Bruce Djite: We need to talk about how we pay for big projects like Adelaide’s new WCH

The proposed Women’s and Children’s Hospital has brought into focus the need for a more sophisticated discussion around how we finance major projects, writes Bruce Djite.

The new Adelaide Parklands site of the proposed Women’s and Children’s Hospital was always destined to divide opinion.

It’s undeniable, however, that we need to provide our children, mothers, and clinicians the best possible environment to receive and deliver care.

At a cost of about $3.2bn, the new WCH is shaping up to be the most expensive publicly owned building ever attempted in this state.

I’m not a betting man, but it’s a fool who would wager the WCH will come in under budget given the complexity of building such a significant and technologically advanced public hospital.

How its construction will be funded is yet to be publicly announced, but one would expect additional borrowings will be necessary.

The cost and building timelines will be heavily scrutinised.

But for me, it has brought into focus the need for a more sophisticated discussion around how we finance major projects and, importantly, how we take control of our own financial destiny.

Artist impression of the Women's and Children's hospital planned for Adelaide. Picture: SA Government

In 2020, Statewide Super’s Tony D’Alessandro and Con Michalakis – in an opinion piece in The Advertiser – called on the state government to create a local pool of capital to stimulate our economy and make it easier for industry and business to access funds. Their rationale at the time was, with the state pushing the limits of its borrowing capacity, a local fund could make a big impact on our economy and take pressure off the state’s finances.

Superannuation could potentially be the biggest provider of capital in South Australia, with those funds put to work supporting local projects, with immediate impact on our economy.

Just 2 per cent of Super SA’s current balance would provide upward of $700m in investment capital. It’s a missed opportunity if SA fails to tap into local funds like other jurisdictions have done for many years.

In 2017, Deloitte identified the creation of a South Australian Investment Corporation as one of the top 25 opportunities to kickstart the transformation of Adelaide and SA. The investment corporation idea was based on the successful Queensland Investment Corporation, a government-owned investment company, was established in 1991 with $5bn worth of public-sector funds for long-term investment. It now manages more than $90bn.

This type of fund allows direct investment into underlying assets and is not restricted to investing into other funds. A similar corporation in SA would generate more jobs in the finance sector and help attract more highly skilled professionals to Adelaide to manage it.

Strong leadership from government and industry is needed to support this approach and to collaborate on designing robust parameters needed to get the idea off the ground.

The Deloitte report also called for decision making about capital allocation to be brought back home to Adelaide. That is, we need a thriving local investment management industry in SA.

In 2019, there was nearly $47bn in institutional investment capital in SA but this was almost entirely managed by fund managers from outside this state.

To engage these interstate and overseas specialists, it has been estimated we pay more than $100m annually in management fees.

Our local funds management industry is nascent, albeit there are some green shoots appearing in recent years, such as the growth of Adelaide-based Lanyon, a specialist equities fund manager. The creation of a corporation or local investment fund, or funds, would assert SA’s independence, help to build a high-value, thriving local industry and reduce reliance on overseas investment.

With our state’s future in mind, there is real potential for the state government and fund managers to use local capital to invest in projects that enhance our state’s wellbeing and support a pipeline of projects to advance our economy.

For example: Aligning investment with industries in areas such as renewable energy, technology and agribusiness; Providing capital to start-ups, and; Investing in healthcare, other health industries and social and affordable housing.

And perhaps even a new hospital.

To prosper, generate wealth and generate a thriving economy, we must adopt a long-term approach and a bold plan to create our own future and legacy.

The opportunity exists now to establish a pool of capital and we should embrace it.

* Bruce Djite is chief executive of the Committee for Adelaide