Government ‘cannot go it alone’
WITHOUT doubt public-private partnerships are drivers of economic growth, according to Kogan Pillay, head of the SADC PPP Network.
The network is tasked with helping countries harmonise their public-private partnership (PPP) legislation, policies and institutional arrangements and work with member states to identify and prepare bankable PPP projects.
“PPPs show government’s commitment to attracting private sector investment in public infrastructure and the provision of public services.
“It is a clear message that government acknowledges that it cannot go it alone anymore and it requires expertise and input from the private sector; not just from a capital funding perspective but also in terms of service delivery and innovation.
“In other words, governments are looking for the efficiencies that the private sector can bring to bear,” Pillay says.
In addition, he says PPPs create long-term business opportunities. In traditional once-off procurement processes projects such as schools or hospitals are constructed and the private sector walks away once the project is completed. However, in a PPP companies/special purpose vehicles can be established and they have long-term sustainability, running projects for as long as 30 years or more.
“This environment allows businesses to grow,” Pillay says.
Furthermore, while a project may be constructed by a major league construction firm, there are huge opportunities for SMEs to participate as subcontractors.
Moreover, those SMEs that distinguish themselves and leverage off the new skills they can acquire can win new business as a result of their proven ability to perform and they may even win ongoing participation in the original project by assisting in maintenance and operations.
“One of the key objectives in forming a PPP in the first place is to ensure that there are spinoff developmental benefits for smaller companies,” Pillay says.
He says in sub-Saharan Africa the only really industrialised country is SA. However, infrastructure PPPs can help develop the rest of Africa. Roads, railways, independent power producers and telecommunications provide the foundation on which industrialisation can develop.
“If you can get the infrastructure right it invites investment in terms of industrial development. Having sound infrastructure in place creates the opportunity for development nodes to form and grow.”
He says one of the issues in subSaharan Africa is that investors keep pointing out that the infrastructure required to justify long-term investments is often not there yet.
“In the past infrastructure was government’s issue to resolve, but today infrastructure solutions can be developed in partnership between government and the private sector.
“For example, developing a coal mine requires infrastructure to ensure the coal can be delivered to its customers. This may well involve rail construction and port facilities so that the coal can be shipped to customers such as India and China.
“By partnering with the private sector, those industries that need to be involved to create the required infrastructure can be brought on board. Moreover, conditions can be created so that it will be profitable for the private sector to build maintain and operate the facilities on behalf of government,” Pillay says.
“In this way the mining industry has access to the raw materials and can get them out to the markets where they are needed.”
He says capacity — or rather the lack thereof — is an issue. The capacity in the public sector in Africa is uneven. Some countries have really good centres of excellence where people understand what they to achieve and they have the skills to make it happen.
However, in other countries the capacity is almost zero.
“This does not just relate to PPPs but also infrastructure development as a whole,” Pillay says.