‘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.”