Thursday, September 24, 2020

A growing appeal of Public-Private Partnerships despite slow take-off

BY PORTIA NKANI

Captains of the industry in the construction industry have attributed the slow uptake of Public-Private Partnerships (PPPs) to the slow economic growth.

The global economy continues to be characterised by sluggish economic activities, due to uncertainty in global markets, therefore affecting Botswana who exports mainly minerals to the US, China, India which are the biggest economies.

The domestic economy is forecast to grow by 4.5 percent in 2018, 4.2 percent in 2019, and 4.8 percent in 2020.

Caesar Tshupelo – Chief Executive Officer at 360 Degree Architecture firm said in an interview that the financiers of PPP are still skeptical about long-term return under the current economic climate. The investment risk still exists; Financiers need guarantees that are sustainable and more rewarding on capital investment

Tshupelo is of the view that, “the PPP model should derive a win-win for all contracting partners. PPP’s are very useful for long-term benefits, the built industry could be sustainable in that arrangement. Construction costs are constituted on a project to project basis and the contractors, consultants have that mutual agreement on fees and it’s controlled.

He further expresses that, PPP’s have a benefit on Equity financing and the Risk Management is the driving force. They are normally very beneficial on large to mega projects as he cited an example with, “Morupule B, North-South Carrier had they been modeled around such. State land in Gaborone is one very good example that the City of Gaborone and Investors could use PPP models for Infrastructure developments.”

Another industry player, Outule Bale – Chief Executive officer of Khumo Properties said that not many PPP projects have been undertaken in the past and as such there may be a lack of confidence/trust/experience amongst participants.

He noted that there may have been insufficient knowledge sharing on the PPPs framework and policy. Bale said, “I would have thought PPP Act is needed to provide. Government decision making takes too long and if Government is to partner with the private sector then it must be nimble footed. I also think that some monopolies (Acts thereof) need to be changed to allow for PPP implementation in the affected sectors such as water, electricity, amongst others)”

He further indicated that, people have fronted their reluctance to PPP’s with the excuse of high construction costs.  With willingness nothing is impossible, he said.

Barclays Bank Botswana Economist, Naledi Madala also expressed her views that, PPPs provide the public sector with an efficient mechanism for harnessing private sector expertise and capital. However, she emphasised “it is important to note that without a proper enabling environment (such as enforcement of regulation) and project structuring, PPPs may not achieve their intended objectives. In fact, if not implemented accordingly, PPPs may worsen the usual problems that plague infrastructure construction because they are inherently complex, both technically and financially, and there are currently major capacity constraints in the industry.”

Further, Madala said the model is not yet well understood in Botswana as to date; there are only two projects in Botswana developed through the model. “The PPP unit itself was only set up in 2016. Although the private sector may construct and own an infrastructure asset, the public sector still has an important role to play throughout the process of a PPP project.”

Pundits maintain that for countries such as Botswana which still lag behind in power supply, water, road and air infrastructures, the PPPs model would be ideal in realizing the success and improved economy. Botswana just like its peers in the region, through the Renewable Energy Independent Power Procurement Program (REIPPPP) there is potential for PPPs to deliver the much needed infrastructure, when conducted in a transparent, competitive, and fair way. Recent PPP project progress in Ghana, Kenya, and Senegal further support this trend. Whether the Botswana government can recreate the success of this program in other sectors remains to be seen.

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