High political risk stalling PPPs


High political risk and lack of clear legal and policy framework have been blamed for the slow implementation of public-private partnerships (PPPs) that are key in reviving the country’s deteriorating infrastructure.

The African Development Bank estimates the country requires at least $14,2 billion to fund its infrastructure investments.

Total capital expenditures over the next five years are expected to average $593 million a year.

The institution cited PPPs as one of the important means to fund infrastructure development.

The government requested assistance from the World Bank to identify bottlenecks preventing private investment in infrastructure.

The Bretton Woods institution in turn engaged Castalia Strategic Advisers to produce a report.

According to the Zimbabwe Rapid Needs Assessment final draft report prepared by Castalia, limited knowledge on PPPs and skills within the government, lack of co-ordination and an oversight body coupled with a weak regulatory capacity in specific sectors had resulted in the slow pace of implementing PPPs.

There are other policies, institutional and legal barriers preventing the PPP programme in the country from attracting more investors and closing more deals,” reads part of the report.

“These barriers are high political risk, lack of fiscal space, no access to political risk mitigation tools, foreign shareholding limitations and economic instability.

“Some of these barriers can be overcome at project level, at the structure, tender and contract design stages, or through broader government-led reforms.”

Castalia said government agencies did not initiate PPPs as they did not know where to start, what process to follow, which projects or types of contractual arrangements were applicable.

It said lack of PPP knowledge and skills within the government could lead to selection of wrong projects, not preparing them well and eventually not achieving desired outcomes.

Weak capacity within the newly created Energy Regulatory Authority (ERA) had prevented the issuance or improvement of rules critical to encourage private investment in electricity.

“For example, there are no clear guidelines on how generation, transmission and distributions licences should be phased to allow developers to raise capital,” the report said.

“Also, there is no competitive process in place for awarding the (power) generation licences.

“The creation in 2011 of (ERA) was a good step towards clarifying and improving rules.

“The board and manager have already been appointed and the staff is being recruited.”
Castalia said there was no policy document for PPPs in the country that clearly stated objectives, scope and guiding principle for the PPP policy, adding the legal framework applicable to PPPs was scattered in various acts.

“This adds a layer of complexity to understanding an important aspect of PPPs in a complex and risky PPP environment,” Castalia added.

As part of interventions suggested by Castalia to help overcome or mitigate effects of the challenges, it had been proposed funding be made available to enable the engagement of a PPP expert advisor to help draft a high-quality Act.

Zimbabwe has experienced severe deterioration of its infrastructure over the past decade.