Councils look to PPPs as gov’t funding dries up

Mbongeni Mguni | Monday October 10, 2022 06:00

As the primary interface between government and communities, various local authorities across the country, particularly in rural areas, shoulder a huge burden of expectations.

However, as part of its belt-tightening exercise, the Finance ministry intends to cut the revenue support grant it gives to local authorities over the next few years, with the urban councils particularly affected.

For 2022–23, the total funds government will give out to the local authorities have been cut by nearly P200 million and projections provided recently indicate more reductions from next year going forward.

Local authorities, some of whom are located in remote areas where villagers can be as far as 500 kilometres from the district capital, are faced with a cruel dilemma of high ambitions versus low funds. “As councils, we barely get any money at all and in fact, we work with very high deficits,” says Boteti Sub-District Council’s Molemi Galeragwe.

“In Boteti, we are already in a deficit of P45 million this year.

“There’s nothing we can do for our people and even travelling to consult them, we don’t have fuel to reach them. “You know the distances involved in our constituencies.”

Local authorities’ development plans for their areas are guided by the Local Economic Development (LED) initiative, a localised approach to development under which stakeholders in specific communities identify their needs, projects, and funding requirements for the creation of jobs and improvement of livelihoods.

Initially piloted in four local authorities in 2018, the LED programme has since been rolled out to all 16 councils and is seen as spearheading the inclusive, community-facing approach to development that the development budget at the central government level cannot achieve.

The budget cuts and lack of funding for the LED were hot potatoes when local authorities met Finance Minister, Peggy Serame and her lieutenants at a recent Budget Pitso held as part of the 2023–24 budgeting process.

Kgalagadi District Council, which like Boteti, is far removed from urban areas, feels hard done by the plans to slash funding at a time when COVID-19 has increased Batswana’s need for economic support.

“I can say LED has actually failed,” district chair, Hendrick Jacobs told the Pitso.

“It’s not as we preach it. We preach in theory but practically, it’s something else in the district.

“The implementation is not budgeted for.

“For instance, if I tell my planner to go and implement something in Struizendam, we are talking 500 kilometres away and there is no budget for that.

“We say get money from the recurrent budget, but that’s the same one that every single financial year is being cut and is going down.”

Under the LED, local authorities were required to identify their needs and projects, then come up with strategies on how these would be implemented.

For those councils that have given up on waiting for government to pump money into the LED, the most viable avenue for funding their projects is the Public Private Partnership (PPP) model.

PPPs involve a contractual arrangement between a governmental institution and the private sector, where the private sector party provides public infrastructure and/or infrastructure-related services.

Typically, the public entity’s contributions, over and above equity in the venture, may include subsidies, incentives, provision of service, the cost of providing the service, and others. Those local authorities who have finalised their LED strategies and dared to approach private capital for partnerships, are reporting that the road to success is littered with barriers.

“I have been in council since 2019 trying to understand the PPP documents and up to now, there’s no project at any council to say it’s coming, even though the country has been talking about PPPs for years now,” said Gaborone City Council finance committee chair, Kaisara Sejoe.

“PPP is a Ministry of Finance national anthem that does not benefit the local authorities and it is not understood by them. “It’s a complex document and yet it should be simple to say 1,2 and 3.”

Sejoe’s views are shared by North East District Council’s Bazwadzi Gaotingwe who told Serame and her lieutenants that the PPP documents were impossible for local authorities to comprehend.

“That’s why most local authorities are not able to go into partnerships,” she said.

Local authorities report that even in cases where private investors have expressed willingness to partner with them, the complexity of the PPP arrangements makes it impossible to progress any deal.

The troubles faced by local authorities in using the PPP model for the LED initiative are replicated at central government, where the complexity of the technical and legal work required to structure PPP deals has bogged the programme down over the years.

Each deal requires robust and visionary expertise around the allocation of risk and ownership of the asset, something that has beset several potential PPP projects since the policy’s official adoption in 2000.

PPP Unit coordinator and veteran technocrat, Boniface Mphetlhe acknowledges that local authorities face an uphill battle to understand the policy and apply it for their own LED strategies.

“We want to accept that PPP has many difficult challenges and even us, as speak, we are also teaching ourselves and we have people at school for this at the moment,” he told the Pitso. “We are trying to meet with local authorities to share the little understanding that we have.

“What we have said is that we agreed with the Local Government ministry that as you propose for PPPs, send to your ministry and also send us a copy.

“That helps us to know that there’s something coming.” According to Mphetlhe, the Finance Ministry is finalising guidelines that will smoothen the PPP process for local authorities. “It’s true that the process is difficult and it’s also true that it takes time. “We owe you guidelines and we are trying to finalise and share these with you.

“We expected that these guidelines would be out by April, but I believe we will have them finalised by December.”

While they wait for the guidelines and the time when the Finance Ministry approves their first PPP deals, local authorities will have to continue balancing their high ambitions and low funds.