SA Affordable Housing January - February 2019 // Issue: 74 | Page 29

INDUSTRY MATTERS
The effectiveness
of PPPs was
demonstrated as far
back as 1999, with
Blue IQ.
Gautrain is a great example of PPP.
South African law defines a public private partnership as a
contract between a public sector institution and a private
party, in which the private party assumes a substantial
financial, technical and operational risk in the design,
financing, building and operation of a project.
The International Finance Corporation, which is widely
regarded as a go-to guide on these matters, broadly defines
a PPP as a ‘long-term contract between a private party and a
government entity, for providing a public asset or service, in
which the private party bears significant risk and
management responsibility, and remuneration is linked
to performance’.
The private sector is well poised to deliver the financial,
people skills and expertise for infrastructure development.
It also carries the risks along with the public entity, ensuring
good service delivery.
In reference to the stadia that were built for the 2010
World Cup, a 2015 Mail & Guardian article by Lisa Steyn
states that, “Their main findings indicate that ancillary
investments near the stadiums are essential to mitigate risks
and that the coordination of a central government entity
may reduce the capital required for risk management when
several stadiums need to be built in a short timeframe.”
It is quite conceivable, had the PPP model been adopted for
the stadia and associated infrastructure, that the measures
required to mitigate the risks after the fact, could have
been avoided.
Economic models are specific to each partnership and it
should be to the benefit of each party.
The PPP model is also intended, in part, to alleviate the
pressure on the fiscus, therefore assisting government in
meeting its GDP targets as it relates to infrastructure
development, economic growth, job creation and other such
factors that will have a positive effect on the trajectory of
the country (in the broader sense).
By its nature, a public private partnership entails:
• targeting public spending, principally on outputs to
agreed standards
• leveraging private sector financing and efficiencies
• allocating risks to the party best able to manage the risk
In South Africa, the private entity is most likely to provide
the efficiencies and is best placed to manage the
operational risks.
Take for example, the Isibalo House, the fairly new Stats
SA building built to accommodate more than 3 000 people.
At a cost of R1.4-billion, this is a PPP between Stats SA and
Dipalopalo Consortium, that sub-contracted Dipalopalo
www.saaffordablehousing.co.za
Facilities Management Solutions (DFMS) to provide one of
the most integrated facilities management solutions known
in South Africa. DFMS is a special purpose vehicle, created to
operate the building for 26 years.
This partnership allows Stats SA to focus only on their
core business and outputs, with facilities being managed by
DFMS. The services provided include cleaning, security,
landscaping, catering, hygiene and pest control. In facilities
management parlance, these are referred to as soft services.
DFMS has subcontracted these services to Servest Integrated
Services to deliver on all these soft services. The benefits of
having these services provided by a single entity include
reducing costs associated with multiple service providers,
reducing the number of contracts that have to be overseen
and simplifying the overall management of subcontractors.
The success of any PPP can be measured from three
different perspectives* namely, project management,
stakeholder perspective as well as contract management.
DFMS, as the operator of Isibalo House, concerns itself
primarily with contract management. For the duration of the
PPP, the success or failure of the PPP rests on how well the
contract between the private party and the state is managed,
as well as how well the subcontractor agreements are
managed between the operator and its subcontractors. The
success of the Stats SA project, to date, can be attributed to a
proper understanding and monitoring of contractual
obligations of each party, as well as a commitment to comply
with said obligations.
Facilities management at Isibalo House, however, goes
beyond the usual cleaning, security and other soft services.
It includes technical services such as mechanical ventilation,
electrical, lifts, fire protection, building fabric and finishes,
telephony, security systems and audio-visual equipment in
over 40 conference rooms, ensuring high availability and
functionality of this cutting-edge technology. Life cycle
asset management plays an important role in the
partnership with the risks associated with the operation of
the building being borne by the private party, not the
government, for the life of the partnership.
The effort to make a success of this, or any PPP for that
matter, is greatly assisted by regular communication and
consultation, which pre-empts problems and aids the effort
to realise and enhance the benefits of the PPP for all
stakeholders.
Source:
https://doi.org/10.1080/01441647.2014.994583.
https://goo.gl/F4RPyC
JANUARY - FEBRUARY 2019
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