Speak up for in­fra­struc­ture sup­port

Lesotho Times - - Business -

LE­SOTHO is fac­ing chal­lenges in fi­nanc­ing its Queen Mamo­hato Hospi­tal, which costs US$67 mil­lion a year to run, rep­re­sent­ing half of the coun­try’s mea­gre health bud­get.

The project, which the World Bank’s In­ter­na­tional Fi­nance Cor­po­ra­tion helped de­sign, is a re­sult of a pub­lic-pri­vate part­ner­ship (PPP) agree­ment be­tween the Le­sotho govern­ment and a South African pri­vate health­care provider.

Un­der the terms of the part­ner­ship the Le­sotho govern­ment pur­chases health­care ser­vices while the lat­ter co-fi­nanced, built and op­er­ates the pub­lic health­care fa­cil­ity and de­liv­ers clin­i­cal and non-clin­i­cal ser­vices for a pe­riod of 18 years.

The health care provider is re­spon­si­ble for treat­ing a stip­u­lated num­ber of pa­tients per year ac­cord­ing to an agreed for­mula, af­ter which the Le­sotho govern­ment will be charged ad­di­tional costs for ex­cess treat­ments. In or­der to make the project a re­al­ity, the govern­ment made up-front pay­ments to the value of $58 mil­lion.

Un­for­tu­nately the project is not go­ing ac­cord­ing to plan. Con­trary to ad­vice that the oper­a­tional costs of the hospi­tal would not ex­ceed pre­vi­ous bud­gets, the num­ber of pa­tients re­ceiv­ing treat­ment at the fa­cil­ity has con­tin­u­ously sur­passed the agreed-upon num­bers. Partly due to this, the Le­sotho govern­ment’s pay­ments to the health care provider have sky­rock­eted.

Re­la­tions be­tween the two part­ners have de­te­ri­o­rated as a re­sult, and Le­sotho of­fi­cials have ac­cused the health­care provider of over­charg­ing for its ser­vices.

Since the hospi­tal opened its doors in 2012, the ex­cess charges have run into mil­lions of U.S. dol­lars and by 2014 the project fees were three times higher for the Queen Mamo­hato Me­mo­rial Hospi­tal than its pre­de­ces­sor, draw­ing on funds that are des­per­ately needed for ru­ral clin­ics.

How­ever, ris­ing im­ple­men­ta­tion costs of the project are only one of many chal­lenges fac­ing the Le­sotho govern­ment. With­out proper con­tract man­age­ment skills, tech­ni­cal spe­cial­ists and mon­i­tor­ing ca­pac­ity, the govern­ment finds it dif­fi­cult to re-ne­go­ti­ate its agree­ment with the health­care provider or en­sure that it ful­fils the terms of the PPP agree­ment.

The Le­sotho ex­am­ple high­lights some of the dif­fi­cul­ties that de­vel­op­ing coun­tries in Africa face in ac­cess­ing fi­nanc­ing for ma­jor so­cial in­fra­struc­ture projects, which are in turn crit­i­cal for the so­cial and eco­nomic de­vel­op­ment of its poor­est cit­i­zens.

Up to $93 bil­lion is re­quired an­nu­ally un­til 2020 to fund the con­ti­nent’s in­fra­struc­ture gap. lenges that de­vel­op­ing coun­tries face when ac­cess­ing in­fra­struc­ture fi­nance.

In Le­sotho, the fund is sup­posed to sup­port the roll-out of in­fra­struc­ture such as clean en­ergy, wa­ter and san­i­ta­tion and the build­ing of in­sti­tu­tional ca­pac­ity such as tech­ni­cal re­sources and know-how.

How­ever, a new study con­ducted by the Global Eco­nomic Gov­er­nance Africa (GEG Africa) pro­gramme of the the South African In­sti­tute of In­ter­na­tional Af­fairs shows that these projects are of­ten jeop­ar­dised by an in­abil­ity to ac­cess suf­fi­cient lev­els of fi­nance, as well as in­suf­fi­ciently skilled staff to man­age com­plex in­fra­struc­ture fi­nanc­ing con­tracts.

De­spite the in­tent to cre­ate a con­ducive en­vi­ron­ment for pri­vate sec­tor growth and in­volve­ment in in­fra­struc­ture pro­vi­sion, a lack of trans­parency in ten­der pro­cesses re­mains an un­for­tu­nate re­al­ity in Le­sotho.

To date, the AFDB’S sup­port fa­cil­ity for the de­vel­op­ment of an in­sti­tu­tional frame­work for PPPS re­mains un­re­alised in Le­sotho.

There is an acute need for the bank’s in­volve­ment in mon­i­tor­ing and as­sess­ing the fea­si­bil­ity of PPPS, as well as ad­vis­ing gov­ern­ments on tech­ni­cal and le­gal re­quire­ments when en­gag­ing the pri­vate sec­tor.

This is im­por­tant for en­sur­ing that sim­i­lar PPP projects do not fail and that the pub­lic sec­tor is not solely re­spon­si­ble for all in­curred costs.

The fund it­self should also step up its pro­vi­sion of much-needed tech­ni­cal as­sis­tance for larger in­fra­struc­ture projects, com­ple­mented by train­ing pro­grammes for do­mes­tic pri­vate in­vestors in PPPS.

Red tape and fund­ing sup­port for the project prepa­ra­tion phase is another chal­lenge that re­quires ur­gent at­ten­tion to quicken the ap­proval time­frames for in­fra­struc­ture projects in ben­e­fi­ciary coun­tries and to help fa­cil­i­tate suc­cess­ful im­ple­men­ta­tion.

In­fra­struc­ture fi­nanc­ing is es­sen­tial for the con­ti­nent’s fu­ture. South Africa and Le­sotho have an op­por­tu­nity this month to im­prove the fund’s op­er­a­tions. All par­ties need to be in­cluded in the process, to en­sure that the chal­lenges sur­round­ing poverty and eco­nomic growth are tack­led ef­fec­tively.

l As­mita Parshotam is a re­searcher in the Eco­nomic Di­plo­macy pro­gramme at the South African In­sti­tute of In­ter­na­tional Af­fairs. She re­cently co-au­thored a dis­cus­sion pa­per for GEG Africa on the African De­vel­op­ment Fund’s fi­nanc­ing of low-in­come African coun­tries.

Health fa­cil­i­ties in Le­sotho are in fi­nan­cial crises, says the writer.

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