THE World Bank has recommended that Lesotho should enact supporting laws and set up relevant structures to regulate the operation of public private partnership (PPP) initiatives.
The bank said this in the PPP Readiness Diagnostic report, which was recently tabled before principal secretaries and other senior government officials during a high level meeting by a team of World Bank Group consultants. The report further said there is a need for guidance, guidelines and standardised documents to support PPP.
The country report comes on the back of an assessment meant to improve Lesotho’s readiness to implement PPP’s.
Except a PPP policy that was adopted in 2017, Lesotho does not have any other form of legal framework such as PPP Act or Regulations, which are integral parts of a functional PPP environment.
Apart from the broad Public Sector Investment Committee, the country also does not have a specific PPP institutional structure, unit or steering committee. These form part of an institutional framework necessary to operate a functional PPP.
However, as a result of these short-comings, Lesotho has not had a pleasant experience in its first PPP venture in 2005 in the form of Queen ‘Mamohato Memorial Hospital (Tšepong Hospital), where the government has revealed that it spends more than half of its entire annual health budget on service payments to its private partner, Netcare.
By definition, a PPP is a contractual arrangement between the government and a private partner to deliver a public service. The arrangement involves risk sharing between both parties and performance based payments.
Part of the report reads: “PPP is best integrated within the legal and regulatory framework and institutional arrangements for public investment management and public financial management”.
“There is need to link public investment management and PPP with annual budgeting, optimal risk assessment and allocation; and ensuring that projects are affordable, bankable and provide value for money. Alignment between the PPP programme and individual projects is essential.”
The report also recommended the enactment of supporting laws and relevant structures.
“Lesotho should consider subordinate PPP legislation under existing primary legislation as an interim measure. Adoption of a PPP Act can be considered later.
“A PPP steering committee is missing from the existing institutional framework but may be necessary to ensure consensus and support for PPP project implementation.”
The report also said the country must assess the need for a PPP unit, what it would be, what it would do and how it would achieve it purpose.
It further said the range of authority and decision-making; functions and activities of PPP units vary considerably in other countries and has evolved with time and changing circumstances.
“Many units have reoriented towards infrastructure project management and financing with the fiscal risk and affordability assessment being conducted by a different part of the Ministry of Finance.”
Below are the concluding thoughts from the report:
“Lesotho needs to decide on the time-frame, sequencing, availability and allocation of human and financial resources, the institutional framework and linkages, capacity and capability for improving public investment management, PPP; and public financial management (including public procurement and debt management).
“Most aspects are the subject to ongoing reviews, recommendations, and draft legislation/regulations.
“Building capacity and capability on all these fronts and trying to integrate activities and results at the same time while promoting understanding of PPP within government is a major challenge.”
The report however, warned that too many changes at one time will overload agencies, staff and systems and unintentionally fragment the unified nature of public financial management. Instead, the report recommends a phased basis of implementation on public investment management and PPP; considering interim arrangements.
“Actions could, for example be separated into those carried out in 0 to 18 months, 18 to 36 months and 36 to 60 months.”
For her part, principal secretary in the Ministry of Finance Motena Tšolo said Lesotho’s PPP programme is moving ahead with the adoption of the PPP policy in December 2017.
“An action plan for the implementation of the PPP policy is being prepared with assistance of the World Bank Group. Building on today’s high-level discussion, the action plan will set out the short, medium- and long-term actions that will help us realise the opportunities that PPP’s offer our communities,” Ms Tšolo said.