Botswana lacks potential to promote PPP for infrastructure development
Botswana should consider introducing user fees for infrastructure project usage Capital market in Botswana has excess liquidity that can be harnessed for PPP infrastructure
Botswana does not have potential to promote public private partnerships ( PPP) for infrastructure development despite its favourable economic conditions.
This is cont ai ned in research findings by Botswana Institute for Development Policy Analysis ( BIDPA). The study compiled by Kelesego Mmolainyane highlights that PPPs are complex contracts and mainly require legal and project finance experts to advise parties involved regarding benefits and risks associated with the projects.
“Various project financing models can be designed to suit project specifications and not be over- generalised for all PPP projects. Botswana does not have potential to promote PPPs for infrastructure development”.
The report states that an enabling institutional and legal framework is vital to the success of PPPs.
“Traditional model of financing infrastructure projects through unitary payments is not sustainable in the long run, given Botswana’s current macroeconomic challenges of reduced mineral revenue collection and fiscal deficits”.
Government of Botswana is promoting the use of PPPs in developing and operating public infrastructure and related facilities. The ministry of Finance and Economic Development established the PPP Unit in 2016 to ensure successful implementation of the PPP Policy. Government has formulated privatisation, PPP policies and strategies in order to facilitate private sector participation.
However the study confirms past study findings that polices and reforms aimed towards PPP developments in Botswana are not implemented mainly because of government inefficiencies.
The report states that Botswana should consider introducing user fees for infrastructure project usage in order to improve service delivery inefficiencies, encourage equity financing and lessen the current government burden.
The report says there is need to build capacity and expertise in the PPP office and promote collaborations with the capital market that will facilitate formulation of various project-financing models for PPPs.
“Suitable project financing models can relieve government of the financing burden that can otherwise be shared with the private sector, especially the capital market and Botswana should benchmark from advanced countries efficient and effective PPP approaches and financing models that may lead to sustainable and inclusive economic development”.
The report states that the capital market in Botswana has excess liquidity that can be harnessed for PPP infrastructure development.
Given the fact that government often invest its funds abroad because there are no profitable investment opportunities offered locally, PPPs offer an alternative of using project financing techniques that enable risk associated with infrastructure developments to be shared between the public and the private sector.
Government is currently planning to revisit the process of delivering public infrastructure through the PPP model.
Delivering the national budget recently Minister of Finance and Economic Development, Dr. Thapelo Matsheka said there are two specific interventions.
These includes the promulgation of the PPP procurement law, which he said is at an advanced stage, and the development of a strategy for financing mega projects such as roads, rail and ICT.
He said the strategy will form the basis for mobilising resources from development partners, including the private sector, to accelerate the pace of infrastructure development.
Dr. Matsheka said to alleviate pressure on the Government budget in the short to medium term, other forms of project delivery, such as PPPs, continue to be pursued to deliver on planned projects.
He said with respect to engagement of the private sector in the implementation of projects using the PPP method, several Ministries have already identified suitable projects.
“The Ministry of Land Management, Water and Sanitation Services has invited the private sector to undertake the Reclamation and Treatment of the Wastewater project at Glen Valley, while the Ministry of Mineral Resources, Green Technology and Energy Security has already pre- qualified bidders for the Coal to Liquid project.
“Private sector partners will be contracted, in the coming Financial Year, to finance, construct and operate these projects,” Dr. Matsheka said.
In addition, the minister said that requests for expressions of interest to build, finance and operate the Zambezi AgroCommercial Development project , Chobe- Zambezi Water Trans fer Scheme, Tshele Hill Bulk Fuel Storage Facility, Sepopa Prison Farm, Headquarters for Botswana Prison Services, S erowe Magistrate Court, Offender Rehabilitation Centre in Lobatse, Francistown- Nata Road, Maun- Mohembo road and the Mmamabula- Lephalale and Mose t se- Kazungula Railway on a PPP basis, will be issued in the coming financial year.