Business News of 2014-02-18

PPP projects gather steam

The Ministry of Finance has started preparing 10 capital-intensive and strategic public infrastructure projects to attract the private sector for their speedy execution.
The projects, which include the dualisation of the Accra-Takoradi highway; the Accra-Tema Motorway overlay; the Asutsuare Water Project and a health diagnostic centre at the Korle Bu Teaching Hospital (KBTH), are at various stages of preparation, the farthest being the completion of a full feasibility study on one of the projects.
The rest are the Takoradi Port Expansion Project; US$250 million Boankra Inland Port and Eastern Railway project; Urology Centre of Excellence at KBTH; which have been on the drawing board for more than two decades; Pedestrian Foot Bridges; establishment of a national airline and a national sports college, and the upgrading of Martey Tsuru, a sprawling residential area in the Ledzokuku Krowor Municipal Assembly (LEKMA).
The Director of the Public Investment Division (PID) of the Ministry of Finance, Mrs Magdalene Appenteng, who made this known at a workshop in Accra on February 11 to sensitise the media, explained that all the projects were at the preparatory stages, with the efforts geared towards selecting transaction advisors.
PPPs against traditional procurement
The projects have been selected under the Public Private Partnership (PPP) policy being spearheaded by the Public Investment Division (PID) of the Ministry of Finance.
The regime is a strategy to partner the private sector to attract much needed capital, benefit from the efficiency of the private sector and speed up projects as there would be committed funds to projects underway.
“We are doing the PPPs because of the constraints in delivering public infrastructure, rehabilitating or maintaining them; we are looking to the private sector to seek their assistance in providing these services,” Mrs Appenteng explained.
Why PPPs are not privatisation
PPPs, being a contractual agreement between a public entity and a private sector party/parties for the provision of clearly defined infrastructure and services traditionally provided by the public sector, sharply contrasts with privatisation where the ownership of a public service or facility is transferred to a private entity in full or substantially to be managed in accordance with market forces.
It is important to note that in PPPs, the contracting authority establishes the specifications of the project (the objectives and purpose) and leaves the private sector to provide the best form of solution.
Usually, the private entity finances all or a substantial portion of the project and is, therefore, allowed to recoup the investment with returns satisfactory to both parties. While the public sector still retains ownership, the private entity may be asked to manage the facility or service on behalf of the public, due to efficiency.
Some achievements
The Public Private Partnerships are sector-based, and projects are therefore chosen and led through by sector ministries with technical assistance from the Ministry of Finance.
Mrs Appenteng said the PID had so far helped to set up PPP approval and implementation committees in the sector ministries and their capacities built to enable them to understand and grapple with the technical requirements of the process, such as risk assessment, pricing, project evaluation and costing.
In addition, the PID has drafted a PPP law which is with the Attorney General’s Department. The draft is expected to be passed into law by the middle of the year.
The PID has consequently organised courses in financial modelling and cost benefit analysis and organised study tours for the health and the water sectors to apprise them of examples elsewhere.
Besides two workshops for the media, the Public Investment Division of the Ministry of Finance has also trained a team of 44 lawyers from both the private and public sectors on PPP projects.
PPP Champion
Mr Paul Victor Obeng, who has enormous experience in the public and the private sectors, is the PPP champion. He told the journalists that the policy had made provision to also attract the indigenous and local private sector in the process to promote shared growth and development in the economy.
Mr Obeng explained that investments would also be attracted within the capacity of the country’s budget in order not to overheat the economy.
The International Finance Corporation (IFC) of the World Bank estimates that Ghana needs about US$1.5 billion annual investments for the next decade to bridge the infrastructure gap.
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