EDITORIAL COMMENT : Partnership deals must be standardised, implemented Professor Mthuli Ncube

Public-private partnerships have been successful with the new Beitbridge Border Post and the related infrastructure in the border town being an outstanding example.

The dramatic upgrade of the Pomona waste site in Harare  is also a major example of a PPP, where the public partner is a local authority.

There are others that are working, and where Zimbabwe is benefiting, but two problems or potential problems have been identified. First some agreements are just that, a piece of paper, with nothing physically existing and no investment made.

A second and largely potential problem is that many PPP agreements are one-offs, and while each has to be separately negotiated, it has become apparent that a general framework would be very useful not only to speed up the process, but also to ensure that the final agreement maximises benefits fairly for both parties –  the public party and the private investor.

Cabinet this week wanted the policy upgraded and streamlined within a policy framework and with a major increase in functioning partnerships to accelerate infrastructure development.

The partnerships, as Minister of Finance, Economic Development and Investment Promotion Prof Mthuli Ncube explained, allow a lot more capital development to take place each year that can be funded out of the national budget.

This means that a particular development can be done soon, or is in progress, rather than having to be scheduled for some years when it reaches the top of the list of work done by Government directly through the budget.

Through the fiscal discipline of the last six years by the Second Republic, capital development is budgeted for each year, and is in fact usually the second largest block of items in the budget after staff costs, so the Government has been able to do a lot.

But much can be done via the budget it is, in one sense, never enough. We need the roads, dams, power stations, health facilities and the like today, rather than next year or next decade.

So the Government is more than happy to bring in the private sector and work out suitable deals. The private investor normally requires a way to recoup the investment, and that normally means a charge is laid and paid by users.

But users are prepared to pay these charges, so long as they are within reason, when they see the benefit they get.

For example there are charges at Beitbridge Border Post, but the comments from users of the refurbished and rebuilt border post generally do not mention the charges, just the benefits the users get, implying that they do not just accept the charge, but find the benefits excellent value for money.

The Government, naturally, needs to be able to do its own calculations when a deal is proposed, to make sure that, while the investor gets a return on the capital invested this is a reasonable return, rather than profiteering. It should be noted that in such agreements there is almost always a clause that allows the Government to buy out the private investor at a fair price if there is some future difficulty.

The new framework for PPPs has a few basics. For infrastructural development, the Government would like to start with a minimum of a 26 percent shareholding with the agreement allowing this to be increased as the years go by.

Very often that initial shareholding will come from the land needed, and other licensing arrangements, such as mineral rights. In some cases Prof Ncube will have to budget the money, but only for a minority holding, not the whole lot.

In more commercial cases, such as between State-owned companies and a private investor, the initial percentage of shareholding to be held by the State-owned company should be 30 percent. There is also to be revenue sharing from the start, roughly in line with the shareholdings held.

We hope that the decision to build a fairly standard framework for such partnerships, and to re-examine those where deals that have been signed but nothing has happened, will be interpreted liberally, including a lot of other potential infrastructural development.

The energy sector, to highlight one area, has seen a lot of potential investors seeking licences for a power station and seeking land from the Government for their new station.

This particular sector has become almost notorious for the small number of licenced stations that are being built, and the large number of licenses or agreements where there is absolutely nothing on the ground.

This has led to some of the calculations done by ZESA falling short, as assumptions were made at one time that more of the private stations would be coming on tap.

This is why it is important to be able to know if a private investor will be going ahead with an infrastructure project, and if so when will work start and when will the result be commissioned.

Sometimes, the Cabinet accepts, there might well be need for renegotiation, either because the original agreement is not really viable or because circumstances have changed. Unimplemented older deals will be relooked at in light of the new standard policies.

In some ways it is not new that an agreed investment should go ahead within a time limit. All prospecting and mining rights are awarded on this basis, that they are either used within the set number of years or they become available for others to apply for and use them.

And there is a growing building of opinion that the same should apply to land rights, that they are used or withdrawn.

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