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Public private partnerships the way to go

PUBLIC private partnerships (PPPs) have over the years become a mechanism to develop large-scale high budget infrastructure projects on a cost effective and sustainable basis.

By Pamela Makanjera

Public Private Partnership model is an infrastructure financing trend that has gained momentum globally over the last decade as governments have come to realise that the tax base alone cannot fund the huge needs for infrastructure.
Public Private Partnership model is an infrastructure financing trend that has gained momentum globally over the last decade as governments have come to realise that the tax base alone cannot fund the huge needs for infrastructure.

Efficient, robust infrastructure is the bedrock of successful sustainable economic growth for any economy to competitively place itself on the global market.

Thus making sure that Public Private Partnerships are successful should be a priority for the Zimbabwean government if it is serious about becoming a global economic player.

The PPP model is an infrastructure financing trend that has gained momentum globally over the last decade as governments have come to realise that the tax base alone cannot fund the huge needs for infrastructure. Zimbabwe is not left out in navigating this new phenomenon, albeit slowly. There are not many PPPs that have been implemented despite the release of the “PPPs in Zimbabwe” guidelines document in 2004. While adopting PPPs as a strategy is good, its success depends on a number variables and chief among them is trust between the government and the private players willing to engage in such partnerships.

Currently there is no specific legislation pertaining to PPPs and the existing various pieces of legislation that deal with PPP issues are highly fragmented. The “PPPs in Zimbabwe” guidelines document of 2004 was adopted as a prelude to a legal and regulatory framework being put in place.

Zimbabwe experienced an economic crisis in the period 1998 to 2008 that constituted a major business, political and social environmental change that had a huge negative impact on existing infrastructure and infrastructure development in general.

The continued deterioration in Zimbabwe’s basic infrastructure over the years has had serious impact on other productive sectors of the economy and the quality of services to the public, and this, in turn, has had a huge impact on growth of the country. Infrastructure development is a paramount tool for economic growth and advancing the developmental objectives of any nation. Poor infrastructure is a critical barrier to accelerated growth and poverty reduction.

As the economy began covering from a decade-long economic crisis in 2009 when the inclusive government came into power, full recovery remained constrained by a several factors including ailing infrastructure and a lack of resources to rehabilitate infrastructure.

Although we saw the birthing of new projects and continuation of those projects that had been stopped because of foreign currency challenges, these developments are slowing down as a result of the current economic challenges facing the country. The recent “bondification” of the economy does not help things either as foreign currency is slowly disappearing from circulation, confirming Gresham’s Law which postulates that bad money drives out good money.

There is no arguing that PPP financing models for infrastructure development will continue to gain momentum globally as various governments face a contraction in fiscal space. Zimbabwe needs to urgently develop its infrastructural base to enhance economic activity and growth. This infrastructural development must not be funded by continued taxing of the already overtaxed citizenry. Therefore, the earlier the fundamentals of private public partnerships are understood, adopted and implemented, the better. In light of this, the following are recommendations that can help Zimbabwe adopt successful PPP projects.

Improve legal environment

There must be a clear, predictable, consistent commercially viable legal framework that protects all stakeholders in the partnerships to ensure trust and accountability. This legal framework has to:

Provide sufficient security for the state and its citizenry. This entails security from the abuse of capitalists who are bent on making super profits at the expense of the majority. The society must be protected from environmental degradation and other forms of natural resource depletion which have catastrophic consequences in the long run. The legal system must also protect workers from the abuse of private partners who pay peanuts with inhuman working conditions when they make huge profits for themselves. The law must further protect complete externalisation of profits without paying the necessary taxes due to the country.

Offer enough incentives to lure investors and protect their rights. Improving legal processes improves arbitration processes as well. An investor needs to be confident that the judiciary will enforce laws and enforce contracts in the case of disputes.

Empower citizens through, for example, a certain percentage of goods procured when there is a major PPP. The private partner can get tax breaks for offering apprenticeship training for skilled professions. This move will help create employment, empower locals, increase the skills base all at once.

Reduce corruption and profiteering especially among top government officials. Wherever there are loopholes, corrupt tendencies flourish. Therefore, improving the legal systems reduces bottlenecks in the system, thereby reducing corruption. Corruption is becoming a viral disease in Zimbabwe. The latest rankings by Transparency International indicate that Zimbabwe is ranked the 17th most corrupt country in the world and 8th in Africa. These rankings are not good for the country at all therefore our government needs to act on corruption and not just talk about it.

Create of a PPPs unit

Countries with dedicated separate PPP units seem to be faring well in PPPs. Our neighbours, South Africa, have a PPPs unit within their Treasury. Like the regulatory institutions we have in Zimbabwe- for example Zimbabwe Energy Regulatory Authority (Zera), Postal and Telecommunications Regulatory Authority (Potraz) — such units have various positive outputs because they:

Improve the regulation environment as they would be a dedicated body looking into all PPPs projects. Improvement in the regulatory environment increases accountability of all stakeholders involved in PPPs. Furthermore, regulation increases monitoring and evaluation of projects to ensure that the objectives and benefits of the partnership accrue as per the contract agreement.

Improve implementation, communication and ownership of projects by government as opposed to the current systems where one project is supposedly owned by several ministries who fight for relevance and in the end lose sight of the broader objective of the project. For example, the Beitbridge Border Post project had over eight ministries with each ministry pulling in its own direction, which caused a lot of unnecessary bureaucratic delays, eventually leading to a stalemate between the government and the private partners involved.

Reduce bureaucracy as the PPPs unit brings various government requirements from various departments under one roof.

Create a pool of skilled individuals who gain more experience with each PPP they oversee. These skilled individuals can negotiate better deals as opposed to the current scenario where representatives from line ministries without the necessary PPP skills negotiate on behalf of government. The result is substandard deals because these individuals will be negotiating with the private sector which hires skilled personnel to craft and negotiate their deals.

Improve initiatives on capacity building

Improvement of PPPs skills should be government’s medium to long-term goal as they engage experts in the meantime.

Embedding PPPs issues in the curriculum especially at tertiary institutions should be seriously considered. PPPs are the future for building infrastructure globally so as a nation, we must invest in acquiring knowledge on all aspects of it.

Commit to long-term political stability and political will to make private public partnerships work
After all is said and done, it is no secret that capital responds better to political stability. Thus the Government must continue on the path of improving the political environment and shed its label of having weak political commitment and policy inconsistency. This improves long-term financial markets which are the bedrock of successful PPPs.

Makanjera is an economist, a local fixer for international researchers and an entrepreneur. These New Perspectives are coordinated by Lovemore Kadenge, president of the Zimbabwe Economics Society (ZES) Email kadenge.zes@gmail.com and cell +263 772 382 852.

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