CHOOSING THE PPP MODEL FOR AFRICA ROAD DEVELOPMENT
On the African continent, infrastructure investment requirements for highways and roads far exceed the available public financial resources. The private sector is therefore needed to help play a much more extensive role in financing infrastructure in partnership with the public sector. This form of financing is called public–private partnerships (PPPs), and is one-tool Africa governments have to ensure their road projects see fruition. Over the past decade, African states have increasingly recognised and increasingly emphasised the need to adopt PPP models for the development of critical road infrastructure. The Bitumen Exchange 2016 survey highlighted that the PPP approach can lead to improved service delivery, and yet host countries haven’t been able to implement as many of these projects as they would like due to an array of difficulties.
Though the PPP models have gained significant attention on the continent, we felt it timely as we head towards our annual Road Infrastructure and Investment conference in Kenya, to consider the PPP proposition for the private sector in East Africa.
Challenges in the long grass
While implementing PPPs in road development hold significant benefits, they also present formidable challenges. The PPP model itself is not simply the answer, as many of the problems associated with government finances in the region are also apparent in attracting private investment, which is not easy. Financers not only need returns but also an enabling regulatory environment that gives them confidence to invest.
For this to happen, governments in the region need to formalise the PPP models they prefer to be implemented. This has already had huge success in Asia and India, where strong procedures have been put in place on those looking to procure a PPP project. These are overly zealous for those organisations not qualified to carry out projects, but in-fact reassuring for those with an ability to do so. Ideally the process is publicly disclosed in order to in still transparency in the process. This should be relatively easy to do for people like the
Kenya National Highways Authority who already make similar information available on their websites.
The other key issue in addition that still needs to be addressed in East Africa are the conflicting interests of multiple stakeholders (inter-departmental rivalries, investment banks ability to lend at lower costs than government & end users ability to pay).
So far, most efforts on the development of PPPs have been on attracting investment, and improving the procurement process. Subsequently little attention has been paid to the operational phase, and an area we feel is vitally important in Africa given a poor track record of road maintenance. Overtime many highway projects will enter the operational phase of the PPP, and ensuring strength of structures post management will become an important issue. One area that has seen success in Asia is the establishment of a central repository of management systems. This allows authorities to access vital maintenance records and ensure timely rehabilitation of roads as well as assisting operational PPP projects.
The Bitumen Exchange 3Wins Concept highlighted that it is not a case off too little capital holding back road investment, rather too few bankable deals. Selecting the right PPP model is one vital stepping stone to achieving this aim. The Road Infrastructure and Investment Congress is hosted with regional governments and multilateral investors to disseminate knowledge while developing capacity and assist in formulating the right agenda to implement successful PPP projects. It looks to answer many of the questions raised in this article and the 3Wins Concept.
The Bitumen Exchange Team