Public-private partnerships (PPPs) for public infrastructure are emerging as a viable source of infrastructure investment in developing countries. are emerging as a viable source of infrastructure investment in developing countries. However, there are also some costly failures that have negatively affected development. This study explores the conditions under which PPPs create win-win situations by discussing 10 case studies from a variety of African countries.
The study found that the added value of a successful PPP lies in: 1) the increased efficiency of project delivery and operation, 2) reinforced competition, 3) access to advanced technology, and 4) a reduction in government budgetary constraints due to increased access to private capital.
General conclusions from the case studies are that: 1) PPP procurement is complex, but, if done well, infrastructure can be delivered quickly, is less likely to suffer cost overruns or delays, and is more likely to be maintained properly (note: the complexity of the PPP process lies in the fact that the contract must not only cover the construction of the infrastructure, but also its operation and maintenance for a long period of time, and that the requirements of private-sector investors and lenders need to be considered), 2) PPPs need political support to prevent obstruction, 3) political interference should be limited, and 3) PPPs are more successful when combined with sectoral reform.
When formulating PPP contracts, policymakers should be aware of what is required for proper implementation in the different phases of the PPP: 1) project structuring – affordability over a prolonged period and risk transfer, 2) the procurement process – an appropriate governance structure including monitoring and approval, the pre-selection of investors with financial capacity and a good track record, and solicited bids (unsolicited bids often lack finance and/or expertise), 3) finance – for example, currency risks emerge when lending abroad, 4) construction – private sector stakeholders should incur risks, so that actual risk transfer takes place, 5) operation phase – monitoring pre-set conditions for budgets, staffing and training is important, and 6) return of asset control to the private sector – the constructed asset should be returned in good condition.