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Module 3 Template 9 Drafting notes to the large cap tourism PPP agreement

Module 3 Template 9 Drafting notes to the large cap tourism PPP agreement 2.
Table of contents

Page

1. Relationship with the Standardised Public Private Partnership Provisions 4

2. Project Finance.................................................................................................4

3. Generic nature of the PPP Agreement.............................................................4

4. Clause 1.1.1 – definition of "the Act"...............................................................5

5. Clause 1.1.29 – definition of "Independent Expert"........................................5

6. Clause 5.3.1.-- ownership and return of the Project Site and the Facility.....6

7. Extent of the Project.........................................................................................6

8. The situation where the Facility is already erected on the Project Site........6

9. Sale of Institution Assets..................................................................................7

10. Rights of access, traversing rights and sharing of common facilities.........8

11. Clause 7 – Institution assistance and rights and limitations on liability......9

12. Clause 8.3.2 and Schedule 7............................................................................9

13. Clause 11 – Key Personnel and removal of personnel...................................9

14. Clause 13 – Access to documents, copyright and related matters...............9

15. Clause 17 – Performance Bond and Final Bond...........................................10

16. Clause 18 – Commencement and Completion of Works..............................10

17. Operator...........................................................................................................11

18. Clause 20.4 – marketing.................................................................................12

19. Clause 21 – PPP Fee.......................................................................................12

20. Clause 22 – User charges in respect of Operation and Maintenance.........13

21. Clause 23 – Penalties......................................................................................13

22. Clause 24 – Default interest............................................................................13

23. Clause 27 – Consequences of a Relief Event................................................13

24. Termination Amount on Private Party Default...............................................14

25. Clause 31 and a direct agreement with a lender to the Private Party.........14

26. Clause 31.3 – Equity and Shareholder Loan compensation on Institution


Default......................................................................................................................... 15
Module 3 Template 9 Drafting notes to the large cap tourism PPP agreement 3.
27. Clause 38.2 – certificate of indebtedness.....................................................15

28. Institution's right to step in............................................................................15

'23 Institution Step-in............................................................................................16

29. Capital grants by the Institution or a Responsible Authority......................17

30. Final Bond........................................................................................................17

31. Documents to be included in Project Documents........................................18

32. Sale of business upon termination or expiry................................................18

33. Schedule 4 - Environment and heritage obligations....................................18

34. Schedule 5 – Black Economic Empowerment obligations..........................21

35. Schedule 12 - Penalties.................................................................................21


Module 3 Template 9 Drafting notes to the large cap tourism PPP agreement

1. Relationship with the Standardised Public Private Partnership Provisions

The PPP Agreement is based on the Standardised Public Private Partnership


Provisions ("the Standardisation") issued as National Treasury PPP Practice
Note number 01 of 2004, available on www.ppp.gov.za. It is not the intention to
repeat the provisions of the Standardisation in these Notes but to supplement
them. Accordingly, it is advised that persons using the draft PPP Agreement for
large cap tourism PPPs and these Notes consult the Standardisation in
conjunction with these Notes and the PPP Agreement.

2. Project Finance

The draft PPP Agreement for tourism PPPs assumes that finance is raised by the
Private Party in the form of corporate finance supported by the balance sheets of
its shareholders. In the event that project finance is used, relying on the cash flows
of the project, (limited or non-recourse debt) then this PPP Agreement must be
amended in accordance with the Standardisation, making suitable provisions for
the lenders. Institutions are advised in such circumstances to seek the advise of
National Treasury's PPP Unit.

3. Generic nature of the PPP Agreement

The draft PPP Agreement is relatively generic and non-project specific. It should be
more closely moulded to the specifics of the Project if, and once, decisions have been
taken on Project specific issues. Once decisions in respect of the Project have been
taken, then the following clauses in the PPP Agreement must be amended:

clause 1.1.15 (definition of "Development Period"), clause 1.1.20 (definition of "Expiry


Date"), clause 1.1.36 (definition of "Long Stop Date") and clause 4.1.2
(the time period of the Development Period) ;

clause 1.1.44 (definition of "Operation and Maintenance"): definition should describe


the Operations that the Private Party is required to provide at the Facility
in respect of the Project;

clause 1.1.61 (definition of "Protected Area"): this definition should include a


description of and the name of the site where the Project is to take place,
such as (for example) the name of the relevant dam or river or park or
Protected Area;

clause 1.2.2 and wherever else the phrase "month and year in which the Signature
Date appears": the month and year in which signature of the PPP
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Agreement occurs should be inserted as they will form the base date off
which inflationary increases will happen;

clause 2.2: the description of the physical structures and the activities that the Private
Party is to provide and undertake must be inserted into this clause;

clause 3.2 and clause 7.2: whether the Private Party will have exclusive use of the
Institution Assets and the Project Site will depend on the nature of the
Project and what other uses the Institution wants to make of the Project
Site. If the Private Party is not to have exclusive use of the Project Site,
then the wording in square brackets in clauses 3.2 and 7.2;

In certain clauses, numbers of days or amounts are either in square brackets, bold and
italics or have not been filled in. The Institution and the Transaction Advisors must fill in
these numbers of days and amounts after considering what would be appropriate in
respect of the Project to which the PPP Agreement relates.

4. Clause 1.1.1 – definition of "the Act"

This definition should refer to any legislation that specifically governs the Institution
and permits the Institution to undertake the PPP and enter into the PPP
Agreement. If there is no such legislation and/or the Institution derives its
Institution, power and capacity from the common law or a statute such as the
Constitution, then this definition may not be necessary.

5. Clause 1.1.29 – definition of "Independent Expert"

A Project may require different experts to determine a dispute between the Parties.
For example, a Project in respect of a water PPP may require a financial expert to
determine certain financial issues and an expert in riverine biology and Project in
respect of a game reserve may require experts in respect of flora and fauna. The
clause contains 4 types of experts but the number and type of the experts may
need to be expanded in respect of a specific Project.

6. Clause 5.3.1.-- ownership and return of the Project Site and the Facility

Where the institution is not the owner but has delegated rights from the owner, this
clause should be used as an alternative to clause 5.3.1.

The Private Party agrees and acknowledges that the Project Site is registered in
the name of [insert name of relevant government department or entity in
whose name the Project Site is registered] and that [insert name of relevant
Module 3 Template 9 Drafting notes to the large cap tourism PPP agreement 6.
government department or entity in whose name the Project Site is
registered] has delegated to the Institution the power and authority to conduct the
Project on the Project Site and to grant the rights detailed in this PPP Agreement
in respect of the Project Site to the Private Party.

7. Extent of the Project

It is possible that a Project could require the Private Party to undertake certain
conservation functions of the Institution in respect of the entire Protected Area. In
this situation, the RFP documents must clearly specify that the Private Party must
be required to undertake these conservation functions and the Operation and
Maintenance Specifications and the Environmental Specifications must specify in
detail what the conservation functions are and what obligations, duties and
functions the Private Party is required to undertake and perform.

8. The situation where the Facility is already erected on the Project Site

It is possible that the Facility has already been erected on the Project Site when the
PPP is undertaken. If this is the case, two situations are possible:

the first is where the Private Party will have to restore, renovate and/or refurbish the
Facility; and

the second is where the Private Party can use the Facility in the state in which it is
delivered to the Private Party by the Institution.

In the first situation, all of the provisions in respect of the undertaking of the Works in
accordance with the Construction Specifications and to the satisfaction of the
Independent Certifier, by the Long Stop Date will still be necessary. In this situation,
the definition of Works will need to deal with the restoration, renovation and
refurbishment of the Facility (rather than the design, construction etc) and the
Construction Specifications in Schedule 1 will need to provide the detail of the
restoration, renovation and/or refurbishment that needs to be undertaken in respect of
the Facility. Accordingly, the definition of Works should read as follows:

"Works" - the restoration, renovation and


refurbishment of the Facility
pursuant to the Project
Deliverables but excluding the
Operation and Maintenance, as
detailed in Schedule 1.
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The second situation is anticipated to occur rarely. In this situation, the following
definitions, clauses and schedules will need to be deleted and the transaction advisors
will need to pay particular attention to ensuring that the PPP Agreement is amended to
incorporate consequential changes to the provisions of the PPP Agreement and to
detail that the Facility has already been designed, constructed, commissioned and is
completed and is being provided to the Private Party in a readily useable state.

The definitions to be deleted are the following: Completion Certificate, Construction


Specifications, Development Period, Independent Certifier, Independent
Certifier Agreement, Long Stop Date and Works.

The clauses to be deleted are clauses 14.2.2, 18, 30.15 and 30.1.7.

The schedules that may be deleted are Schedules 1, 3 and 11.

Clause 9 will need to be amended to remove any references to the Construction


Specifications in the title and by deleting clause 9.2.5.

9. Sale of Institution Assets

In certain PPP projects, the Institution may wish to sell certain of the Institution Assets
to the Private Party. In this situation, the following definitions need to be inserted into
clause 1.1 in the correct alphabetical positions:

"Purchase Price" - the purchase price to be paid by


the Private Party to the Institution
in respect of the Sale Assets,
which price is in the amount of
R[insert amount];

"Sale Assets" - those Institution Assets which are


listed on Schedule [ ] and which
are sold by the Institution to the
Private Party;

The following clause should be inserted into the PPP Agreement as clause 5:

'Sale of Sale Assets

On and with effect from the Effective Date, the Institution sells the Sale
Assets to the Private Party, who purchases the Sale Assets from the
Institution. The Sale Assets are sold to the Private Party voetstoots.
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The Purchase Price shall be paid by the Private Party to the Institution
by way of electronic transfer into the following account [insert account
details] on the Effective Date and upon receipt of the Purchase Price,
the Institution shall deliver the Sale Assets to the Private Party by
granting access to the Project Site to the Private Party.'

A new Schedule should be attached to the PPP Agreement and this Schedule should
list all of the Sale Assets.

10. Rights of access, traversing rights and sharing of common facilities

If the Private Party is to be granted specific rights of access to or rights to traverse


other parts of the Protected Area or is going to be required to share any common
areas or parts of the Protected Area, then this will need to be specifically provided
in clause 5 and the following clause can be inserted as clause 5.1.15:

'5.1.15 The Private Party shall be entitled to [access/cross/have


common use of, together with any other persons to whom the
Institution grants similar rights,] the following areas of the
Protected Area:

[insert list of areas of the Protected Area].'

11. Clause 7 – Institution assistance and rights and limitations on liability

The wording in square brackets in clause 7.2 should be deleted if the Institution or
another Responsible Authority may wish to grant rights to other persons to conduct
similar PPPs to the Project or may itself wish to conduct a similar project to the
Project, in respect of the Park or place at which the Project Site is situated. If the
Institution is prepared not to have the ability to grant such rights to another person
or itself conduct such a project, then the square brackets can be deleted and the
wording retained. Whether the Institution undertakes not to grant a similar PPP to
another Private Party or to operate a similar project itself will depend on the quality
of the asset on which the Project takes place and whether that asset can
successfully sustain two similar projects, yielding the required returns. In addition,
the Institution must also decide whether the exclusivity of rights, if given, extends
to the Project Site only or to the entire Protected Area.
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12. Clause 8.3.2 and Schedule 7

The wording in square brackets in clause 8.3.2 and its subclauses and the whole
of Schedule 7 can be deleted if there are no Consents which the Institution is
going to obtain.

13. Clause 11 – Key Personnel and removal of personnel

If the Institution is going to require the Private Party to take over the employment
of any employees of the Institution, then section 197 of the Labour Relations Act,
1995 will be applicable. Specialist legal advice will be necessary in respect of the
procedures that need to be followed and the requirements of said section 197, as
well as any legal agreements that may need to be entered into pursuant to the
transfer of the employment of the relevant employees.

14. Clause 13 – Access to documents, copyright and related matters

If intellectual property rights, trade marks and branding are important issues in
respect of a particular Project, the Institution is advised to consult specialist
intellectual property attorneys as to advice on these issues and specific provisions
that may need to be inserted into the PPP Agreement.

15. Clause 17 – Performance Bond and Final Bond

The amount of the Performance Bond during the Development Period should not be
less than a percentage of the cost of the Works, which percentage should be
determined with specific reference to the particular Project. In addition, the amount of
the Performance Bond during that period may also cover additional damages and costs
that the Institution may incur should the Private Party default on its obligations during
that period. During the Project Term, the Performance Bond amount should not be less
than the Minimum PPP Fee and may also cover any additional damages and costs that
the Institution may incur should the Private Party default during that period. The
Performance Bond will need to be issued in respect of a specific amount in respect of
each period as financial institutions and corporate entities will not issue bonds in
respect of potentially unlimited amounts.

The amount of the Final Bond and when the Final Bond should be provided for the first
time should reflect the financial costs of the maintenance to be done in the last few
years of the Project and when the final maintenance should commence. For example,
if there are large replacements of equipment (such as kitchen equipment) required 5
years before the Project Term expires, then the amount of the Final Bond will be larger
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than and it will be required to commence sooner than, the Final Bond in respect of a
Project where there is no major maintenance in the last 5 years of the Project and the
routine maintenance is of relatively low value.

16. Clause 18 – Commencement and Completion of Works

The PPP Agreement is drafted on the basis that an Independent Certifier who has the
expertise to monitor and sign off the Works will be appointed. This is to avoid the
situation where the Institution monitors and signs off on the Works as this may result in
the transfer back to the Institution of the risk in the design and construction of the
Facility, which is to be avoided. It will be necessary for the Institution and the Private
Party to enter into an agreement with the Independent Certifier, who will be appointed
by both the Parties and will be paid by both the Parties in equal portions. A draft
Independent Certifier Agreement is attached to the PPP Agreement as Schedule 11.

17. Operator

In some PPP projects, the Private Party might not carry out the Operation and
Maintenance itself but may appoint a sub-contractor to conduct the Operation and
Maintenance on its behalf. This situation may arise where certain members of the
Private Party will not be involved in the Operation and Maintenance and certain
members of the consortium that bid for and was awarded the Project will be involved in
the Operation and Maintenance but will not be members of the Private Party.

If the Operation and Maintenance is to be carried out by an Operator and not by the
Private Party itself, then the following provisions will need to be inserted into the PPP
Agreement:

the following definition of "Operator" will have to be inserted into clause 1.1 in the
correct alphabetical order:

"Operator" - the Subcontractor who is


appointed by the Private Party
to conduct the Operation and
Maintenance;

the following clauses should be inserted into clause 8.1 as clauses 8.1.3 and 8.1.4
respectively:

'8.1.3 A copy of the Subcontract between the Private Party and the
Operator shall be submitted to the Institution before the
Private Party enters into that Subcontract and the Institution
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(acting reasonably) may impose requirements that it deems
desirable in respect of the terms and conditions of that
Subcontract, with which the Private Party shall comply;

8.1.4 Once the Subcontract between the Private Party and the
Operator has been signed, the Private Party shall provide
the Institution with a signed copy of that Subcontract and
then shall provide the Institution with a copy of any proposed
amendments, variations or cancellations to or of the terms
and conditions of that Subcontract. The Institution (acting
reasonably) may impose those requirements that it deems
desirable in respect of any such amendment, variation or
cancellation and the Private Party shall comply with those
requirements. The Private Party shall give the Institution a
copy of the signed amendment, variation or cancellation
agreement;'

the following clause should be inserted into clause 8.4 as clause 8.4.10:

'8.4.10 as at the Signature Date:

8.4.10.1 the authorised and issued share capital in the Operator


and the share premium on that issued share capital,

8.4.10.2 as well as any shareholder loans to the Operator

are as detailed in Schedule 16, and

8.4.10.3 the shareholders in the Operator,

are all as detailed in Schedule 16.'

Schedule 16 must be amended to record the equity arrangements of the Operator as


well as of the Private Party and so the title of this Schedule must be
amended by inserting the following phrase at the end of the title:

'and of the Operator'.

18. Clause 20.4 – marketing

The Request for Proposals needs to specify that one of the output specifications
required as part of the bidders' bid submissions must be a marketing plan in
respect of the Facility and the Operation and Maintenance.
Module 3 Template 9 Drafting notes to the large cap tourism PPP agreement 12.
19. Clause 21 – PPP Fee

The amount of the PPP Fee in clause 21.1 is to be determined by the Institution
prior to issuing the RFP and should be stated in the RFP. The percentage detailed
in clause 21.2 is to be derived from the preferred bidder's proposal.

20. Clause 22 – User charges in respect of Operation and Maintenance

If the Project is a restaurant, tea room or other retail facility, the Institution may
have an interest in the user charges being charged by the Private Party to the
members of the public. In this situation, the following provision should be inserted
into clause 22 as clause 22.5:

'22.5 The Private Party shall charge the user charges specified in
Schedule [x] in respect of the items sold at the Facility. Such user
charges are indexed to CPIX. If the Private Party wishes to
increase or decrease such user charges (indexed to CPIX) by more
than 20%, it shall first obtain the prior written consent of the
Institution to such increase or decrease before it undertakes it and it
shall provide the Institution with its reasons for such increase or
decrease. The Institution, acting reasonably, may withhold its
consent to such increase or decrease, provided that the Institution
shall have no liability to the Private Party of any nature whatsoever
as a result of or arising out of any withholding of its consent.'

21. Clause 23 – Penalties

The amounts of the penalties and the breaches in respect of which they are to be
imposed must be determined with specific reference to the Project in respect of
which the present PPP is being undertaken. The levels of the penalties should be
set so as to be punitive but not to bankrupt the Private Party.

22. Clause 24 – Default interest

The name of the bank with whom the Institution banks should be inserted into this
clause 24. In addition, it may be appropriate in some projects to increase or
reduce the percentage of 2% and the Institution may do so.

23. Clause 27 – Consequences of a Relief Event

It is possible that the occurrence of a Relief Event may place financial strain on a
Private Party, even if there is Project Insurance in respect of such an event and its
Module 3 Template 9 Drafting notes to the large cap tourism PPP agreement 13.
consequences as the Delay in Start Up and Business Interruption Insurances may
only be available after a certain period of time has elapsed. In such
circumstances, the Private Party may ask for relief from payment of the PPP Fee
and/or an extension of the Project Term. The Institution should carefully consider
the consequences to it of granting either or both forms of relief and should grant
whichever form of relief is least adverse to it. Relief from payment of the PPP Fee
should be granted in preference to an extension of the Project Term.

24. Termination Amount on Private Party Default

The present drafting of the PPP Agreement provides for a retendering option, in
terms of which the Institution pays the Private Party the highest price bid by the
tenderers.

25. Clause 31 and a direct agreement with a lender to the Private Party

It is possible that, if the Private Party is borrowing monies from a financial institution in
order to under take the Project, that financial institution will require the Institution and
Private Party to enter into a direct agreement with it, granting it certain rights (including
step-in rights) upon the occurrence of a Private Party Default. A draft direct agreement
is available in the Standardised PPP Provisions Part O: Standard Direct Agreement,
available on www.ppp.org.za..

If a direct agreement is to be entered into in respect of the relevant Project, the draft
form of that direct agreement should be attached to the PPP Agreement as Schedule
18 – Form of Direct Agreement.

In addition, the following definitions will need to be inserted into the PPP Agreement, in
the correct alphabetical position:

"Credit Agreement" - has the meaning assigned to it in the


Direct Agreement;

"Debt" - at any date, all amounts due and payable by


the Private Party that are outstanding
under the Credit Agreement at that date,
but excluding all default interest,
breakage premiums as well as all fees,
costs and expenses whatsoever in
connection with any hedging
Module 3 Template 9 Drafting notes to the large cap tourism PPP agreement 14.
arrangements entered into by the
Private Party;

"Direct Agreement" - the agreement so titled between the


Lender (or their nominated agent), the
Private Party and the Institution
concluded simultaneously herewith,
substantially in the form of Schedule 19;

"Lender" - any person providing finance to the Private


Party under the Credit Agreement.

In addition, clause 31.3.1 of the PPP Agreement should be amended by


deleting the present wording and replacing it with the following wording: 'the
amount of the Debt at the Termination Date'

26. Clause 31.3 – Equity and Shareholder Loan compensation on Institution


Default

The percentage return on the Equity and Shareholder Loan outstanding balances
that the Private Party would want on to be paid on termination for Institution
Default must be inserted by the Private Party as part of its mark up of the PPP
Agreement that is submitted together with its response to the RFP.

27. Clause 38.2 – certificate of indebtedness

This provision helps the Institution with discharging the burden of proof it is
required to discharge in respect of claiming monies owed to it by the Private Party.

28. Institution's right to step in

If the Project Site is of the type of nature or in a position where it may be desirable
for the Institution to be able to take possession of it for reasons of health, safety or
security or for environmental reasons without terminating the PPP Agreement and
the Project, then the following clause should be inserted into the PPP Agreement
as clause 23. The effect of this clause is that the Institution can take over the
Project Site and suspend the Project for the duration of the event causing it to take
the Project Site over, without having to terminate the PPP Agreement and having
to pay the termination sum for Institution Default, which could be a substantial
sum. Instead, the Institution pays the smaller sum of the Private Party's monthly
income for the period that the Institution has 'stepped in'.
Module 3 Template 9 Drafting notes to the large cap tourism PPP agreement 15.
'23 Institution Step-in

23.1 If the Institution reasonably believes that it needs to take any


action in connection with the Facility and/or the Operation and
Maintenance because a serious risk arises to the health or
safety of persons or property, or to the Environment, or to
national and public safety and/or to discharge a statutory duty,
then the Institution shall be entitled to take action in
accordance with the following provisions.

23.2 If the Institution wishes to take action in terms of clause 23.1,


it shall as soon as possible after deciding to do so, notify the
Private Party in writing of:

23.2.1 the action it wishes to take;

23.2.2 its reasons for taking such actions;

23.2.3 the date when it wishes to commence such action;

23.2.4 the time period (the "Step-in Period") which it


reasonably believes will be necessary for such action
and which must be a fixed period; and

23.2.5 to the extent practicable, the effect on the Private Party


on its obligations to perform the Project Deliverables
during such time period.

23.3 Following the Operation of such notice, the Institution shall


take such action as notified under clause 23.2 and any
ancillary action as it reasonably believes is necessary (the
"Required Action") and the Private Party shall give all
reasonable assistance to the Institution in the conduct of such
Required Action.

23.4 For so long as and to the extent that the Required Action is
taken, and this prevents the Private Party from providing any
part of the Project:

23.4.1 the Private Party shall be relieved from its obligations in


respect of that part of the Project; and
Module 3 Template 9 Drafting notes to the large cap tourism PPP agreement 16.
23.4.2 in respect of the time period over which such Required
Action is conducted and provided that the Private Party
provides the Institution with such reasonable assistance
as the Institution may need in the conduct of such
Required Action (such assistance, however, to be at the
expense of the Institution to the extent of any
incremental costs), the Institution shall pay to the Private
Party an amount of monies that is equal to the revenue
that the Parties agree or it is determined in terms of
clause 38 would have been earned by the Private Party
at the time of and during the period of the Required
Action if the Private Party was fulfilling all its obligations
in respect of the Project that are affected by the
Required Action.'

29. Capital grants by the Institution or a Responsible Authority

In the event that the Institution makes a capital grant contribution to the capital
cost of the Project, these payments to the Private Party must only be made
according to a Milestone Completion Schedule upon sign-off at each milestone by
the Independent Certifier. These milestones will need to be very precisely defined
by the Institution. In addition, advice should be taken at the time of undertaking the
relevant project as to whether it is necessary specifically to exclude the capital
grant from the definition of "Gross Revenue". In drafting this aspect of the PPP
Agreement, the Institution should seek the advice of the PPP Unit.

30. Final Bond

In certain Projects, it may be appropriate to require the Private Party to provide a final
bond in respect of its obligations to provide maintenance, in the last few years of the
Project Term, as detailed in the PPP Agreement in clause 17 and Schedule 10.

In other instances, however, the economic and financial aspects of the relevant Project
may mean that the Project cannot bear the cost of providing a final bond or a
maintenance reserve account (as a substitute for the final bond).

The Institution must consider each Project to ascertain whether it can bear the cost of
providing a final bond, and if it cannot, the Institution may need to consider putting in
place alternative means of managing the risk that the Private Party fails to perform
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maintenance in the last few years of the Project, such as a regime of increased
inspections and penalties if maintenance is not performed.

31. Documents to be included in Project Documents

The Project Documents would include all agreements and subcontracts that are
necessary in order to enable the Private Party to undertake the Project. Such
documents will usually include the shareholders agreement, all subcontracts and
any funding agreements.

32. Sale of business upon termination or expiry

Upon the termination or expiry of the PPP, it may be necessary for the existing
Private Party to effect a sale of business to the person who will take over the
Project. As the Project Assets already belong to the Institution, this sale of
business would be in respect of the transfer of the employees and any assets of
the Private Party that are required for the conduct of the business. At the time that
the Project terminations or expires, it will be necessary to take specific legal advice
as to whether it is necessary for the Private Party to enter into a sale of business
and this will be dependent largely on the tax and employment laws in place at that
time.

33. Schedule 4 - Environment and heritage obligations

The Institution remains responsible for the conservation of the Project Site, even
though part or all of this task may be contracted out to the Private Party in the PPP
Agreement. This needs to be borne in mind by the Institution when deciding on the
environmental requirements for a specific Project.

Schedule 4, which deals with environmental issues, will have 3 parts as follows: a part
that sets out the environmental guidelines for the Protected Area; a second part that
contains the management plan and a third part that specifies the specific
environmental requirements and guidelines for the Project. These various parts of
Schedule 4 need to reflect the specific requirements of the Institution in respect of the
Protected Area where the Project is being undertaken and in respect of the Project
itself, as well as the reporting requirements of the Institution in respect of the
environmental aspects of the Project.

If it is already known that there are things and objects that are governed by the
National Heritage Resources Act, 25 of 1999 on the Project Site or if there is a strong
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possibility that such things and objects will be discovered during the conduct of the
Works, then the following clauses should be inserted into the PPP Agreement:

'heritage matters discovery

Upon the discovery of any heritage object or resource (as


defined in the National Heritage Resources Act, 1999 or any
corresponding provincial legislation) during the course of the
Works, the Private Party shall:

promptly notify the Institution of such discovery;

take all necessary steps not to disturb the heritage object or


resource, including cease any Works to the extent that the
carrying out of such Works might reasonably endanger the
heritage object or resource or prevent or impede its
excavation or preservation; and

take all necessary steps to preserve the heritage object or


resource in the same position and condition in which it was
discovered.

action

The Institution shall promptly and in any event within [x]


Business Days of the notice in clause [above] issue an
instruction to the Private Party specifying what action the
Institution requires the Private Party to take in relation to
such discovery.

The Private Party shall promptly and diligently comply with


any instruction so issued at its own cost, unless such
instruction results in a change to the Works or the
Operation and Maintenance, in which case the Parties may
amend this Agreement and the Institution will compensate
the Private Party for any increases in its costs and
expenses that arise as a direct result of such discovery and
the resultant amendment to this Agreement.

Whilst the Private Party is complying with the instructions of


the Institution, it will be relieved of any obligations with
which it is unable to comply as a result of those instructions
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and will be given any extensions of time in respect of the
completion of the Works and the Scheduled Operation
Commencement Date will be moved, to the compliance
with the Institution's instructions necessitates such
extensions and movement.

If directed by the Institution or Responsible Authority, the


Private Party shall allow representatives of the Institution or
Responsible Authority to enter onto the Project Site for the
purposes of removal or disposal of such discovery;
provided that such entry shall be subject to the Institution or
Responsible Authority complying with all relevant safety
procedures which shall include any relevant health and
safety plans for the construction of the Facilities and any
reasonable directions regarding the safety of the Project
Site that may be issued by or on behalf of the Private
Party.'

34. Schedule 5 – Black Economic Empowerment obligations

Schedule 5 should contain the Black Economic Empowerment specifications


specifically devised in respect of the relevant Project and also in respect of the nature,
details and extent of the involvement of local communities in the relevant Project. The
requirements in respect of the nature, details and extent of the participation of local
communities in the relevant Project will have to be devised specifically in respect of
that Project by the Institution undertaking that Project.

It is intended that the Private Party will report on its compliance with the requirements
of Schedule 5 at the end of each quarter of a Project Year and the measurement of
compliance with these requirements will be done at the end of each quarter of a Project
Year. The application of any penalties and Private Party Default provisions will be done
on an annual basis at the end of each Project Year.

The participation of a Community Trust may or may not be a requirement of the


Institution in respect of a particular Project. If such participation is not a requirement,
then all provisions in respect of the Community Trust must be deleted from the
definitions in Schedule 5.
Module 3 Template 9 Drafting notes to the large cap tourism PPP agreement 20.
35. Schedule 12 - Penalties

The PPP Agreement makes provision for the Institution to apply a penalty regime
that would apply in circumstances where the Private Party is in breach of its
obligations under the PPP Agreement, but such breach is not with regard to a
material obligation. Examples would be if the Private Party exceeds the amount of
water it is allowed to consume, or fails to meet one of its BEE obligations, or
exceeds its agreed staff numbers in any one year. An Institution must carefully
consider whether such a penalty regime is necessary, and if so, what appropriate
penalties should be imposed, and insert this regime into the PPP Agreement.