Govt turns to industry
PHILLIMON MHLANGA
Transport and Infrastructural Development Minister, Felix Mhona has called on the business community to partake in the development of the country’s public infrastructure, which has been characterized by continuous deterioration due to economic downturn, Business Times can report.
Mhona made the appeal to captains of industry attending the CEO Africa Roundtable meeting in the capital on Thursday.
The development comes against the backdrop of efforts by government to fix its long neglected growth enhancing infrastructure in the transport, air , power and water sectors, among many others.
Mhona admitted that government has limitations.
Consequently, he appealed to the private sector to partner government through the Public Private Partnerships (PPPs).
“The ministry (of Transport and Infrastructural Development) superintend over the roads, rail and the air sectors. There are vast opportunities in these sectors. Tap into the opportunities available there, in which we can partner under PPPs. The environment is enabling. We are saying what is it that you are coming up with as the business communities? Mhona asked.
He added: “The business community has let us down in this country. Its high time we must refocus and tap into these opportunities. There is no way we can fund infrastructure from fiscus. How many have approached the ministry (of Transport and Infrastructural Development) to say these are the suggestions that we have?
I urge the business community to come up with innovative programmes and we work together.”
There are several PPPs schemes that can be adopted , depending on the nature of the infrastructural project in question.
These include Build and Transfer (BT) scheme, Build Operate and Transfer (BOT) scheme, Build Own Operate and Transfer (BOOT) scheme, Build Lease and Transfer (BLT) scheme, Rehabilitate Operate and Transfer (ROT) scheme and Build Transfer and Operate (BTO) scheme, among many others.
Under a BT scheme, the private sector player sources the finance and constructs the infrastructure. Upon completion, the company hands the infrastructure to government or responsible government agency, which then takes over all the roles including ownership and operation roles. In turn, the government would pay the company an agreed sum, together with reasonable returns negotiated beforehand while under a BOT model, a private sector player undertakes the construction of the infrastructure, financing the construction as well as the operation maintenance.
The company would then operate the facility for a fixed term, during which the private player would be allowed to impose on users of the infrastructure fees or rates, such as user fees, rentals and many others.
The charges to consumers would be expected to be exactly as captured in the contract and should enable the company to recover its costs as well as earn a reasonable return. At the end of the fixed term contract, the facility is transferred to the government agency or local government unit concerned.
Under BOOT model, the private sector company finances, constructs, own and operates the infrastructure for a fixed term. Ownership implies that the company is allowed to make any decisions it sees fit during the ownership tenure, with minimal or no government interference. It also gets the opportunity to recover its total investment, operating costs, as well as a reasonable return. This would be done through collecting tolls for example for highways, fees, rentals or other charges. At the expiry of the fixed term, the infrastructure is handed over to government, which would then take all responsibilities.
When government and the private sector enter into a BLT model, the private sector constructs the infrastructure and once complete, it hands the operation issue to the government on a lease arrangement, where the government or government agency would be paying for the lease. The lease payments would give the company an opportunity to recover its costs, and after an agreed term, the government stops paying the lease and assumes ownership and control over the facility.
On the other hand, a ROT model involves a system where the infrastructure that is already in existence but in a sorry state is handed over to the private sector player for refurbishing, maintenance and reconditioning. The private player is allowed to operate the infrastructure for a period, recoup investment costs and get a reasonable return, following which the facility is handed back.
Under a BTO scheme, the private sector company building the infrastructure and upon completion, transfers the infrastructure to the government. However, despite not having ownership, the company is allowed to operate the infrastructure on behalf of the government, with proceeds being distributed as per contract agreement.
