Africa’s economy is a giant machine with moving parts ranking in the trillions, its activities serve and is serviced by over 1.2 billion people. With a population so large, Africa’s existing infrastructure assets are creaking from stress. To serve such a population, you need more hospitals, roads, schools, bridges, railways and other forms of vital infrastructure. Although several governments are picking up the challenge of providing more infrastructure for their citizenry and to strengthen existing ones, the sheer rate of population growth outpaces these efforts by far.
In its 2020 report, the African Development Bank (AfDB) posits that Africa needs between $130 and $170 billion annually to meet its infrastructure needs for the next 30 years. Over half of that amount will likely come from private sector funding. I’ll be stating the obvious when I say that fund shortages have been the major bottleneck of infrastructure development in Africa. Most states continue to record huge deficits in their infrastructure budgets. No thanks to Covid-19, that struggle has intensified.
Pre-Covid, it was impracticable for governments to single handedly fund public infrastructure projects. How much more now? We have always explored Public-Private Partnerships (PPPs) for this purpose. But with a once-in-a-century pandemic before us, traditional methods are failing. We must get creative in the way we engage the private sector.
No doubt, the private sector will play a major role in financing Africa’s industrialisation. But if this will happen, our PPPs must evolve. We need to get creative. Fast!
Unsolicited Proposals
We need not go far. All we need to do is consider what we’ve either neglected or under utilised; Unsolicited PPPs (UPPPs) or Unsolicited Proposals (USPs). One way to do this is for African States to incentivise the wider application of UPPPs through friendly policies.
But what are USPs?
An unsolicited proposal refers to any proposal submitted to a government—or its ministry, agency or department—by the private sector, which was not requested by the government. In this case, the private sector assumes responsibility for project preparation costs such as pre-feasibility and feasibility studies, design specifications and other such related assessments.
More so, USPs allow private sector players to propose new, innovative ways to deliver projects in the public’s interest. Unlike projects originating with the government that already have defined scopes, USPs offers the private sector an extensive option to create new projects using their own innovative solutions. Unlike competitive bidding, where the private sector cannot solicit public support for its proposal; private teams submitting USPs can contact key stakeholders to rally support for their proposed projects. The primary principle here is that all USPs are channeled through a transparent, competitive process where challengers have a fair chance of winning.
Most UPPPs adopt the Swiss Challenge System which recognises the investments made by the Project Proponent in preparing the proposal to the requisite Outline Business Case standard. Therefore, the original proponent reserves the right to counter-match the best offer and clinch the contract. When done right, UPPPs offer a huge potential for success. To say that this model does not exist in our policy documents would be a blatant denial of fact. However, most of them are handpicked from developed countries and simply replicated in Africa, with no adaptations. This is not a bad idea except that Africa is a cocktail of socio-cultural, political and economic factors that would torpedo any infrastructure delivery model that isn’t adapted for context.
This is why, beyond adopting UPPPs, we must adhere to the rules that regulate them. We must re-evaluate and update our legal and regulatory frameworks for managing USPs. This is just one of several obstacles on our way to leveraging the power of USPs. I’ll discuss two and their corresponding solutions.
- Implement USP regulations and harmonise regulatory framework at sub-national levels
In terms of regulatory frameworks, A 2019 study by George Nwangwu turned the spotlight on the Accra-Kumasi Highway project which was Ghana’s first PPP. It says that the project was designed to “link two major commercial centres in Ghana when completed. The project includes the construction of 141km of dual carriageway, which would also provide access to northern Ghana as well as an international transit route for Ghana’s landlocked neighbours – Burkina Faso and Niger.
“The goal is to slash travel times between Accra and Kumasi from 5.5 hours to 2.5 hours. In 2011, the estimated construction cost was $400m, which would span four years and for a concession period of 30 years. However, it was disclosed that the preferred bidder was rejected after failing the World Bank due diligence. An unsolicited bid was submitted by Arterial Toll Roads Company Limited, a joint venture between US, Canadian and Egyptian companies, and was awarded the concession for 30 years in 2005. “Construction was supposed to last for four years. However, the project stalled for several years largely due to political and institutional failures. The major failing of the project was that it was procured in the absence of any PPP policy or guidance and, therefore, lacked any form of transparency or even process. The public sector officials neither had any capacity nor were they given any direction on how to proceed with the USP and these factors contributed to the unending delays bedeviling the project.”
This shortcoming, the study says, still affects the project till date. Asides from the non-binding tool kit mentioned earlier, Ghana is yet to pass the relevant laws that would regulate USPs. More so, no evaluation mechanism was in place to ensure that the project provides value for money.
Over a decade later, the Accra-Kumasi Highway project scenario has replayed itself in several African countries such as Nigeria, Tanzania, South Africa, etc. This is partly because there are no clear rules that regulate the handling of UPPPs. Even where they exist, they are either relegated to the shelves of history or too disjointed and erratic for stakeholders, including investors and project delivery teams to commit to it long-term. More so, some regulations only apply to certain sectors such as energy or transportation.
To address this, African governments must actively promote more harmonised regulations into state and local legislation, as well as industries. Governments can work with respective industries to design archetypal UPPP legislation in domains that have no existing laws yet or amend laws under which UPPPs have been difficult to execute.
- Subsidise entry cost of USPs
In most climes where UPPPs are used, bidders often pay a large fee alongside their submission. The fee, experts say, is meant to compensate the government agency for its time and effort in reviewing the USP.
Industry insiders agree that this fee, which is also part of the costs of developing the proposal, has been a major obstacle and, sometimes, a deterrent for private sector players. African governments can come in here to subsidise these costs through specified grants.
In conclusion, as Africa gradually recovers from the pandemic, it will require heavy investments in its infrastructure assets. Whether we realise it or not, private capital sector will be a vital part of this recovery process. Therefore, the private sector must be adequately incentivised and protected when recommending new infrastructure projects to produce novel ideas to attract investors. Private capital will not do it all. But when enabled through friendly legislation, UPPPs could accelerate Africa’s vision to procure the infrastructure assets it urgently needs.
