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Why PPPs are evading Zimbabwe

The African Development Bank (AfDB) and the World Bank have stressed that Zimbabwe’s infrastructure gap requires investment amounting to $2 billion annually, following years of deprived investment and lack of maintenance.

By Victor Bhoroma

The Zimbabwean government spent virtually nothing on infrastructure in 2009, $200 million in 2010, $300 million in 2011, $300 million 2012, $100 million in 2013, $200 million in 2014, $300 million in 2015, $500 million in 2016 and about $300 million in 2017, despite the huge deficit in this segment.

Some of Zimbabwe’s unfinished projects which are key include dualisation of the Harare-Masvingo Highway, Harare-Chitungwiza Railway, Gwanda Solar Project, Gwayi-Shangani and Kunzvi dams, Batoka Gorge Hydropower project and upgrades to all border posts linking Zimbabwe to the region.

The consequences of this deficiency in infrastructure development are evident in the unsustainable cost of importing power from neighbouring countries, high cost of doing business and poor investment inflows into the country, as investors prefer markets with better infrastructure.

The most prominent characteristic of all developed nations is their ability to build, maintain and modernise infrastructure at a pace in tandem with economic development.

Public-Private Partnerships (PPPs) have been used in developed nations and the African continent to the greater good of national development. PPPs are long-term contracts between a private player and the public sector (government or local authorities), for providing a public asset or service, in which the private party bears significant financial, technical and operational risk and above all management responsibility.

PPPs can be implemented in virtually every sector from health, education, commerce, mining, agriculture, sport, tourism, information technology and most prominently in transport and infrastructure development projects.

The central objective of these partnerships is to encourage governments to join hands with the private sector, civil society and international organisations to meet Sustainable Development Goals (SDGs) in building robust infrastructure that unlocks social and economic development across the country and reduce the cost of doing business among other important objectives.

The benefits of PPPs are plentiful, especially when it comes to powering the much needed growth in the local economy.

These benefits include effective asset utilisation, revenue generation, infrastructure modernisation, value for money to all stakeholders, quick delivery of key projects, increased investment and employment creation for local skills directly and indirectly from such projects.

PPPs were first presented in Zimbabwe in 1994, when the government partnered private players in the construction of the Limpopo Toll Bridge under a 20 year Build-Operate and Transfer (BOT) arrangement, which had a total value of $18 million.

Another PPP project that was successfully undertaken by the government is the Beitbridge Bulawayo Railway (BBR) line, which was implemented on a BOT basis by Beitbridge Bulawayo Railway (Private) limited in July 1999.

The most noticeable PPP so far has been the Plumtree-Bulawayo-Mutare Highway rehabilitation project implemented by Group Five of South Africa with funding from Development Bank of South Africa (DBSA) in 2014.

The project cost was $206 million on the 820km highway. What makes this last project a marvel in local PPPs so far is that it was completed a year ahead of schedule with high quality standards that matched a reasonable budget.

The $600 million Chisumbanje Ethanol Plant Project by Green Fuel and ARDA is another success story completed ahead of schedule in 2013, even though question marks remain on the shareholding structure of the project.

Despite these successful examples, PPPs have been evading Zimbabwe in a worrying trend. The major reasons for the slow uptake in PPPs locally include:
Lack of political commitment

PPPs require high level government leadership commitment before and after implementation, since the private players incur operational and financial risks in these long term contracts.

PPPs require clarity on policy and legal framework before the private sector can commit millions of dollars into public projects.

Zimbabwe has been at pains to separate economic policies and politics in the last three decades to the detriment of economic development.

Institutional decay

Key institutions such as contract enforcement, the rule of law, protection of property or minority rights, government bureaucracy, governance structures, tax systems and economic policies are key to PPPs success.

Without institutional integrity, PPPs may remain risky ventures for local or international private players.

Corruption

Zimbabwe is ranked number 157 out of 180 in the Corruption Perceptions Index 2017 by Transparency International.

The same organisation points that the country’s tender procedures, police, courts, mining, state entities, border and tax agencies are the most corrupt departments in Zimbabwe, costing the government over $1 billion annually.

Corruption has been rampant in PPPs agreements to a level where some projects had to be abandoned or costs have skyrocketed even before the projects begun.

Negative perceptions on Zimbabwe

Zimbabwe still has a high country and economic risk to the private and international community.

The major reasons for the negative perceptions emanate from the three reasons above and the manner of the land redistribution program done in 2000.

As the country gears for elections on July 30, the private sector and international community will be paying a close eye on developments in Zimbabwe.

Most long term public projects and investment decisions hinge on how the upcoming process will be conducted.

Source: Newsday

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