Partnering for growth, development
Correspondent | Friday March 16, 2018 10:53
My passion for public private partnership (PPP) is the reason this proverb is close to my heart. Around the World, there are plenty of examples of the value of good partnerships in the advancement of socio-economic development. In 2004, the United Kingdom government, in partnership with the private sector, developed, the Building Schools for the Future (BSF) programme.
This PPP programme resulted in the delivery of educational facilities which could have not been possible had the Government gone alone. Turkey’s Health Transformation Programme was introduced by the Government of Turkey to enhance the accessibility, efficiency, and quality of healthcare facilities. Due to the limited availability of public resources to fund these new investments in healthcare, the government decided to procure them by using the build-lease-transfer (BLT) PPP model.
The result of this policy shift was the launch of the integrated Healthcare Campuses Programme in 2007 which will result in the delivery of a hospital programme with a combined 95,000 beds required by 2023. Faced with the challenge of both office and staff accommodation in the Uganda Police Force, the government is rolling out the Uganda Police Force Accommodation PPP, which once fully implemented will see the delivery of police barracks, police headquarters, a training academy and police stations. In 2017, financial close was reached between the Rwandan government and a private party for the implementation of the Kigali Bulk Water Supply.
This build-operate-transfer (BOT) PPP will ensure the provision of 40,000m3/day of potable water to serve domestic, commercial and industrial end users. Closer to home, the South African government has adopted the PPP model to deliver various renewable energy projects through the internationally acclaimed Renewable Energy Independent Power Producers Procurement Programme (REIPPPP). According to the Department of Energy, the REIPPP presently contribute over 6GW to South Africa’s generation capacity from the 92 wind, solar, biomass and small hydro projects currently in commercial operation. Botswana has got its own testimony of the value of partnership and how the PPP model can be used to drive development. The partnership between De Beers Diamond Mining Company and the Botswana government, which resulted in the formation of Debswana is a good case study for the PPP model in mining sector. Debswana has played an important role in the emergence of our country as a middle-income country due to the commendable achievements on economic growth and infrastructure development. Going forward, our ability to ensure increased growth and stimulated job creation, will depend on whether we replicate the successes of the Debswana PPP model to other economic sectors. We need to make bold policy reforms and adopt the PPP model to implement game-changing programmes that will ensure growth in other economic sectors. We must, as a matter of urgency, and based on lessons learned from the De Beers – Botswana partnership, develop policy, institutional, legislative and regulatory frameworks and the associated incentive structures that would create other “Debswanas” in the aviation, agriculture, education, infrastructure, oil and gas, financial services and manufacturing sectors. This bold move and policy shift will bring with it increased foreign and domestic direct investment that will contribute meaningfully to job creating economic growth and private sector development.
In the aviation sector, we need to look at repositioning value by recapitalisation and restructuring of Air Botswana (AB). This can follow the PPP model, where experienced airline operators such as Virgin Atlantic, Qatar Airways, Etihad Airways, or Emirates Airline take over the operation function of AB by way of a management PPP. The management agreement should be based on a payment mechanism that incentivises operational efficiency, the achievement of set industry standard targets and profitability. Other than ensuring the competitiveness of our national carrier, the proposed restructuring will transfer operational risks to a private sector party and minimise the burden of operational losses on Botswana Plc. We all want an AB that is able to give millions back as divides for economic development and this is what the proposed PPP arrangement will achieve.
If we don’t reposition our national carrier, we run the risk of losing market share to new entrants like CemAir and continue to direct strained Government budget to keeping AB in the air. With regards to the infrastructure sector, government should make PPPs a key model for procuring public sector projects. This will expand the fiscal space and prevent a situation where essential government projects are shelved on account of budgetary constraints. Construction in its nature is labour intensive and relies on an extended supply chain, so increasing construction output will create more jobs. Furthermore, the PPP model has proven over time to be effective when it comes to risk allocation and mitigation.The PPP programme rollout should amongst other things involve the identification, selection, development and prioritisation of projects to be implemented through the PPP model. This should culminate in the development of a long term focused and comprehensive “Botswana Infrastructure Investment Plan”. A well-developed infrastructure plan provides visibility of bankable projects and thus serve as an important tool for highlighting investment opportunities in the country. It also enables cohesion between the government agenda and private sector strategic planning. Another area where the government can participate to boost growth and development is by setting up a project preparation grant facility for use in early stage project development. This is an important area in the investment value chain requiring government support. A lot of good manufacturing and industrial projects presented to financial institutions for funding, fail to reach financial close because they have not been developed to a stage of bankability. This is mainly due to the prohibitive costs of project preparation. The proposed grant facility will enable project sponsors to undertake the requisite feasibility studies, develop associated technical designs and produce financial models which are critical to investment appraisal processes for most financial institutions.
The world has a lot of very good examples of the effectiveness of PPPs across the different economic sectors and the impact they make on socio-economic development. The story of Debswana is a good example of how a PPP model can deliver the much-needed results – development, job creation, innovation, efficiency and promoting foreign and domestic direct investment.
*Batho Mohwasa is a Chartered Quantity Surveyor and a proponent of public private partnership. He writes in his personal capacity