‘PPPs are not a silver bullet’

Public Private Partnerships (PPPs) are not the only solution to Africa’s financing problems, says Johan Greyling of KPMG. Speaking at the annual Railways and Harbours conference and exhibition in Johannesburg last week, Greyling said there had been a definite over-reliance on PPPs in Africa to fund much-needed infrastructure. “PPPs are not a silver bullet that solves the problem with government sitting back and saying we need a new road or rail line and then forming a partnership with a private company which out of goodwill then builds it and maintains it and funds it. It does not work that way.” Greyling said while PPPs remained a good way to get funding for infrastructure projects, ultimately there were only two ways of funding a country’s infrastructure. “Either a government pays for it or the user of that infrastructure must pay for it. With PPPs we must understand the benefit lies in that the government does not have to fork out a big amount of cash ahead of a project, but rather the private company will foot the bill until completion of the project when the payment to the private sector commences as the users then start to pay for the service.” He said in this regard it was therefore important that governments considered what they – or the residents of a country – could afford ahead of commissioning a project. “Can your road users afford the toll fee once the upgrade on the freeway is completed is a very important question to be asking ahead of loaning a large sum of money from a private organisation,” he said by way of example. “There are no real quick fixes when it comes to funding. PPPs are a good option, but they are only part of the solution.” He said securing funding for maintenance, upgrading and building of new infrastructure in Africa was extremely important, but an over-reliance on the private sector could backfire on governments. “The good news is that governments and private organisations don’t see the world very differently from each other, but there must be a return on investment for a private organisation to become involved.” With the largest impediment to infrastructure investment in Africa being the lack of stable, adequate, long-term financial resources, it is important for the continent to find solutions that will address the issues. “Sub Saharan Africa spends about $45 billion per year on infrastructure, but the required spend needed is in the region of $93 billion,” he said. “If you want to see GDP growth, you must spend on infrastructure every year. It is estimated that if a country like Zimbabwe for example wanted to see 4% growth, it would need to spend 25% of its GDP on infrastructure.”