‘PPPs critical for economic development’

TENDAI BHEBE IN BULAWAYO

 

The Zimbabwe Investment and Development Agency (ZIDA) says the Public Private Partnerships (PPPs), guided by the National Development Strategy 1, is critical to the development of the economy.

PPPs are a contract between the government or its agency and a private company.  The private company provides a public service or project and assumes substantial financial, technical and operational risk in the project.

Zimbabwe has over the past decade experienced deteriorating public infrastructure due to the economic downturn.

President Emmerson Mnangagwa’s administration took a stance to adopt PPPs model, in which the private sector has been called in to partner the government in several projects.

This means government projects would be completed with private funds.

“The PPP Unit’s key role is to contribute to the attainment of economic growth through public private partnership projects and ensure that all such projects are affordable to the contracting authority and provide value for money. They also provide for the optimum transfer of technical skills whilst minimising operational and financial risks to the counterparty in a globally competitive world,” ZIDA said in its latest newsletter.

ZIDA said several projects were in the pipeline and PPP projects can take the form of either solicited or unsolicited proposals and the ZIDA Act provides the procedures under each option.

“Solicited proposals are those projects in the pipeline of the Government’s development agenda currently guided by the NDS1. Unsolicited projects are the one brought to the government that would not have been in its project agenda,” it said.

ZIDA said all PPP projects are approved by Cabinet due to the fact that they involve partnership with government assets.

ZIDA recommends such projects to the Cabinet through the PPP committee which is chaired by the permanent secretary of the Ministry of Finance and Economic Development George Guvamatanga due to the fiscal contingent liabilities that PPPs assume.

“The partnership is solemnised by an agreement under which counterparty undertakes to perform its contracting obligations over a specified period of time. In return the counterparty receives an array of benefits for performing the function,” ZIDA said.

There are several PPPs models that can be adopted, depending on the nature of the infrastructural project in question.

These include the Build and Transfer scheme (BT), Build Operate and Transfer (BOT), Build Own Operate and Transfer (BOOT), and Rehabilitate Operate and Transfer (ROP), among many models.

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 the 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.

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 and rentals.

Under a BOOT arrangement, the private sector company finances, constructs, owns 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, etc 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 the government, which would then take all responsibilities.

ROT 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.

PPPs are intended to obtain more “value for money” than under traditional public procurement options, and when correctly implemented, they produce reduced life-cycle costs, better risk allocation, faster implementation of public works and services, improved service quality and additional revenue streams.

According to the Zimbabwe Economic Policy Analysis and Research Unit, PPPs result in improvement in service delivery in comparison with the situation where the government is operating alone.

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