Minister amends PFMA to cut red tape for public private partnerships

Until now the regulations for public-private partnerships were so wrapped up in red tape that the private sector often did not bother to participate. The minister of finance has now amended the regulations to streamline public-private partnerships.

Enoch Godongwana, minister of finance, amended the National Treasury Regulation 16 in terms of section 76 of the Public Finance Management Act (PFMA).

The National Treasury says in a statement that the government recognizes the importance of public-private partnerships (PPPs) as a lever to deliver much-needed infrastructure and ease pressure on stretched government finances.

“However, although the economic landscape significantly changed over the years, the PPP regulatory framework remained static for close to 15 years.”

Therefore, Treasury is advancing the implementation of recommendations from the comprehensive review of the PPP regulatory framework across all three spheres of government. Treasury expects that the changes will drive higher confidence and investment in PPPs as well as greater private-sector participation.

According to the 2024 Budget, amendments were drafted to National Treasury Regulation 16 and the Municipal PPP Regulation 309 that govern PPPs. After the public commentary process closed on 15 April last year, Treasury says it made good progress in addressing the public comments and amending the regulation.

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Final amendments for public-private partnerships

The final amendments were issued in the Government Gazette on 7 February. These amendments include:

• Rationalisation of the approvals for smaller projects with a proposed threshold of R2 billion that exempts projects from Treasury Approvals IIA and IIB.
• Expression of the PPP Advisory Unit’s roles and responsibilities to support institutions in the planning and procurement process for PPPs and to fast-track the conclusion of PPP projects to reach financial close.
• A clear delineation of institutional roles and responsibilities in terms of the PPP advisory function and the regulatory function.
• A provision to empower national departments to establish dedicated units tasked with adopting a programmatic approach to support PPPs on behalf of other organs of state within the strategic sectors under their jurisdiction. The PPP Advisory Unit will collaborate closely with these departmental units to ensure effective coordination and execution of PPP initiatives.
• Legislative amendments that provide mechanisms to report, track, and manage fiscal commitments and contingent liabilities through the FCCL reporting requirements at Treasury Approval I, IIB, and III.
• Improved provisions to grant exemptions to Regulation 16 to ensure good governance.
• Improved provisions for applications where institutions seek approvals for amendments to PPP agreements and clear explanations to ensure good governance.
• A clear framework for receiving and processing PPP unsolicited proposals together with incentives to ease entry for the private sector.

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More details about public-private partnerships in the budget review

According to the statement, further details will be provided in the 2025 Budget Review documents covering supporting processes to enable procuring institutions to meet the new requirements introduced by the amendments.

However, the amendments to the Municipal PPP Regulation 309 require more time due to procedural processes, including consultation with parliament, and according to Treasury, these amendments will be finalised by June 2025.