INGENIEUR
budgets .”
There is an enormous demand for infrastructure across the African continent , but many countries are struggling with their
INGENIEUR
‟
budgets .”
continent , but many countries are struggling with their budgets . That is why PPPs are important .” Rwelamila cites , among others , the N4 toll road connecting South Africa and Mozambique . The road has been financed , built and managed by a private consortium , Trans African Concessions in exchange for a 30-year concession and for debt guarantees by the governments .
This is only one of the many ways in which public-private partnerships can be structured . And though PPPs can be deployed as a source of financing , they are an even more important efficiency tool , bringing the discipline and ability to innovate that is typical of the private sector to public-sector investments . “ In India the Government , especially , at the state level , is beginning to see that money needs to be spent on building an infrastructure project and that the role of a PPP is to do this in a more efficient and less costly manner ,” says Manish Agarwal , leader for capital projects and infrastructure at PwC India . In the southern state of Karnataka , the Government is experimenting with a hybrid annuity model for roads , whereby it provides the private partner with partial funding of the construction cost and then pays it an annuity to cover the rest and to manage the infrastructure over time , without transferring toll revenue risk .
PPPs are central to the European Fund for Strategic Investments , an effort by the European Commission to leverage € 21 billion ( US $ 24 billion ) of public money and guarantees into investments of € 315 billion . In the US , President Barack Obama recently introduced the Build America Investment Initiative to get the private sector more involved with infrastructure . Countries like Australia , the Philippines , South Africa , the United Kingdom , Canada and Colombia , are all leading the way in their region . Colombia , for example , is undertaking a US $ 25 billion roads development programme and has set up a new PPP law ,
There is an enormous demand for infrastructure across the African continent , but many countries are struggling with their
- P . D Rwelamila , University of South Africa
Australia , in particular , can count on clear guidelines and broad acceptance of infrastructure PPPs by the community . “ The early focus was on motorway projects that could self-fund ,” says Brendan Lyon , Chief Executive of Infrastructure Partnerships Australia . “ As the market became increasingly sophisticated , we saw the PPP model consortium being stretched further . For the new Ravenhall Prison in Victoria , the winning PPP consortium must not only provide the physical infrastructure but also bring the reoffending rate of prisoners 12 % below the state average .”
International organisations are also increasing their investment in infrastructure developments . In 2014 the World Bank Group introduced a Global Infrastructure Facility to deepen the collaboration among the various actors working on complex infrastructure PPPs . The Asian Development Bank established an Office of Public-Private Partnerships ( OPPP ) to provide advisory services on PPPs and is developing the Asia Pacific Project Preparatory Fund to assist countries pursuing PPP projects . “ The biggest challenge we see is the implementation capacity of Government ,” says Ryuichi Kaga , the head of OPPP . “ So we help them in setting up PPP policies and provide hands-on advice on structuring individual transactions .”
COMPLEX STRUCTURES
Infrastructure investment remains a complex endeavour and , in emerging markets , private participation has been declining . Today it represents only around 15 % of total finance . Among the hurdles , beyond finding the money , are :
●● selecting worthwhile projects ;
●● predicting users ’ demand , which is particularly difficult in the transport sector ;
●● setting up a framework of risk sharing acceptable to public and private partners ; and
38 VOL 66 APRIL - JUNE 2016