AMENA AFRICA

The challenges facing public private partnership projects in Africa

The challenges facing public private partnership projects in Africa

Ever heard the phrase ‘Africa Rising’? This phrase was used frequently at the start of the 21st century as a reference to the expansion of African economies.  It encapsulates the visible growth in the continent despite the social-economic challenges it faces. Public Private Partnerships (PPPs) are ideally long-term agreements between the government and a private party where the private partner delivers and funds public services using a capital asset while sharing the associated risks. Investments via PPPs on the continent are rising and are a major frontier in spurring development in the days to come. For instance, in Kenya, the Lake Turkana wind farm is a good example of a PPP, which has seen an additional 310MW into the Kenya electricity power grid. In Rwanda, the Kigali Bulk Water Project  was designed to supply 40,000m3 per day and provide bulk water to the water and sanitation corporation, which then sells to local consumers. However, this has not been without its fair share of challenges.

The challenges to PPPs in Africa

Many African countries experience a lack of experts who understand how PPP frameworks operate. As a result, not many have clear guidelines on how PPP policies operate within their states, inhibiting the scale at which projects can be executed within the respective countries as private sector players are not able to fully engage in the different projects. 

 

Additionally, several local and regional financial markets are not advanced and are hesitant to finance projects with long tenors.  As such, most private sector players pursue financing from international organizations, which are not cost efficient. Ultimately, the high financing costs are transferred to the public through high user fees and/or taxes.  

 

Local governance plays a key role in the development of a nation. It is imperative that governments have a clear outlook on the infrastructure development in the country. This will act as a blueprint along which projects will be implemented in the respective countries. Unfortunately, many African countries have ambitious projects, which hardly see the light of day. Unless there exist efficient government support mechanisms, raising finances for those projects will be a pipe dream and eventually prove un-achievable. Immediate focus should be channeled towards identifying and implementing relatively smaller climate-and technology-smart, impactful projects with a long-term focus on building experience and record of accomplishment to manage large infrastructure projects. 

 

Unfair market preferences and political interference are also a major setback to PPP growth in the continent. There have been instances where private sector players who have undertaken projects end up being shortchanged by local government entities leading to investors shying away from potential projects. For instance, in the energy sector in some countries, independent power producers such as solar and wind energy have been sidelined to their thermal and hydropower counterparts. Whereas the argument has been that thermal and hydropower energy supply is more stable at lower tariffs, the lack of commitment to ensure green energy is well established in the grid system raises many questions about sustainability. As such, any private sector player who has intended to invest in the green energy sector has no guarantee of their return on investment. 

Conclusion

It is paramount that all developing African countries warm up to PPP deployment in their markets as its one of the guaranteed ways through which private sector can actively participate in public projects. This would result in job creation, development of strong and robust financial institutions and holistic infrastructure development.  

 

However, for PPPs to be effective there is a need for working systems of governance to be in place. This will ensure all stages of development are followed through and in accordance with the law. There has never been a riper time for the implementation of PPP projects in Africa than now. There is also room for further collaboration driven towards the achievement of growth in different African economies. The future is here, the future is now. Let us accelerate Africa’s potential. 

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