Tuesday, August 17, 2010

Between Rhetoric and Realities of PPPs in sub-Saharan Africa Countries

Many of the governments in developing countries are looking to public-private partnerships (PPP) to radically improve infrastructure networks and service delivery to their people. They hope that the model where the state shares risk and responsibility with private firms but ultimately retains control of assets will not only improve services but also reduce unemployment, higher prices and corruption (Farlam, 2005). This paper will show that in theory, PPPs may have the potential to solve sub-Saharan Africa’s infrastructural problems but in practice, PPPs suffer many of the same ills that afflict privatization and public tendering before it (Figure 1).

The paper will draw on plethora of literature on PPPs to show that theoretically, these innovative contracts may offer substantial public benefits, including improved service quality, risk sharing with the private sector, and cost savings (Grimsey & Lewis 2004). The paper will also draw on specific illustrative case studies dealing with ongoing or abandoned PPP contract to show that PPP is not a magic formula that will fix a country’s problem and may actually create more problems due to its complexities (Bull & McNeill, 2007). Attempt will be made to explore some peculiarly African, “practical impediments” to achieving the market-driven, risk sharing and transparent competition envisaged by disciples of PPP (Farlam).

This review of PPP will also suggest that African government must fundamentally improve their systems for dealing with the private sector to realize the efficiency and effectiveness gains that these partnerships promise. The paper will concludes with an examination of the panacea that may bring the benefits of PPP to sub-Saharan Africa through investment in specialized expertise, effective contract management, and strong governance structures. Above all, it will recommend that a sustainable infrastructural and service delivery mechanism must necessarily include a mixed method that combines the benefits of market to the rising middle class in Africa, with the benefits of public delivery to the rural poor (Warner & Hefetz, 2008). The commitments of all stakeholders to the actualizations of any of these arrangements cannot therefore be overemphasized.


The term public-private partnership is used in slightly different ways with the result that a concise definition to which all will agree is elusive (Bettignies & Ross, 2004). Wettenhall argues that “there is often little precision in how ‘partnership’ is used, and belief that what it refers to is ‘a good thing’ seems much more a matter of faith than of science” (2003, p.80).
South Africa has the greatest cumulative experience of public-private partnership in sub-Saharan Africa, with over 50 such partnerships in development or implementation since 1994 (Farlam, 2005). I will therefore seek to adopt the definition proffers by the South African National Treasury:

a contract between a public sector institution and a private party, in which the
private party assumes substantial financial, technical and operational risk in
the design, financing, building and operation of a project (PPP manual, 2004,

It is imperative to point out however, that PPP is not a creation of Africans or that of the sub-Saharan Africa’s government; in fact the public-private partnership concept draws its main momentum from the entrepreneurial government movement in the West, with its emphasis on capturing the benefits of private sector techniques such as market-driven competition and performance contracting in the 1980s (Yergin & Stanislaw, 1998).

The 1990s saw a revolution as governments in developing countries urged on by multilateral institutions, like World Bank and International Monetary Fund (IMF) adopted the new paradigm of private provision of infrastructure services. The boom grew rapidly, reaching a peak in 1997 (Harris, 2003). By 2001 however, annual investment flows began to decline in the wake of the East Asian financial crisis (Figure 4). The optimism of the mid-1990s as highlighted in the documentary movie “Commanding Heights” has now been replaced by a widespread pessimism (Figure 2). Annual investment flows to private infrastructure projects in developing countries, including sub-Saharan Africa are down (Figure 4). Projects have been renegotiated and some have been re-nationalized or cancelled. Investor interest in private infrastructure projects in developing countries is also subdued, while there are signs of popular discontent (Harris, 2003).

Despite this decline, anyone reading contemporary theorist of PPP will think it is a magic wand that can fix all infrastructure and service delivery problems of Sub-Saharan Africa. The primary reason for this is that most of the literatures on PPP are generated by advocacy groups, think tanks, and private consultants who has successfully reinforced the message of the long term benefits of PPP by an avalanche of favorable publicity, enhanced by the megaphone of such respected financial and multilateral institutions such as World Bank, International Monetary Fund (IMF), and the United Nations. The impact of such pseudo intellectual blitzkrieg on the potential benefits of PPP are so pervasive, that one writer described it as something that “can make theorist swoon” (Klitgaard & Treverton, 2003, p.16).

In practice, however, the challenges and complexities posed by PPP arrangements have “brought many African governments to its knees in debt”, with attendant streets protest, riots and outright overthrow of regimes found sympathetic to it (Harris, p.7, 2003). As we will show shortly, many PPP projects that were reported and promoted as low-risk, cost saving initiatives has saddled many African countries with high-risk, costly obligations for decades to come (Tati, 2005). We will examine several independents studies with similar findings on plethora of projects all over sub-Saharan African continent.

It is important to emphasize that some successful cases have been reported as well. For instance, in 1996, the government of South Africa (SA) and Mozambique (MZ) signed a 30 year concession for a private consortium, Trans African Concessions (TRAC) to build and operate toll road from Witbank, SA to Maputo, MZ. The road has been judged by many as huge success, and now touted all over Africa to show the viability of PPP where users are willing and able to pay. It has also reduced overloading on heavy vehicles and boost growth of tourism in MZ.

Critics however argued that high transportation costs along the toll road mean that “small-scale traders and informal businesses, and hawkers lose out to large-scale and organized traders and businesses” (Soderbaum, 2004). Others argued that for every single successful PPP project, there exist a litany of other abandoned projects by multinational corporations and financiers in Africa (Tati). For instance following, the success of the SA-MZ experiment, the Kenyan government attempt to build a similar toll road at its northern corridor is now moribund following accusations of “attempted corruption” (Farlam, 2005, pp. 11-12).

In general, however, the dearth of comprehensive, reliable data from African government on the performance of PPP projects requires that researchers had to rely largely on anecdotal cases reported by industry groups and other advocacy organizations (Moore, 2000, p. 25). The cases that will be discussed in this paper are therefore offered as a reality check on the largely uncritical publicity that PPP have garnered. I also hope to draw on my extensive knowledge as a public infrastructure lawyer in Africa, prior to my emigration to the United States.
Some argued that the main benefits of public-private sector partnering are the flexibility to accommodate change when operating in an uncertain environment, improve communication, transparency and better dispute resolution (Domberger, Farago, & Fernandez, 1997). Other posits that partnerships by its very definition require a fiduciary relationship with a mutual goal and that, the private party in PPP goal is set up to make maximum profit for its share holders (Grimsey & Lewis 2004). For most government in Africa, PPP are convenient arrangement to avoid public sector labor unions or to deflect blame on non delivery of democratic dividends (Bettignies & Ross).

Drawing on illustrative cases, this paper will now proceed to explore some of the practical impediments to putting theory of PPP into practice in sub-Saharan Africa and offer observations aimed at strengthening African government management and governance in this high-risk area of government contracting.

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