Treasury clears path for SME participation and private investment in public works

In a bid to streamline approvals, clarify institutional responsibilities, and enhance efficiency in the public projects tendering process, recent amendments to National Treasury Regulation 16 (NTR 16) were put into effect by Finance Minister Enoch Godongwana and gazetted in February 2025.

These changes are geared towards making public-private partnership (PPPs) more viable and creating new opportunities for small businesses in the construction sector, stimulating competition and facilitating broader participation in essential infrastructure development.

According to Roelof van den Berg, CEO of the Gap Infrastructure Corporation (GIC), “Smaller projects, such as community clinics or regional road upgrades often face unnecessary delays due to overlapping compliance requirements. This eagerly awaited revision of the PPP framework allows provincial and municipal authorities to fast-track these initiatives, with the potential to reduce approval timelines from months to weeks.

“This step is expected to substantially accelerate service delivery to underserved communities, while freeing up critical resources at a national level for larger, strategically complex projects like port expansions or national grid improvements.”

Merits of the R2 billion project concessions

Previously, all PPP projects, regardless of size, had to go through the same rigorous approval process. The procurement process also had to make preference for bids that protect or advance disadvantaged persons. Now, projects costing less than R2 billion are exempt from certain Treasury approvals, including submitting a draft PPP agreement and pre-obtaining approval for the procurement documentation.

This amendment will reduce several bureaucratic hurdles for smaller projects, enabling faster delivery of infrastructure such as roads, schools, and healthcare facilities. The lower regulatory threshold will also allow small and medium-sized enterprises (SMEs) and emerging black-owned construction businesses, which were previously sidelined by the high compliance costs and risk allocation associated with larger tenders, to participate in the bidding process.

If implemented effectively, the R2 billion exemption could serve as a catalyst for grassroots economic growth, while testing scalable models for future PPP reforms.

Opportunities presented by a new unsolicited bids provision

The additional introduction of a formal framework for unsolicited bids alongside the NTR 16 amendments marks a significant departure from South Africa’s traditionally rigid procurement system. This provision incentivises private companies to propose innovative, market-driven solutions to unmet infrastructure challenges crucial to the local community, explains van den Berg.

For example, a company specialising in green building technologies could pitch a solar-powered housing project tailored to government’s climate agenda, if the proposal demonstrates unique technical or financial value. While the company would be responsible for a review fee and the costs of a feasibility study, they would be automatically qualified for consideration should the project proceed to tender, and receive compensation for development costs if they are not selected as the final service provider.

“The unsolicited proposals framework creates a first-movers advantage, allowing companies to secure early-stage project ownership, and may encourage greater innovation within infrastructure,” he says.

Additional government oversight and support

To support and protect smaller businesses against better established firms with access to greater resources from simply dominating the space, Treasury’s PPP Advisory Unit has committed to providing technical support to applicants, ensuring proposals are judged solely on merit.

Additionally, government has implemented measures to improve financial oversight of PPPs. New mechanisms are in place to monitor and manage the government's financial commitments and potential liabilities throughout a project's lifecycle, strengthening fiscal responsibility.

If balanced fairly, these provisions could enhance competitiveness and maximise the impact of infrastructure spending for the economy, as well as communities.

Feasibility of the R100 billion private sector investment target

Van den Berg notes that the streamlined approval processes, enhanced fiscal reporting, and risk-sharing mechanisms introduced by the NTR 16 amendments address key investor concerns about bureaucratic delays and fiscal transparency. However, the construction sector still faces considerable barriers in the form of skilled labour shortages, energy uncertainty, and a delay in amendment implementation to the Municipal PPP Regulation 309, which is scheduled only for mid-2025.

To achieve the R100 billion infrastructure investment target announced during the 2025 State of the Nation Address will require substantial public-private collaboration on skills development, energy sector stabilisation, and municipal engagements.

For example, GIC recently achieved the milestone of raising R616 million in private capital for public infrastructure, establishing a blueprint for how targeted funding models can help bridge the investment gap, particularly for projects that struggle to attract traditional financiers.

“Coupled with NTR 16 amendments that streamline risk allocation and project approvals, funding models like this, that are implemented and managed by the private sector to assist public projects, could be the basis for attracting more institutional and international investors to commit funds toward government’s R100 billion private sector investment goal.”

He explains that GIC ultimately aims to secure a total of R20 billion over the period of two years, indicating both the firm and the overall private sector’s growing confidence in socially focused infrastructure backed by strong risk-mitigation strategies.

“If successful, these NTR 16 reforms with additional support from major private institutions could be a turning point in South Africa’s infrastructure development that could, for instance, push smaller construction businesses to the forefront of smaller-scale municipal projects. This will help significantly more communities across the country and drive widescale social and economic growth,” concludes van den Berg.