Municipalities free to set up PPPs – Treasury

The National Treasury stressed this week that the cancellation by the Department of Correctional Services last year of planned public-private partnerships (PPPs) to build and operate four new prisons did not have any effect on any other pending or new PPPs. However, the National Treasury remained silent on the planned review of PPP policy. Bulelwa Boqwana, a National Treasury spokeswoman, said that in line with Treasury policy, she was not in a position to comment on any policy issues ahead of the Budget. Finance Minister Pravin Gordhan will deliver his Budget speech on February 22.

Construction companies were incensed when the planned prison PPPs were cancelled in October. Mike Upton, the chief executive of Group Five, said at the time the listed construction and engineering company felt aggrieved and indicated it intended to seek compensation for the costs incurred when submitting bids for the prison projects, but this week indicated it had not thought further about this and would rather work with the government. Boqwana said this week that the National Treasury had not been informed of any claims by any of the bidders to the Department of Correctional Services tender.

“Since no claims have been submitted, to our knowledge, we cannot speculate on the nature of our response. Each case is treated on its merits.” The announcement by Tshwane executive mayor Kgosientso Ramokgopa last week that the metro’s old headquarters, Munitoria, would be demolished and replaced by a new building called Tshwane House at a cost of R10 billion, and be funded jointly by the municipality and private partners in one of the first PPPs of this scale, was puzzling in light of the cancellation of the prison PPPs and government review of PPP policy.

However, Boqwana said the Munitoria project was a municipal one and under applicable legislation and regulations, the National Treasury did not give a municipality its “approval” to procure the infrastructure as a partner in the PPP. Instead it provided its “views and recommendations” to the municipality in response to the municipality’s request for them at the various phases in the municipal PPP project cycle, she said. Boqwana added that the National Treasury had provided its views and recommendations to the Tshwane metro in terms of the Munitoria project at its various stages, the most recent being its April 2011 views and recommendations in terms of the metro’s proposed negotiations with a preferred bidder.

“Each PPP is designed to suit a certain purpose and therefore transactions are not interdependent given the uniqueness of arrangements. It is therefore inappropriate to compare what happens in a different project with another (project),” she said.