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Are Private Public Partnerships Working in Zimbabwe?

Since 1980 Zimbabwe has not made any significant investments in infrastructure and the inherited infrastructure from the colonial state has been steadily deteriorating owing to lack of funding to carry out maintenance work.

This has been compounded by the fact that Zimbabwe is unable to access credit lines from the Bretton Woods institutions since 1998. Service delivery has deteriorated as a growing population demands more service from the failing and inadequate infrastructure.Power shortages (1000 MW deficit) and water supply interruptions coupled with a dysfunctional railway system means the costs of doing business in the country are relatively high placing Zimbabwe at number 129 out of 139 in terms of GCI rankings.Currently spending its revenue on a bloated civil service, the Zimbabwean government has no surplus to spend on huge capital infrastructure projects. A weak pensions market owing to high rate of company closures means the local market cannot sufficiently mobilise funding for long term infrastructure development projects.With unemployment reportedly at 84 %, the government requires massive public works to create employment for its citizens. These public works in infrastructure require massive capital investment.

The government has to look to the private sector and explore new ways of investing in infrastructure to at least ease the pressure on the demand for services by citizens and solve some of these problems.These budgetary constraints and macroeconomic conditions suggest the Zimbabweans government needs to look at new ways of working to fund infrastructure development.

Public Private Partnerships (PPPs) refer to ‘arrangements between the public and the private sectors where some of the services that fall under the responsibility of the public sector are provided by the private sector, with clear share objectives on delivery of infrastructure and service delivery.’Private investors provide capital for infrastructure projects or service delivery and run the project for an agreed period before they hand it over to the government after recouping their outlay and making a profit.

PPPs are viewed as responsive mechanism to market failures while minimising public sector short-comings as a service provider.In the last 10 years there has been a rapid increase of PPPs in developing countries and have contributed 15 to 20 percent of infrastructure development in these countries.They provide fiscal benefits easing the budgetary pressure on governments to provide service, develop local financial markets, increase private development and efficiency gains through more cost effective service delivery

The private sector can provide at least 20-40 % of the infrastructure requirements of a country and contribute towards economic development and efficient service delivery. Historically, Zimbabwe has a high failure rate of infrastructure development with some projects conceived as early as 1912 yet to be completed. The NMZWP water pipeline meant to supply water to Bulawayo started in 1912 by the settler government is yet to be completed after successive governments have failed to adequately fund it.

The government revealed last year that it needed $4, 3 billion to boost the generation of electricity, $2, 2 billion for water storage and transportation, $1 billion for the rehabilitation of sanitation facilities and $4, 2 billion for the rehabilitation of road, rail and aviation infrastructure.There is inadequate spending on maintenance with the government currently spending a paltry $24 million on transport infrastructure versus the required $144 million.

The Batoka Gorge power project which has been proposed as the panacea for the country’s power challenges is yet to begin as the $6 billion required to complete the project is yet to materialise despite reports of contracts and memorandum of understanding having been signed with Chinese funders.PPPs are not a new concept in Zimbabwe after the government embarked on some during the 1990s when the government adopted economic liberalisation policies. The Economic Structural Adjustment Programme (ESAP) which advocated for more private participation in the economy was a step towards this.

Instead of growing as intended, economic growth regressed to an average of 1, 2% .Driven mainly by the World Bank and IMF, the economic policies lacked local contextualisation. Without sufficient legislative reforms and operational policy framework to support the new policies not much success was recorded as the economy took a turn for the worst.

In 1993, a private company teamed up with the Zimbabwean and South African government to build the Limpopo Bridge. This was meant to increase regional trade by improving the efficiency of the flow of goods between the two borders. The Bridge has since been handed over to the government by the private investor.Another similar project, the SADC initiated Bulawayo-Beitbridge railway project completed in 1999 has become a white elephant.  The closure of manufacturing industries in Bulawayo means the feasibility and risk assessments were not thoroughly done as the economic benefits of this project have been limited.

Other countries have implemented PPPs and significant success has been recorded. Between 2004 and 2011, 134 developing countries implemented PPPs and out of the 60 PPPs implemented in 35 countries there has been significant success.In Africa, South Africa has led the way in the implementation of PPPs, implementing 50 PPPs and 300 projects since 1994. There has been implementation in the transport, sanitation, power, eco-tourism and telecommunication sectors.For example the Mozambican and South African governments embarked on the Maputo Development Corridor (MDC) that implemented projects such as the N4 toll road, Maputo Port and the Ressano Garcia railway line.

The most recent PPP is the Gautrain project, a partnership between the Gauteng provincial Government and the Concessionaire, Bombela that has build a modern metropolitan railway system that has reduced the dependence on personal vehicles and created employment.Other successful PPPs in South Africa include prison contracts and the Eco-tourism concession in the Kruger National park in South Africa.

There have been success stories in Brazil since implementing a project to expand, rehabilitate, operate and maintain 667km of a road network in the state of Bahia.Water PPPs in developing countries have accounted for progress in service delivery with an average of 50 projects and an investment of $2 billion to $3 billion a year being embarked on. 535 water projects benefitting from private participation have reached financial closure in the last decade.These infrastructure improvements in countries such as China which account for 58 % of all private water projects by number and 23 % by investment have coincided with economic development in those countries.It is ironic that most of the countries that now make up the BRICS, an economic bloc of emerging major markets have managed to implement successful PPPs. These include China, India and Brazil.In addition to clear enabling PPPs legislation, sound feasibilities and competent risk assessments these countries have implemented strong governance structures that include a constitution that guarantees property rights and stable political environments.

It is on these issues that Zimbabwe falls short. Zimbabwe has no legislative framework to govern the implementation of PPPs but work is at an advanced level to present a draft in parliament. This new policy will set up a PPPs unit in the Ministry of Finance that will handle related issues. But in the absence of this specific legislation, Zimbabwe remains guided by current legislation on how PPPs could be implemented. For example legislation such as the Electricity Act, Aviation Act and many others have provisions on how the private sector may participate in the provision of public services although there is no clarity.

Most recently Group 5 has partnered government in the rehabilitation of the Mutare –Plumtree Highway but other good candidates for public private partnerships such as the Kunzvi Dam and Harare- Beitbridge Highway are yet to find takers.A contentious issue in Zimbabwe is the tendency by government not to respect property rights and ambiguous economic empowerment laws such as the Indigenisation Act that act as deterrents for private capital.

However, PPPs have not been successful or produced economic benefits wherever they have been implemented. It is reported that about 80% of PPP implementations in Africa fail due to capacity issues, corruption and inadequate feasibility studies. In Nigeria, a number of projects have been abandoned before completion after it was realised that they would not be feasible or their cost to the public would be unsustainable.

The Nigerian government cancelled the agreement with Bi-Courtenay for the upgrade and expansion of the Lagos- Ibadan highway. This was done under suspicious and unclear circumstances linked to government corruption. Whether Zimbabwe decides to implement PPPs or not, the massive public spending on infrastructure is likely to create employment for many Zimbabweans. Rampant corruption fuelled by excessive demand for scarce public services may also be eradicated.

Private investment especially in power generation, transport and water works is also likely to improve Zimbabwe’s prospects as an investment destination given that many investors have shunned the country because of increased costs of doing business imposed by use of generators for electricity and disruptions in water supply.

By Malvern Mkudu


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