INFRASTRUCTURE is
critical for the growth of any economy. Power, transport, water, health,
telecoms, housing and educational facilities are indispensable to the activities of businesses and households.
Recently, this reality
became evident when heavy rains destroyed homes and washed out a strategic
bridge in Kilosa District
connecting Morogoro and Dodoma regions.
This painfully left
hundreds of Tanzanians homeless and stranded. Infrastructure failures like
these reduce people's quality of life and productivity. Contrarily, improving
infrastructure facilities and services
fosters human welfare and boosts economic
growth.
In Tanzania, like
elsewhere in Africa, the infrastructure built over the past several decades by
the colonial powers is outdated and incapable of meeting the needs of
businesses and households, which is why providing sustainable infrastructure is
one of the main challenges the government has to contend with.
With persistent budget deficits and the limited (government)
funding available for infrastructure development and investment, public private
partnerships (PPPs) will increasingly play a decisive role in addressing
Tanzania's infrastructure gap.
These partnerships mobilize
private sector resources- finance, technical and managerial expertise - to build,
control and operate infrastructure projects under strict government oversight
and regulation.
They also transfer a
significant risk of cost overruns to the private sector party (concessionaire),
who gets paid for performance by the government over the life of the PPP but
not upfront.
If the concessionaire
underperforms, the government reduces the payments. This aligns the interests
of the government and of the concessionaire in being efficacious and
deliveringa truly seamless infrastructure project.
"As
government budgets tighten, there's a need to change to
other options," says Isidore Leka Shirima, a retired Regional Commissioner
and now Principal Consultant at FK EconoConsult.
"Since government
resources get stretched by the need to meet other competing demands, such that
government money is not readily available to pay for all
the infrastructure needed, the only option is innovative funding through
effectively managed public-private partnerships," Mr Shirima added.
While the PPP model is
more recent in Africa, there are already a number of success stories. In
expressing its commitment to encouraging PPPs, the Kenyan government envisages
that 80 per cent of its infrastructure projects will be financed through
PPPs by the year 2030.
Although Nigeria has
had an inconsistent history of investing in infrastructure, current government
plans have given a new impetus to infrastructure development.
In the past decade,
more than 20 serious infrastructure projects have been implemented through
PPPs. The Federal Government of Nigeria, state and local governments have
contributed over USD66 billion to the projects. On her part, Tanzania has
lagged behind many of its neighbours in the use of PPPs in the past 20 years.
Yet, if well managed,
PPPs can play a prominent role in the development of infrastructure projects.
The World Bank estimates that every 1 per cent of government funds invested in
infrastructure leads to an equivalent 1 per cent increase in Gross Domestic
Product (GDP).
The good news is that
fresh legislative changes aimed at creating a robust legal framework for PPPs
are underway in Tanzania. There's also anoticeable political push towards PPP
as a model for delivering public services and infrastructure. This is opening the
doors for PPP opportunities.
"Government
will continue to create a conducive business
environment for the private sector and also encourage the PPP model towards
achieving sustainable development," said Hon. Janet Mbene, Deputy Minister
for Trade & Industry at the South Africa - Tanzania business forum early
this year.
While the government's
initiatives in encouraging PPPs are welcome, there are still several obstacles
to successfully forming and managing PPPs in Tanzania. One of the greatest
obstacles to the effective implementation of PPPs is the shortage of local
talent in the field of technical, managerial and structuring competence.
Education and skills
training for dealing with PPP activities must be encouraged in the public and
private sector. Inadequate long-term financing instruments is another obstacle.
The Tanzanian banking sector is not yet geared up for the scale of the
infrastructure projects envisaged under PPPs; therefore, international banks in
Hong Kong, Beijing, London and New York will deliver most funding.
This is why the
government's efforts to create the PPP Facilitation Fund for the timely
implementation of viable PPP projects is a good step in the right direction.
Moreover, given that
commercial banks are concerned about asset liability and concentration of
risks, the Bank of Tanzania (BoT) should alternatively clear policy impediments
to enable life insurance
companies and pension
funds, which have funds for 20-30 years at their disposal, to invest in the
infrastructure sector.
Tanzania should also
develop an adequate bond market to facilitate investments in infrastructure. PPPs are the basis of
many unsolicited proposals, which can bring innovation for improving
infrastructure.
Amending the current
PPP law to provide for a framework of dealing with unsolicited proposals will
help private companies embrace innovation and bring in new finance and
expertise to help facilitate infrastructure innovations.
As the development of
a nation is critically dependent on effective infrastructure, it is natural and
appropriate that the government and private sector organisations collaborate to
ensure that needed infrastructure
services and facilities
are in place and available to households and businesses.
In this regard, PPP
financing is going to be increasingly important in Tanzania.
The author is the
Managing Partner of Kibuuka Law Chambers and can be reached at
kibuukalaw.com"paul.
source: daily news
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