The objective of every government is to provide public services in a consistent, fair, honest and efficient manner and that constitutes good governance. The tradition has been that the government collects taxes and allocates resources to various departments responsible for providing specific public service goods and services such as utilities, security, health and education to mention just a few.
PURCHASING & SUPPLY: NYASHA CHIZU
Relying on the ability of the national budget to fund developmental projects has generally been viewed as being ineffective. Development is limited to the available resources. On the other hand, bureaucracy in the public sector is a driver of corruption that erodes development. In view of the shortcomings, developed countries have moved to a new paradigm, where the private sector — generally regarded more efficient — is engaging the public sector in providing public services.
Joint ventures (JVs) and public-private partnerships (PPPs), is now the effective means to improve service delivery. JVs and PPPs are synonymous, according to the Joint Venture Act in Zimbabwe, since any piece of legislation can give meaning to a term through the interpretation section of the Act.
In general, the meaning of the two are different. PPP is a form of voluntary co-operation between the public and the private sectors to provide public services. The private sector has been involved in co-operating with government in the provision of public service in the past. The difference is on the style of the co-operation.
Traditional co-operation was limited to supply and works contracts, where the private sector was limited. In PPPs, the private sector goes further to operate the service on behalf of the government for a specified period.
This strengthens the partnership between the government and the public sector. It expands the role in which the public sector is involved. The private sector would design, finance, construct, operate and maintain the project on behalf of the public sector. The State would remain the owner and has overall authority over the projects. This is achieved by its role to supervise the project in the best interest of the general citizenry.
Joint ventures on the other hand involve the State and the private sector joining hands in a different style. They emphasise mostly on shared risk and shared reward, where the parties may opt to establish a special purpose vehicle that will have its ownership determined by the level of investment of the parties. Joint ventures will be run by directors nominated by parties on the basis of their level of investment. In most cases, these entities are recognised as private companies since the government is usually a minority. Where the government is a minority, procurement activities of joint ventures follow private sector practices and the opposite apply.
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Parties to a joint venture must be willing to make quantifiable contributions during the project development and implementation. In PPPs, the private sector provides the funding and the expertise and they would recover their initial investment and earn through service fees paid by government and or directly by users. Risk in a PPP is tilted to the private sector since they can only recover from effective implementation and efficient operations of the project.
Basically, PPPs are widely regarded as beneficial to the economy because it is the private sector that mobilises resources for the implementation of a public sector projects in support of the government priority project especially in infrastructure and technology.
Despite these benefits, developing countries including our country are very slow in the adaptation of the new paradigm of public service delivery.
Lack of effective regulations to manage PPPs and joint ventures is widely seen as the impediment. There is a requirement of a paradigm shift from the way decision makers understand the structure of PPPs and JVs. Many African countries claim that the government is losing money in PPPs, when there is not even a dime of investment from public coffers.
PPPs are generally efficient and the structure of revenue share varies from 0% to government where the government is paying for the service to as little as 15% to government, where the users pay for services directly.
The reason for such arrangements to allow the private sector a huge portion of the revenue is to allow them to recover their investment early in the life of the contract and transfer the project when the project has reasonable life.
PPPs and JVs are the future for efficient and effective public service delivery and Zimbabwe needs to embrace the new paradigm.
Nyasha Chizu is a fellow of the Chartered Institute of Procurement and Supply writing in his personal capacity. Feedback: [email protected] Skype: nyasha.chizu
