How African Governments Can Use Private Companies for Improved Project Delivery


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August 10, 2015 14:34 EDT

Strong institutions and the elimination of corruption will lead to better delivery of PPP projects in Africa.

The enormous infrastructure gap crippling human and economic development in Sub-Saharan Africa can be addressed through a collaboration of the private and public sectors—popularly known as Public-Private Partnerships (PPP). The recently completed World Bank MOOC (Massive Open Online Course) on making PPPs deliver better services was highly insightful. The participants were able to access the best resources on PPP design, structure, procurement, operation, contract management and transfer.

As a participant with a special focus on Sub-Saharan African, I focused on the challenges of doing PPP projects in Africa and how these challenges can be ameliorated. In no particular order, the difficulties that a lot of countries face in delivering PPP projects include abrupt disclosure of unforeseen costs, project non-viability and the lack of value for money. These often lead to project abandonment, contract renegotiation and citizen discontent.

By the second week of the World Bank MOOC course, it was evident that the most crucial success factor in setting up any PPP campaign is in the project planning phase—the time a project is proofed for financial viability to ensure value for money. Challenges notwithstanding, PPPs remain a means of bridging the lack of relevant infrastructure in Sub-Saharan African countries. To bridge this infrastructure gap, resource-thin countries must do two things: establish a strong institution to structure and sanction PPP projects, and eradicate corruption in the delivery process of PPPs.

In view of this, I make the following policy recommendation.

Establish a Strong Institution to Oversee and Structure PPP Projects

First, a government agency solely dedicated to PPP projects must be established. African governments would show potential private sector partners that they are committed to the structuring and delivery of successful PPP projects when they do this. Partnerships BC, which was established by the Canadian Province of British Columbia, is exemplary and can serve as a stepping stone.

Second, a cohort of experts must be engaged. To be able to set up PPP projects that will meet the bar on all levels, the Ministries of Works and Economic Development of African countries should engage the best people in finance, project management and engineering, among others. These experts should have the capacity to identify viable projects, plan project execution, supervise procurement and oversee project implementation. They must be professionals of high moral standing. They may be sourced locally or globally. The expertise of these professionals is also needed at the operational stage of the project. They are in a good position to follow-up on minutiae like contract monitoring, enforcement or renegotiation.

Third, the team of experts must have the capacity to plan and select only financially viable projects. In order to do this effectively, the team should engage in better pre-project and cost-benefit analysis:

a) Better pre-project analysis should lead to the selection of only the most financially feasible projects. These are projects that ensure good value for money; regional integration; and which provide the public, especially the poor, with a high quality of service.

b) Better cost-benefit analysis should ensure that the revenues accruable from PPPs are not over-estimated. This is highly necessary to avoid a situation whereby a PPP project turns into a fiscal burden for the participating public institutions. The experiences of Colombia and South Korea should serve as effective deterrents.

Fourth, we must engage in better public finance management. To ensure best practice and curtail underreporting of government financial involvement and exposure to badly planned PPP projects, the Ministry of Finance should make full disclosure of its financial commitments in any PPP entered into. Any expected and accrued assets and liabilities must be included in such reports.

Fifth, we must limit the number of renegotiations possible after initial bidding. It has been observed that some private entities doctor their numbers to win a bid. After winning the bid, they suddenly realize that their cost projections are way under. To curtail this, more stringent measures are needed: Governments should do their own internal cost-benefit analysis; and bidding numbers deviating from theirs by a pre-determined percentage should be thoroughly examined before a bidder is awarded the contract.

Eradicate Corruption in PPP Processes

This is achievable in four ways.

First, create an independent public entity with the sole responsibility of auditing the disbursement of funds made by the government agency above. Should this not be possible, a combination of all or some of the following will be necessary.

Second, disburse monies only after project delivery. This will ensure that project contractors are more committed to project completion.

Third, utilize citizen groups like nongovernmental organizations and civil society organizations to monitor and check for unwholesome practices in PPP projects.

Fourth, use independent private auditors to ensure incorrupt project delivery. This can work in a number of ways: The disbursement of funds can be outsourced to a tertiary entity; a private auditor can be integrated into the entire life phase of the project; or the private auditor may engage in annual audit of accounts.

These two key points will test how successfully African governments will fill the infrastructure gap their countries currently face. The need to implement these initiatives in a timely and efficient manner cannot be overemphasized. Moreover, as the consumption patterns of Africa and the quality of human capital avail in the continental changes, it is time for African governments to collaborate more intensely with the private sector and deliver essential services.

The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy.

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