adminThe move away from privatisation, which seemed to be the dominant view in the first half of the 1900s, has led to the development of “public/private partnership”.
Public/Private partnership can also be referred to as limited term privatisation, and “involves the investment of private risk capital to design, finance, construct, operate, and maintain a project for public use for a specific term during which a private investment consortium is able to collect revenue from the users of the facility.”
Once the term is up the title to the project refers back to the Government at no cost, and a tender of sorts will be raised for the next term.
The syndicate running the Government operation will have made its investment back through the revenue collection, and have made a profit.
Both pure privatisation and public/private partnership stem from the realisation that the private sector can produce a more cost effective product than the government can.
One characteristic common to all nations, either developed or undeveloped is the need to build, maintain or modernise infrastructure.
A speaker at Davos in 1995, Jerome Monod, identified Africa as one of five potential growth areas for infrastructure but also highlighted that developed nations would need to initiate the action. Furthermore the Prime Minister of India, Shri Manmohan Singh, stated that private partnership projects (PPP) are much quicker to complete and the Government does not bear the cost of overruns.
As well as improving efficiency and service delivery the Government is able to leverage limited public resources.
The Zimbabwe Agenda for Sustainable Socio-Economic Transformation, which is set to focus on four pillars, namely: Food Security and Nutrition; Social Services and Poverty Eradication; Infrastructure and Utilities; and Value Addition and Beneficiation, has outlined the need for the revival of the local industry in Zimbabwe.
Zim Asset talks about engaging with PPPs especially in the Special Economic Zones that it has outlined as mining and agriculture among others. The Value Addition and Beneficiation strategies, which involve the mining and agriculture sectors, will be heavily dependent on the private sector for funding and execution of activities, while the government would provide the necessary support.
The success of the Value Addition and Beneficiation will be dependent on key “enablers” such as energy, water, transport and ICTs.
Zimbabwe will be stuck in a catch twenty two, as it will need to develop and expand its water, energy, and transport system before any Value Addition and Beneficiation will be able to successfully take place.
The PPPs should be focused on building from the bottom up or at least building simultaneously.
By starting with the infrastructure development, there will be job creation which will stimulate the economy at the same time.
Government will have to rely on PPPs as they have only 12 percent earmarked for these projects, which will not be anywhere near enough to follow through with the proposed development.
San Bilal, a journalist for GREAT Insights, talks about Africa’s lack of infrastructure, and how this affects not only the poverty and equity, but productive activities and network building across borders. An estimated US$800 billion is invested in infrastructure in developing countries each year but the needs are said to be double that. The financing needs for Africa alone are said to be about US$100 billion, mainly for electricity and transport, yet barely half of this is actually invested in infrastructure.
Mark Pearson, writes for the same journal, and believes that inefficiencies cost the continent US$17 billion per year.
Private sector investment in Africa has been slow due to limited long term finance in local currencies, poor business environment, corruption, low per capital incomes and Gross National Income, lack of educated and skilled workforce, private sector funding of infrastructure can be facilitated by the following measures: providing political risk cover, focusing on areas where returns are sufficient to attract interest from the private sector, blending and leveraging public funding to secure private funding and exploring other innovative solutions.
PPPs bring in private sector management skills and are more efficient in that one entity is charged with the design, construction, operation and financing. Private sector partners have often been more realistic in their estimates of time and costs than public agencies.
There is more incentive for the private sector and private partners to build a realistic financial model that takes into account all the costs and revenue flows.
The main advantage that PPPs have comes from the lowering of the total cost and improved project risk management.
PPPs are able to provide a more flexible and timely use of finance for vital infrastructure investments that might otherwise be tied up and inhibited by public debt pressures. India is one of the leading PPP markets in the world, having grown this market significantly in the last 15 years.
A breakdown in the sectors that are benefiting from PPP projects, extracted from the PPP India database, can be seen below. Roads, Ports and Urban development account for the biggest sectors, followed by Energy and Tourism.
The value of the contracts at July 2011 was INR3,833 billion.
One of the reasons that India has been so successful in its PPP projects is the way in which it has structured the process.
There are clearly defined procedures to procure a PPP project, and even beyond that there is monitoring which takes place, mandatory disclosures and fair practice agreements which ensure transparency.
There is a dispute mechanism in place and talk of setting up a PPP market on the web.
The PPP project process should consist of four phases: the first is the PPP identification phase where the feasibility of the project is determined; next is the development stage where the documents are prepared and financial viability is determined; third is project procurement, where the project is awarded and finally the fourth stage consists of project monitoring and contract management.
The Indian Government is able to provide progressive financial support for PPP projects.
Zimbabwe needs a clearly defined process for the PPP project procedure that encompasses all sectors of the economy if they are to succeed and see the benefits of this system. – LES.
Online Reporter