Monday, October 18, 2021

Come clean on PPPs, IMF challenges Botswana

The International Monetary Fund (IMF) has called on Botswana to end its “secrecy” associated with projects carried under the Public Private Partnerships (PPPs).

A recent study of Botswana’s PPP model by the IMF showed that the government generally uses the multi-year project costs for its internal budgeting but does not clearly mark them in the budget estimates.

IMF experts indicate that although the total estimated costs (TEC) and available funds are indicated per development project, the indicative forward projections are not published.

The IMF technical report states that although PPPs in Botswana is on the rise, it remains insignificant. At the same time, it says the Botswana government commitments associated with PPPs are not as transparently disclosed, which could result in underestimating future commitments.

The report says that Botswana’s public investment is relatively high which has contributed to the steady accumulation of capital stock almost three times more per capita than its peers and emerging market averages.

At the same time, the IMF team says that Botswana’s 2009 PPP policy is comprehensive and reflects many good practices, but also has some weaknesses mainly that it does not explicitly apply to State owned Enterprise (SOEs) or parastatals.

A small number of PPPs were procured in recent years under the Public Procurement and Asset Disposal (PPAD) Act, even though the latter does not refer to PPPs and does not provide adequate guidelines on quantifying the fiscal implications of PPPs.

‘’More importantly, these PPPs were procured without the full involvement of the Ministry of Finance and Economic Development(MFED’s) PPP unit, which might expose the government to unquantified fiscal risks,” says the report

There is limited competition within each of the economic infrastructure sectors, which could contribute to increasing government support to loss-making entities.

The report states that the telecoms sector has been deregulated, while the energy and water sectors are not yet competitive. In the water and electricity sectors, the government approves all tariffs often below operating costs requiring subsidies to cover operations.

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