Infrastructure: Bridging the divide between government and investors on PPPs

Over the years, most African governments have strived to meet the infrastructure needs of their citizens with little success, hence the adoption of the public private partnership (PPP) option as a strategy to bridge infrastructure deficit in most parts of the continent.

Experts say that as infrastructure demand grows, government at all levels have a responsibility to distinguish between bankable projects which can be concessioned to private equity firms to develop and non-bankable projects which should be developed by the government.

Speaking at a business roundtable in Lagos recently, the experts noted that though PPPs could sometimes be ill-motivated, its positives significantly outweigh its negatives for developing economies such as Nigeria.

The roundtable with the theme ‘Harnessing the Opportunities in PPP and Confronting the Challenges of Infrastructural Development in Nigeria’ was aimed at sensitising private investors on the many opportunities in the sector presented by the huge deficit.

Julian Roche, an international consultant, argued that if government’s expenditure on infrastructure continued to be inefficient, which is likely, it would open up opportunities for private investors to leverage on by augmenting government’s effort on projects which are bankable for them.

Affirming this, Mansur Ahmed, former director general, Infrastructure Concession Regulatory Commission (ICRC), noted that complete reliance on public procurement would take Nigeria some 80 years to meet its infrastructure needs because of government’s incapacity to deliver some huge projects.

However, despite these opportunities, series of challenges have mitigated against PPPs over the years, such as improper consultation among the government, citizens and investors even before project kick-off; inability to understand contract principles prior to signing by either of the parties; the inability of the government to properly structure projects in the country by separating the bankable from the non-bankable; lack of adequate incentives for investors from the government, and politicisation of PPPs.

The experts posit that infrastructure should be about delivering service to the people and not a tool for politicians to work with and, according to Ahmed, there is a need for a clear definition and understanding of roles and responsibilities allotted to both the government and an investor during a PPP contract. This, he said, is to accord everyone their due respect and ensure that the contract terms are not breached by any party.

“Parties must understand each other’s roles and responsibilities and stick to the principles that govern the contract agreement,” he added.

Gabriel Ekanem noted that the act of secrecy, especially on the part of private investors, often hinders PPPs progress, adding that there was a need for both parties to disclose details of contracts signed to give the public an in-depth understanding of the project’s process and end result.

“The need for a sustainable national infrastructure plan that would be driven by technocrats and not politicians is also imperative to attract investors to PPPs,” said Jobalo Oshikalu, legal director, ARM Infrastructure, adding that there was also the challenge of an unavailable secondary market where private equity firms can trade off their assets and proceed to another project.

On modalities for successful PPPs between the government and the private investors, Mansur maintained that strict adherence and respect to project contracts by all parties involved remains a viable tool for growing PPPs, which experts believe can significantly bridge infrastructure deficit.

According to Roche, other tools fundamental to PPPs growth in developing economies such as Nigeria include fair and transparent bidding process, strong government support and priority, stable legal framework, proper risk allocation, manageable country risk and a win-win approach to PPPs.

By: ODINAKA MBONU