but also drive economic growth and prosperity in the country.
The ICE's view
Attracting private finance for infrastructure is a topic relevant for governments around the world, including the UK.
The National Infrastructure Commission (NIC) estimates that the UK will need to increase its infrastructure spending over the next decade from around £55 billion to between £70 and 80 billion per year.
Most of this investment will need to come from the private sector.
The NIC’s analysis suggests private investment needs to increase from the £30-40 billion per year spent over the last decade to £40-50 billion per year in the 2030s and 2040s.
However, a recent presidential roundtable explored why investors see UK infrastructure as a risky bet – and what government and industry can do to change that.
The UK’s new National Wealth Fund will, via the UK Infrastructure Bank, invest £7.3 billion in key infrastructure and clean energy projects. The aim is to attract an additional £21.9 billion in private funding.
The ICE will be exploring further options for the UK government to boost private investment in infrastructure in a new Next Steps programme, launching soon.
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In case you missed it
- A new report sets out the underlying issues that the UK government must address to deliver infrastructure faster and cheaper.
- A joint UN Environment Programme and Enabling Better Infrastructure event showcased how countries encourage cooperation in planning.
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