PPPs good or bad for public enterprises

PPPs good or bad for public enterprises


The emphasis on the public private partnerships (PPP), as reflected in the just tabled budget, is likely to have many public enterprises boards and executives on the edge of their seats, unsure of the implication on the future of the institutions they lead.

For savvy entrepreneurs – and some would argue to also include the shrewd briefcase businessmen – rolling out public private partnership would be a godsend opportunity to make bucket loads of money.

Public enterprises that for long have looked forward to a budget that line their coffers are now being told to go the commercial routes, as all commercial entities do. Even the public enterprises within infrastructure development have found themselves to be no longer the favourite children whose arrival at Fiscus Building along Robert Mugabe Avenue was always rewarded with a fulfilled wish list.

Finance minister Calle Schlettwein argues that public private partnership (PPP) is the best way to finance infrastructure in the country, and thus reducing public enterprises’ overreliance on public funds for their operations.
The PPP legislation, that guides financing public private financing, has already passed through the National Assembly and, Schlettwein told lawmakers, would prove to be “a means of infrastructure development and service delivery, without over-reliance on the national budget.”

In his defence, Schlettwein did also made it clear that along with the implementation of PPPs there shall be the reforms that would push for improved efficiency among public enterprises, so that at the end of the day they are delivering on their core mandates.

“Public enterprises must concentrate on meeting their core deliverable expectations. These reforms provide a framework on how best Namibia can leverage its state assets to optimise development outcomes,” he said.
And there in lays the source of uncertainty for some of the public enterprises. For as late as last year public enterprises, especially those mandated with infrastructure development, have been expressing uneasiness with the finance minister’s push for PPPs.

They fear that reforms to bring about efficiencies, and wane them off relying on public finances to fund their operations, is nothing but a legal way to effectively replace such enterprises with private entities. Entities who would then carry on the mandates previously entrusted with phased public enterprises, at a higher cost to the Namibian consumers in the name of profit. Some board members also spoke of how certain individuals are set to smile all the way to the bank once the PPPs legislation is implemented.

Much of the concerns were directed at the Roads Construction Company and TransNamib, the caretaker of the national rail network. The two public enterprises have both submitted their business plan and are said to be first inline for reforms.

Some executives also expressed concerns that PPP’s would also divert a portion of money from the Treasury, as such PPP’s are likely to benefit from a number of favourable concessions, in the guise of allowing the private investors to recoup their costs and realise returns on their investment, before paying any dividends to the State.

Schlettwein and public enterprise minister Leone Jooste did not respond to New Era Weekend’ invitation to address the concerns, despite the questions having been delivered to the two ministers a month ago, and acknowledgement of receipt received.

Nevertheless, in tabling the N$62,5 billion budget for this financial year, Schlettwein also announced that the total spending is projected to remain relatively flat for the next three years. The indicative budget allocation for 2018/19 financial year is set at N$61.86 billion while the budget for 2019/20 is estimated at N$62.72 billion.
N$9,09 billion is allocated to the economic and infrastructure development part of the budget. Over the next three years the allocation is approximately N$28,01 billion.

“The allocation to the economic and infrastructure cluster is further supported by targeted allocations to public enterprises in the economic sectors for targeted infrastructure and development finance projects,” said the finance minister.

The key projects are the rehabilitation of the national railway, the on-going expansion of the port of Walvis Bay, several national roads, water and storage infrastructure, the Mass Land Serving Programme and increased funding to the public financial institutions for private sector support and SME development.

However, a larger chunk of the national budget would for the next three years go towards financing the country’s most pressing social needs such as health, education and social welfare for the country’s vulnerable citizens as well as servicing the mounting national debts.

A quick scan of the medium term expenditure framework (MTEF) documents show just how serious Schlettwein is when he says money for some of these activities would from now on come through direct investments and the PPP regime.

Treasury is no longer committing huge amount of money, and even the development budget only has 33 new development projects. Perhaps to not upset the cart, Treasury has undertaken to finance what project that have been in the books and those that went ahead last year without approval, such as the dual carriage road between Windhoek and Hosea Kutako which received its budget allocation of about N$140 million for the year.

Also, there are a number of co-financiers for projects, with money coming from the German development bank, KfW, and other European development financing institutions. In fact a number of infrastructures are to be co-funded by development agencies.

“As fiscal policy becomes less expansionary, timely implementation of structural policy reforms and the harnessing of alternative means of financing are necessary to mitigate financing gaps and to support capital formation and medium-term economic growth,” Schlettwein said in his budget speech.

He also announced that government, in collaboration with the private sector, has established an infrastructure development and liquidity generation work streams which have identified bankable infrastructure development proposals and streamlining private sector capital and PPP arrangements in the priority areas for road, rail, water, energy and ICT infrastructure.

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