South Africa’s National Treasury has taken a significant step to streamline public-private partnerships (PPPs) by easing the approval process for projects under R2bn. This change, which Finance Minister Enoch Godongwana gazetted in February, will come into effect in June this year, effectively removing the need for Treasury to approve smaller-scale PPPs.
Source: Supplied. John Jack, chief executive officer of Galetti Corporate Real Estate.
According to John Jack, chief executive officer of Galetti Corporate Real Estate, “The updated PPP rules are a big jump forward to getting some private investment into the public arena. By cutting red tape, the government could speed up projects that have been hanging.”
Historically, lengthy approval processes have delayed critical projects and deterred private-sector participation. With the new rules, smaller-scale projects – such as mixed-use developments, logistics hubs, and renewable energy facilities – can proceed more efficiently.
Jack notes, “Infrastructure investment is directly correlated to economic growth, which is the major factor in seeing increased property values.”
Reducing red tape
The move also aligns with the World Bank’s recent recommendation for South Africa to stimulate growth by reducing regulatory barriers. In a report released last Friday, the World Bank emphasised the need to get South Africa off the ‘wrong growth trajectory’ by reducing red tape in labour and investment in order to attract private capital.
Jack agrees, stating, “The government is taking important steps to create a more investor-friendly environment. This supports the commercial property sector, which relies on private-sector confidence and investment.”
The good news about PPPs, however, comes on the heels of an anticipated 2% VAT hike (bringing VAT to 17%) to address the country’s fiscal deficit. This contentious hike, which forced the 11th-hour delay of the Budget Speech, could generate additional revenue for the government – but will also increase costs for businesses and consumers.
While President Cyril Ramaphosa projected economic growth of 3% in 2025, certain economists consider it more likely to be around 1.5% – although this figure could be impacted if the US administration refuses to renew the African Growth and Opportunities Act (AGOA), which grants the country around $4bn in preferential exports.
Jack notes, “We don’t have quantifiable data in-house to translate what this means in numbers, but the uncertainty and negativity surrounding it definitely makes people think twice before deploying capital.”
Despite these concerns, he says the easing of PPP rules is an important move that highlights government’s focus on collaborative efforts, “We’ve seen the positive impact of leveraging the expertise and innovative solutions from the private sector for infrastructure development, energy, and logistics. It shows the potential of PPPs to deliver real impact while creating opportunities for the commercial property sector.”
Looking ahead, Jack says the success of these reforms will depend on implementation as we all know the delays that one could find in these arenas.
“The updated PPP regulations are a positive step, but they must be supported by policies that encourage investment and address structural challenges. The commercial property sector has a key role to play in driving economic recovery, but we need a stable and supportive policy framework for this to be achieved.”
