Original Research

Infrastructure development within a regulated environment: Concerns for regulators

Zaakirah Ismail, Patrick Mabuza, Kaveshin Pillay, Siyavuya Xolo
Journal of Economic and Financial Sciences | Vol 7, No 4 | a385 | DOI: https://doi.org/10.4102/jef.v7i4.385 | © 2014 Zaakirah Ismail, Patrick Mabuza, Kaveshin Pillay, Siyavuya Xolo | This work is licensed under CC Attribution 4.0
Submitted: 02 July 2018 | Published: 30 September 2014

About the author(s)

Zaakirah Ismail, Rhodes University, South Africa
Patrick Mabuza, National Energy Regulator of South Africa, South Africa
Kaveshin Pillay, National Energy Regulator of South, South Africa
Siyavuya Xolo, National Energy Regulator of South, South Africa

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Abstract

Poor delivery of infrastructure leads to inefficient pricing of these assets, which is passed through to consumers. Inefficient pricing is caused by a poor selection of a funding and financing method as well as project overruns. This article used a case-study approach to investigate if South African (SA) infrastructure projects were executed efficiently. It was found that the procurement method was not a reason for inefficient infrastructure delivery. Further, SA projects overran significantly by between 5 and 58%. The case of Transnet’s pipeline project was highlighted. Two case studies (Gautrain and e-tolls) are presented to highlight issues around funding. It was found that the user-pays mechanism of funding is efficient only if there is complete transparency and communication between the user of the infrastructure and other stakeholders. Given the findings, this paper ends with policy recommendations for regulators of utilities that will ensure that consumers are protected.  

Keywords

allowable revenue; Regulated Asset Base; Weighted Average Cost of Capital; project overruns; financing; funding

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Crossref Citations

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