PPPs the way to go



FINANCE Minister Dr ‘Mamphono Khaketla’s budget speech last week struck all the right notes given the difficult macro-economic circumstances Lesotho finds itself in. Among the positive interventions the minister announced was the involvement of the private sector in the development of prime land in Maseru. She said the initiative was not only meant to create jobs, but also generate revenue for both government  and  the  private  sector with the added benefit of improving the landscape of the city, which Dr Khaketla rightly noted was littered with eyesores of dilapidated buildings.

Such a development is not only long overdue, but necessary if this country is to emerge from its woeful least developed status. The government is lagging behind in meeting its obligation to provide basic infrastructure services such as clean water, sewage, roads, electricity, telecommunications, to name a few to support the basic livelihood of citizens and businesses. Without such basic services, the long yearned-for foreign direct investment will remain a pie in the sky as the country does not have the competitive edge to stand out among other potential investment destinations.

As elucidated in the budget presentation, Lesotho will have to cope with a highly uncertain global environment. The economy faces a state of heightened risk because of macroeconomic pressures, chief of which is the reduced Southern African Customs Union revenue and the slowdown in the South African economy.

With the monetary union faltering, Lesotho needs to carve her own niche by identifying sources of growth to replace those now becoming exhausted. Lesotho needs to gravitate towards the manufacturing and service industries to ensure increased productivity and growth performance.

However, with the government clearly unable to fill the infrastructure gap, strategic partnerships with the private sector are the way to go.

In this edition, we report that the World Bank has commended the benefits that have accrued from the public-private partnership (PPP) initiative that resulted in the construction of Queen Mamohato Memorial Hospital (QMMH) and four primary care clinics. While acknowledging the challenges the PPP is facing, such as its high cost to the government, the World Bank was unequivocal that it had achieved better health outcomes for a larger number of patients, including providing more advanced medical technologies than were previously available in the country. Another benefit the World Bank noted was that the health network was operating more efficiently and caring for more patients at less cost per patient.

Empirical evidence also attests to the benefits of PPPs such as incentivising the private sector to deliver projects on time and within budget and supplementing limited public sector capacities to meet the growing demand for infrastructure development.

PPPs also help develop local private sector capabilities through joint ventures with large international firms, as well as sub-contracting opportunities for local firms in areas such as civil works, electrical works, facilities management, security services, cleaning services, maintenance services. If properly implemented, PPPs can also result in the transfer of skills ensuring that locals can ultimately run their own operations professionally and eventually bid for projects without foreign help.

While the PPP framework is far from perfect, since the QMMH deal is facing some problems which need to be addressed as a matter of urgency, it is the government’s best bet to quickly address the debilitating infrastructure shortfall to spur economic growth and development.

Experts recommend that in implementing PPPs, the government would need to build and maintain the capacity to manage them, and to monitor and enforce the terms of the contracts. PPPs, they say, do not eliminate, but rather change and intensify the need for a government’s continuous involvement in monitoring performance in service delivery. Given the long-term nature of such projects and the complexity associated, it would be difficult if not impossible to identify all possible contingencies during project development and events and issues may arise that were not anticipated in the documents or by the parties at the time of the contract.  If the need arises, the government and its partners would then need to renegotiate the contract to accommodate these contingencies.

Ultimately, the buck stops with the government since citizens will continue to hold them accountable for the quality of utility services.

Leave A Reply

Your email address will not be published.