Public Private Partnership craze, what is in it for the African Infrastructure Industry?

From a distance the scene is like a mini war. My curiosity carried me quickly to observe so I can give an accurate report to you reader. What I saw upon my curios approach can aptly be described as a fitting scene for a typical African movie- a drunk man confronting a drunk barber for disfiguring his child’s face with a poor shave. You can’t believe this folk. The barber eyes were his witnesses to the amount of alcohol he has consumed. Picture your self-receiving a shave from a drunk barber. What I saw is a clear human right abuse. The barber has clearly abused the child’s right to look nice.

Well at this stage I had to intervene. As I gasped in air to vomit the first word from my belly, the lights went off. The barber was saved as everybody changed their conversation gear to discuss the recent power failure in the country. That wasn’t my biggest problem. I had to drive home on a road worse than the boy’s haircut. Living in my country and many countries in Africa is a frustration.

Governments in many African countries face the increasing challenge of meeting the growing demand for new and better infrastructural services. This is evidenced by the increasing energy failure, increasing housing deficit, roads that serves as death traps, poor sewage system and many more. The estimated financing requirement to close Africa’s infrastructure deficit amounts to USD 93 billion annually until 2020. Successive governments in Africa are confronted with the problem of funding and providing the needed public sector capacity to implement infrastructural projects. The entire African continent is crippled by this infrastructural deficiency hampering trade with the western world and other developed nations. This has considerably reduced investors trust in the continent. 

Take the issue of Electricity as reported by the African Development bank (AFCB). In 2008, only 38% of Africans had access to electricity compared to an average of 68% for all developing countries. The figure is even lower for Sub-Saharan Africa (SSA), currently at 26%. Furthermore, about 30 African countries endured on average 11.5 power outages in 2007. The power outages were due largely to lack of regional interconnectivity of the electricity grids and shortages in affected countries. During this period, regional surpluses in generation capacity were noted for all the five sub-regions except for East Africa, which had intermittent shortages. Some of the surplus countries like South Africa now have deficits due to increases in demand. The costs of power outages are significant, with Africa loosing almost 12.5% of production time compared to 7% for South Asia, which the next worst case. Indeed the emergence of independent power producers (IPPs) signals sweeping changes in the power sector. For instance, the National Energy Regulator of South Africa has established a regulatory environment that would allow upward adjustments in tariffs and thus improve the viability of private sector suppliers. In Morocco, nearly two-thirds of electricity production is by private producers, the Jorf Lasfar Energy Company - presently Africa's largest IPP, Compagnie Eolienne de Detroit (CED) and Energie Electrique de Tahaddart (EET).

Folks, the new jargon in finance and governance is the portmanteau Abenomics introduced by the current prime minister of Japan Shinzo Abe. This policy is becoming as popular as the ripe tomato hair cut craze in Japan.  In this policy, Abe vowed to deregulate the energy, and infrastructure industries. He also plans to boost power industry investment to 30 trillion yen within a decade. This election winning policy is to be achieved by his established goal of tripling the use of Public-Private Partnerships to 12 trillion yen to fund infrastructure projects such as airports, waterworks and highways.

Perhaps this is the time to consider seriously the issue of Public Private Partnership (PPP). PPP- the new craze in infrastructural development for many developing countries is imagined to be the long-awaited solution for Africa infrastructural deficiency. Few governments in Africa have already taken advantage of this to form new strategic alliances and reducing government cost in providing the infrastructural needs of their countries.

PPP is when Governments turns to and/or collaborates with the private sector to provide infrastructure services in energy and power, communication, transport and water sectors that were once delivered by the public sector. The flaunted infrastructures of developed countries like US, UK, and Australia are strong evidence that to close the wedge between African citizens and infrastructure, PPP is the way to go now.

Africa stands to glean lots of infrastructural benefits from Public-Private Partnership which in effect enhance the livelihood of the citizens.

Public Private Partnerships could increase and provide greater infrastructure solutions offering faster project completion and reducing delays on infrastructure projects.

The Public private partnerships return of investment (ROI) is greater when compare to traditional methods, due to innovative design and financing approaches

Risks are weighted from initial conceptual stages to determine the feasibility of a certain project

The operational and project execution risk is transferred totally to the private sector, leaving the public component on a win-win situation

Public private partnership is a concept where early completion is expected under expected budget, reducing the claims and change order process.

Public-Private Partnership allows government funds to be re-directed to other important socio-economic areas reducing government budget and budget deficit.

P3 also provides economic growth and increased and wider employment opportunities.

The successful establishment of the West African Gas Pipeline (WAPCo) is an evidence of the profit of PPP. WAPCo is a public-private partnership owned by Chevron-Texaco West African Gas Pipeline Ltd (42%), Nigerian Natural Petroleum Corporate (25%), Shell Overseas Holdings Limited (17%), and Takoradi Power Company Limited (16%). Its shareholders are Shell, Chevron, Nigerian National Petroleum Corporation (NNPC), Volta River Authority (VRA) of Ghana, BenGaz of Benin, and SotoGaz of Togo.

Folks, after letting you know the benefits of PPP, let me also add quickly that PPP contracts are typically much more complicated than conventional procurement contracts affecting the tendering and negotiation. This is principally because of the need to anticipate all possible contingencies that could arise in such long-term contractual relationships. Parties bidding for projects spend considerable resources in designing and evaluating the project prior to submitting a tender. In addition, there are typically very significant legal costs in contract negotiation. Having several bidders do this involves a cost which can add up in total to tens of millions.

These shortcomings need careful consideration and the wobbling wheels of African infrastructure development and the benefits of PPP must compel all African nations to develop policies to guide the successful implementation of Public-Private Partnerships.

However, failure in making projects bidding transparent and publicly stating government’s stake in the joint venture could turn any PPP project honeymoon into divorce.

Folk, I believe you are interested in what happened next after the blackout. The conversation changed and eventually everyone left for our homes conversely settling the quarrel. Do not quickly commend the blackout because robbery is rampant these days and they take advantage of such situations.