PPPs to complement construction sector

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Having acknowledged the country does not have sufficient resources to fund local infrastructure projects for the improvement of public service, the Finance ministry is focusing on public-private partnerships (PPPs) to complement government efforts in improving service delivery.

Construction projects in areas of housing, transport and water are now targeting private sector participation.

This is against the background that less than $700 million was allocated to capital projects in the $4 billion 2012 Budget presented to Parliament in November.

This is not the first time the government has identified opportunities in improving service delivery by engaging the private sector.

In 1998, the government adopted a policy on public-private sector participation after it was realised that Budget allocation to capital expenditure was declining at the expense of social services.

The policy approved by Cabinet foresaw such co-operation as a means to stimulate productivity, cost effective delivery of public goods and services, and better economic performance.

The policy identified adequate legal and regulatory framework, establishment of an institutional framework to co-ordinate implementation of the policy and programmes, an attractive business environment as key enablers for success of PPPs.

These guidelines clearly recognised PPPs as a form of infrastructure procurement by eliminating ad hoc and case-by-case approach that characterise funding deals. The guidelines were based on the concept of competitive bidding.

The management of PPPs was put under the remits of the Minister of Finance. While the Finance ministry is interested in procurement from a public funds management (PFM) perspective, the actual management of procurement activities are under an autonomous statutory body — the State Procurement Board.

Although SPB was included in the inter-ministerial technical committee, there is a challenge of ownership created.

The legal owner — Ministry of Finance does not have operational control of the activity. The role of Finance is however critical; they are involved in finance mobilisation, investment protection, and risk management in PPPs.

The Zimbabwe National Road Administration-Group Five deal exposed this anomaly.

Ministry of Finance and Ministry of Transport concluded a PPP without the involvement of the SPB in which the latter was concerned with the manner in which the deal was concluded.

Further work is required to ensure an environment conducive for PPPs is prevalent. Although there was effort to regulate PPPs by drafting of guidelines that were adopted by Cabinet, there is still no law by way of an Act of Parliament thereby creating an administrative gap.

This affects the legality of such activities at the expense of attractiveness of Zimbabwe as a PPP market.

There is also need to benchmark with other regional democracies that have successfully implemented PPPs like South Africa and international organisations such as the World Bank and Africa Development Bank Group.

Whilst the current guidelines provide for various forms of handling PPPs such as competitive tendering to negotiation, it is important that financial thresholds are set to ensure issues of transparency and competitiveness are enshrined in such deals.

The thresholds must be set to protect the interest of the taxpayer and at the same time, protecting the private players’ interest.

Where the public stake is less than 25%, it will not be meaningful to belabour the private player with public sector controls.

Public procurement rules will be applicable when the taxpayers’ interest is high. This is meant to increase attractiveness of PPP projects to the private sector.

As reiterated by the Finance minister in his Budget presentation, there is need to ensure government policies are consistent with requirements of private sector participation.

Issues such as the indigenisation policy need to be economically viable and attractive for the private sector, especially the foreign investors who are currently expected to run as minor stakeholders in the current state of affairs.

•Nyasha Chizu is a fellow of CIPS and CIPS Zimbabwe branch chairman writing in his personal capacity. Email: chizunyasha@yahoo.com