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SIDS methodology

SIDS Methodology

The SIDS infrastructure pipeline will contribute to industrialisation and job creation as envisaged in the New Growth Path and the Industrial Policy Action Plan. The pipeline will ensure that investments in infrastructure support the objective of crowding in private funding to maintain and expand electricity, water, transport and telecommunications infrastructure in order to support economic growth and social development goals. It will also ensure that investments in infrastructure are in alignment with the visions set out in the Economic Reconstruction and Recovery Plan (ERRP), the National Development Plan’s (NDP), the Infrastructure Development Act (IDA) and the National Infrastructure Plan 2050 (NIP 2050). The interventions identified will, in the short-term, boost demand and ensure effective coordination of all infrastructure players and formalise systematic engagement with all role players. In the long-term, these interventions will contribute to building a resilient economy by accelerating the delivery of infrastructure.

The Investment and Infrastructure Office (IIO) in the Presidency headed by Dr. Kgosientsho Ramokgopa has established the SIDSSA platform, drawing in sector specialists, technical and financial structuring experts and policy departments who considered over 260 infrastructure projects across public and private sectors. The inaugural SIDSSA, held in 2020, platform was used to unveil an infrastructure project portfolio that includes 55 Strategic Integrated Projects worth over R300 billion.

The Process

Infrastructure South Africa (ISA) has developed the SIDS Methodology as an appraisal process and methodology that will be applied to all projects and programmes that seek to be registered through the office. The SIDS Methodology adopts the Five Case Model from the UK Infrastructure Projects Authority; an internationally recognised best practice methodology for business case development, which aligns with the G20 Principles for the Infrastructure Project Preparation Phase. Using this methodology, ISA seeks to establish the strategic fit, social and commercial viability of projects and programmes and offer support to Project Sponsors to develop their early, intermediate and final business cases in line with best practice standards. The infrastructure projects or programmes that require funding will be categorised in three (3) ways: Debt Capital Markets; the Infrastructure Fund, as a blended finance structuring mechanism; or the Fiscus. These projects will move through seven (7) business case development stages, and five (5) approval gates.

The SIDS Methodology, based on the Five Case Model, asks the following questions:

Appraisal and Approval Stages

stage 1

At the Origination Stage projects will be originated by Project Sponsors, either through the public sector – National Government, Provincial Government, Local Government, State Owned Entities or other Public Entities – or the private sector. The originators will be required to fill in a standardized template that will be submitted to the ISA Portfolio Management Office (PMO).

stage 2

At the Registration Stage, the PMO will check the submitted projects for basic compliance. The PMO will check if templates are filled in correctly and completely; what stage the project is in the life-cycle; if there is information outstanding that ought to be requested; and which Technical Working Group (TWG) needs to consider the project.

Gate 1: The Infrastructure Investment Committee (IIRC) will consider whether the project needs to be returned to the project sponsor or be registered and proceed to stage 3.

stage 3

Early Business Case Appraisal
Stage 3 begins to look at the project on its more substantive matters. In the Early Business Case phase the TWGs will receive the project documentation and begin to assess and appraise the project based on the strategic need and overall fit, probable costs, benefits and risk, an options analysis and begin to outline delivery arrangements.

Gate 2: The IIRC will consider the information received from the TWGs and make a decision on whether the project must proceed to Stage 4 or return to the Project Sponsor for further work.

stage 4

Intermediate Business Case Approval
During Stage 4, the TWG will consider whether the Project Sponsor has taken into account a robust strategic case, undertaken a cost-benefit analysis by identifying the preferred option, confirmed a procurement strategy, tested affordability, and put in place management arrangements.

Gate 3: The IIRC will consider analysis done by the TWG and decide whether the project can go to Stage 5, where a decision will be made for funding by financing institutions. The IIRC will also be recommending the project for gazetting to the Infrastructure Investment Committee (IIC).

stage 5

Should the IIRC approve the project for Stage 5, the IIC will review the decision for gazetting and funding. Should the IIC also approve the project it will be recommended to the Presidential Infrastructure Coordinating Council (PICC) for gazetting.

At stage 5, the project will be considered for blended financing, fiscal financing or commercial financing.

Gate 4: IIRC will either approve the project for stage 6 or return to project sponsor for further work.

stage 6

Final Business Case
Stage 6 constitutes the development of the Final Business Case and in this instance the IIRC will be checking whether: the strategic case has been updated; public value is confirmed; the commercial and contractual arrangements are in place (procurement); the project is affordable; and the project can be delivered and monitored.

Gate 5: The IIRC will consider a final recommendation by the TWG on whether the project should go ahead for implementation or be returned to the project sponsor for further work.

stage 7

Implementation and Benefits Realization
At Stage 7 the project is implemented (goes to construction) and there is a process of monitoring and evaluation.