Letters

Use service PPPs to grow road networks

ppp

Ongoing construction of the Nairobi Expressway. PHOTO | FILE | NMG

Summary

  • The poor condition in majority of the countries is limiting the potential for intra-African trade due to connectivity constraints, increased transportation costs and high accidents rate.
  • Over the years, the Public-Private Partnerships (PPP) model has been used to procure and finance infrastructure in Africa.

As Africa races to operationalise the Africa Continental Trade Area treaty (AfCFTA), poor connectivity among the countries occasioned by lack or poor state of roads is a big challenge.

The poor condition in majority of the countries is limiting the potential for intra-African trade due to connectivity constraints, increased transportation costs and high accidents rate.

To address this, a number of countries have instituted policy framework reviews that have, among others, established special funds to address road maintenance requirements. This progress notwithstanding, there is still a huge financing gap.

Since most of the countries have reached unbearable debt levels, there is a need to engage the private sector so as to unlock the much-needed financing. Over the years, the Public-Private Partnerships (PPP) model has been used to procure and finance infrastructure in Africa.

In a PPP service contract, a road repairs target to meet specific standards. In return, when they have met the performance conditions, they will receive periodic availability payments from the procuring authority.

However, for the contract to be regarded as a service PPP, the “at-risk” and performance-based contract’s tenure has to be relatively longer and there has to be an optimal transfer of risk to the private party.

If properly structured, service PPP contracts can not only help the continent to ensure quality road conditions but also help in building the requisite capacity to implement infrastructure projects. 

However, the continent faces a number of challenges that inhibit the use of PPP to deliver public assets and services. These include an undeveloped financial system, lack of practical capacity, high-risk profile, and lack of commitment for PPPs. 

These should, however, not limit the continent from crafting service PPP contract variants that can possibly deliver value for money within the limitations.

An example is Performance-Based Contracting (PBC) which has been widely used across the globe delivering impressive results.