Keynote address by the Northern Cape Premier Mme Dipuo Peters at the occasion of the oversight visit of the National Council of Provinces (NCOP) Select Committee on Finance, and Development Bank of South Africa (DBSA), Northern Cape Legislature, Kimberley

Honourable Speaker of the Northern Cape Provincial Legislature
Honourable Chairperson of the NCOP Select Committee on Finance
Members of the National Council of Provinces
Members of the Northern Cape Provincial Legislature
Delegation from the DBSA
Ladies and gentlemen

I feel honoured to be invited to this session of the oversight visit of the select committee on finance of the NCOP and the DBSA management. I sincerely hope that your visit will not only benefit the people of our province but will actually enhance your understanding of the complexities of the challenges that face our government in pursuit of a better live for all.

As you explore the vast landscape of our province and interact with the masses of our people in our different areas during this week you will most certainly appreciate the real challenges of service delivery in a province like the Northern Cape.

The Northern Cape Provincial budget is largely skewed towards the social sector. A significant percentage of our budget is directed towards health, education and social services. This leaves us with a very small allocation to channel towards the economic sector and activities directed at stimulating economic growth and development.

It is therefore important that our government in the Northern Cape and development institution like the DBSA collaborate in efforts geared towards economic growth and development.

We believe that the DBSA should also contributes to the quality and rigor of our knowledge about the challenges ahead and how we should work together with development financial institutions to overcome these challenges.

Continued investment growth is a critical pre-condition for broader and deeper economic and employment growth, but it is not just about the numbers. Investment needs to be well-targeted, which means it must rest on intelligent and well-considered infrastructure plans and business proposals.

And so when we talk about improved investment performance, we are also talking about improvements in the quality of planning better freight management, better traffic modelling, forward-looking energy and water resource planning, improved understanding of the pace and direction of technology change in communications, materials processing, biotechnology, micro-electronics, business information systems, etc.

It is particularly important, in an economy in which savings are low and industry is predominantly capital intensive, that we should base our investment decisions on sound plans and good analysis. The Development Bank has a special role to play in this regard.

Its location within the public sector makes it peculiarly well-suited, amongst lending and investing institutions, to respond to long-term public interest investment considerations. But as an independent entity, with a broad regional mandate and no special relationship with a particular province or municipality or industry, it is also well-placed to promote dispassionate, disinterested, analysis of options and assessment of risks and opportunities.

A particular challenge for us in the Northern Cape is to find ways of contributing to the financing requirements of municipalities, whose balance sheets are weak and who cannot access finance on commercial terms.

Madam Speaker, this is about designing and arranging the mix of grants and confessional lending that may be appropriate for smaller municipalities or non-commercial development projects, and it is about managing and sharing risk in appropriate ways. The DBSA is well-placed to take a leading role in this area of financial reform.

A special challenge, for us again, relates to the planning and project management capacity of both provincial departments and municipalities that currently lack sufficient professional expertise. Successful project lending is in part about appropriate support for project management and associated capacity building at the local level.

The DBSA already plays a significant role in providing such support in many of our municipalities, and is well-placed to become a leading centre of project management and infrastructure planning expertise.

Ladies and gentlemen, on our partnership we believe that DBSA could draw the design and throw the foundations and build the walls and put up the rafters itself. But the building is so much stronger when there is a convergence of minds and a sharing of expertise and resources before a project design is completed. And so it is right that one of our strategic priorities should be to increase the share of project funding that is matched by investments, co-financing and partnership arrangements with others.

The DBSA's development partners include its clients, municipalities or government agencies; for example, who share in the funding responsibilities where this is appropriate. But partnerships also include co-financing with the private sector and with international organisations.

These are arrangements that take time to negotiate and can involve complex risk-sharing and difficult decisions about alignment of responsibilities, and mobilisation of complementary resources or expertise. Well structured partnerships are not straightforward what works in one structure may need considerable modification in another.

One of the enormous challenges of our time is to, strengthen and deepen the partnership agreements through which infrastructure investment and service delivery can be accelerated towards 2014.

The Financial Sector Charter provides a framework of numbers, very substantial financial commitments but the hard work is putting the deals together that will make it possible to mobilise these resources effectively.

There are immense investments required to make an integrated urban landscape a reality, for example. There are public infrastructure requirements, but there is also a large opportunity for private investment in housing improvements, commercial and, industrial and recreational facilities etc.

This is what the Financial Sector Charter refers to as "transformational infrastructure" investment that changes the quality of ordinary people's lives the working class and the poor.

For municipalities, the regulatory environment has to be reformed in important respects, and there are still planning gaps. You cannot expect private investors and private capital to make transformational investments if they are unsure about returns on their investments.

But the reconstruction of our towns in the Northern Cape is a collective responsibility, and the role of private and development finance is recognised in our new Municipal Finance Management Act. In this regard, it is imperative that the structure of both public and private investment in the infrastructure of our towns/cities should deepen considerably over the years ahead.

We also have to consider the rural landscape. It is a mistake to think that developmental policies are either focused on promoting urban growth or on agriculture and the rural poor. Productivity of the rural landscape is in fact closely bound up with the efficiency and the economic needs; food, resources, recreation of the city. The challenge of redressing a distorted and fragmented landscape is even more severe in the rural heartland (kgalagadi rural node).

There are also huge challenges in transport, energy and communication infrastructure. This is of course why we should put considerable effort into developing a robust programme of public private partnerships, which brings private equity and non-recourse debt finance into selected areas of public together as custodians of our nation's well-being and future.

We can galvanise the full wealth of our people's skill, our innovation and our energy to eradicate poverty and drive development. The challenges are of cause enormous the provision of quality health care for all; quality education for all; safe water and sanitation for all; road, rail, communication infrastructure that will stimulate growth; black economic empowerment; a justice system that works; sport and cultural facilities that build pride; the protection of our biodiversity heritage. And much more!

Therefore ladies and gentlemen, when we are confronted with the practical matters of "what is to be done", it is not surprising that we look to the full spectrum of our country's resources, both public and private. We do so rather, with a sober understanding that the diverse interests of different sectors can in fact be harnessed for the collective good. That is what public-private partnerships (PPP) projects are about.

The public gets better, more cost-effective services; the private sector gets new business opportunities. Both are in the interests of the nation. Doubtless, it is a fine balance to strike in each deal. Doubtless, this is why PPPs are tricky and require high levels of expertise. But it is also why we should work very hard to get them right.

Our policy is to use diverse sources of funding for meeting our identified infrastructure and service delivery needs, and in a manner that is cost-effective and appropriately adapted to the circumstances of each particular project.

To make the appropriate choice in each case requires careful assessment of options and perhaps the most important signal of the expanding envelope of opportunities for infrastructure and service delivery.

The Financial Services Charter targets that have been agreed for investment in infrastructure, housing, empowerment, small business development and public services can only be met through a rapid growth in well designed PPPs, in which private and development finance is effectively mobilised, project by project.

In this regard, the Ministry of Finance in our province is in the process of developing a strategy on partnerships to effectively implement our mega projects, identified in our Provincial Growth and Development Strategy as well as in Accelerated and Shared Growth Initiative for South Africa (AsgiSA).

A perception may have been created that in the course of the realisation of our goals, government has placed too much emphasis on the needs of the private sector as a conduit for the developmental needs of our province.

Furthermore, this relationship, if you like, has also apparently demonstrated an excessive sensitivity to the concerns of the private sector. The degree of investment from the private sector in the public private partnerships has not materialised as envisaged, nor have the partnerships yielded the intended results to the extent that we would have wanted them to.

Hence government now has to play a more central role in service delivery in terms of its developmental agenda. To this end, the state should champion the rights of the poor and marginalised, while simultaneously ensuring that growth and prosperity attracts capital.

The state needs to meet the needs of a diverse and multi-cultural citizenry, and in so doing, ensure redress for past imbalances. We also needs to address the key question of the dual poles of the capitalist economy, ensuring the redistribution of wealth without alienating the participants of the rich pole of the economy or so called first economy.

This complexity requires a flexible, strategic state that is unapologetically developmental, and increasingly sophisticated.

In conclusion, ladies and gentlemen we hope that we could amend our memorandum of understanding with the DBSA so as to make provision for future co-operation within the local government sector in line with the new mandate of the bank. As far as our struggling municipalities are concerned we would like DBSA to extend its support to district municipalities, especially in the case of Pixley ka Seme, Namakwa, Siyanda and Kgalagadi until functional shared services units have been established.

We believe if any of us had doubts in our mind about the solidity, strength, maturity and vitality of what we have been able to build. These doubts have been removed by what we have been able to achieve over the last thirteen years or so.

Our hearts are now warmed by an unshakeable certainty which gives us courage in the difficult but glorious struggle against underdevelopment and squalor: no power in the world will be able to destroy our commitment to bring about a better quality of live for our people in pursuit of the creation of an egalitarian society, and we are happy to know that we can rely on our colleagues in the NCOP and valuable partner like the DBSA.

Ke a leboga. I thank you.

Issued by: Office of the Premier, Northern Cape Provincial Government
30 July 2007