Build the capacity for locals on Public-Private Partnerships at LGAs level

UNDERNEATH assumption of market incentives, public-private partnership appears to be more suitable than hierarchical command relationships or argumentative regulatory processes.

But within, implementing PPP route on selected service delivery, successful execution of public-private partnership depends to a large extent on the development of sound legal procedures.

Agreements and contracts and an understanding of negotiators that clearly define the relationship between parties into the intended project.

A key development priority of the Tanzanian government is nothing else than having ventures with value for money.

That will not only speed up high-impact infrastructure projects that will keep up with the needs of the country’s rapidlygrowing demand but sustain to increase the quality of its existing amenities.

Building the capacity for local public-private partnership go-betweens and contracting of a PPP in an economic theoretical and public procurement perspective.

How to establish an efficient PPP contract under a strong public law doctrine is what lies below. Leading to pen down perspective on the way PPP is being looked at and acknowledged in Tanzania.

I am not sure if all of us are at the same page in understanding what PPP involves. In our region, governments are progressively relying on the private sector for the financing and development of infrastructure projects.

Why? owing to shrinking public financial resources, grants and lending by governments and multilateral lenders caused by various restrictions, recent one being reported by Xinhua 2nd October 2018 (see xinhuanet. com) titled “World Bank withholding grants for Tanzania over restrictions on statistics”.

In PPPs trajectory, privately financed infrastructure projects nurture government concerns that private sector interests may be at variance from public interests in certain respects, hence mistrust. Consequence among others could be unnecessary lengthy business deals signing off or project delivery closure all together.

Under PPP engagements, at national level especially on strategic projects such as power plants, dams, gas pipes, highways, ports, trade logistic centres, and local level for revenue generation undertakings.

The task of any government in such deals is to structure partaking to protect the public interest while obtaining the benefits of private investment.

Without going into specifics, a PPP project can by and large be defined as a form of collaboration or joint endeavour between the public and private sectors.

For the purposes of either developing, constructing, operating and financing an infrastructure project on behalf of the government.

Therefore, in such partnership a well versatile and well-informed negotiation team is critical because balanced approach to reconciling and harmonizing the interests of the public and private sectors.

If not well construed can be not only a source of misunderstanding but can cause excessive delays in closing business deal and hence delay in project execution.

Like in any other countries, local government entities in Tanzania are playing a more central role when it comes to infrastructure development in line with the government’s instruction and trend on decentralization.

Wherein local governments are assigned with increasing authorities, responsibilities and resources. For local government looking to collaborate on PPPs project may capitalize on the huge potential offered by PPP for their infrastructure requirements.

Since there are a lot of benefits that LGAs can acquire for embarking on PPP, like the optimized risk allocation, wherein risks are borne by the party who can best manage it.

On the other hand, a PPP project can also be complex to organize and take a substantial amount of time to implement.

It additionally requires specialized skills such as being able to deal with project sponsors, project entity itself, ability to know when a commercial lender is required.

Understanding of contractors, ability to understand operators and suppliers, issues related to insurance and kind of PPP agreement necessary for success.

Which grounded on anecdotal thinking are not ready always available, predominantly to local government level where PPP is still an undiscovered financing mode for local infrastructure projects.

Much as all legal disputes related to projects under the public private partnership agreement in Tanzania is viewed to be contained in the recent new law sanctioned to resolve PPP disputes.

As stated (see Daily News 12th September 2018) that correspondingly sanction Finance Minister to manage implementation of PPP strategy.

Laws and regulations, in Tanzania, there is a need for capacity development program to help improve the capacity of local governments to plan for local PPP projects and increase their proficiency in fiscal management among others.

Skills and acquaintance particular on identifying issues related to the negotiation of the main project agreement for a PPP cannot be acquired over a workshop or seminar.

Such expertise is through undergoing designed training that unfortunately go unobserved. Training local government official would be critical in imparting understanding to address some of the key challenges and matters faced by local governments in implementing PPP projects.

Capacity building of technical staff, information sharing, and support on regulatory aspects are key hurdles in accepting PPP context both by the public and private sectors.

For example, local government’s official understanding on financial statements, expectations, calculations and projections relative to their imagined PPP projects is significant.

Since officials will get a clearer image of the true financial scope of their projects, which would be advantageous to better market their project(s) ideas to private sector partners.

At the same time, to allow them to have more solid information that could come in within reach during negotiations with private partners.

Building the capacity for local public-private partnerships is very timely with the renewed policy direction of the government in the implementation of PPPs in the country to reach out to local implementing agencies.

It is very important to build suggested capacity in all areas for LGA officials, predominantly in financing agreements. The terms and conditions of the debt financing of a project is in the financing agreements and this is the core of project.

Among other issues, officials need to know if moneys are borrowed from a consortium of banks, note purchase agreement or capital markets.

The main financing agreement will be the credit agreement between the project company and the agent for the bank syndicate.

Opinions articulated here has tried to offer a swift analysis of positive important issues related to project agreement in connection with a PPP.

Expounding such issues and respective interests of the public and private sectors that local officials at LGAs need to be aware. In fact, some of the main agreements involved in a PPP infrastructure project comprise of project or concession agreement.

Construction contract, operations and maintenance agreement, shareholders agreement, government support agreement and financing agreements.

Other supplementary agreements can also involves customarily entered into, such as supply-side agreement, a land lease agreement (or land purchase agreement), sponsor support agreements, security agreements, an escrow agreement and warranties and warranty bonds if necessary.

The specific realities and state of affairs of each transaction in any project differ and may require further auxiliary agreements between the relevant parties.

Build the capacity for local level cadres on PPP especially at LGAs is critical for the efficiency and improved knowledge of the government officials.

Both levels accountable for undertaking the burden of protecting the public interest on behalf of the government or electorates “aka wapiga kura”. Thereby expediting the execution of PPPs more contented, generally and with the individual issues, explicitly.

Author: Dr Hilderbrand Shayo

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