Public-Private Partnerships:
Buzzword or Business Sense?
If we took a random sampling of 100 individuals anywhere in Zambia (possibly on the continent) and gave them a word association test to say the first thing that comes to mind when they hear the term PPP, chances are that more than 80% of the sample would respond with an emphatic “Roads!”
Over the years, PPP (short for Public-Private Partnerships) has somehow become synonymous with road construction. It would appear, though, that this has done a severe disservice to this remarkable model, which is why we would like to venture into the very engine room of PPPs to unravel their inner workings.
What Are Public-Private Partnerships?
Distilled to its simplest terms, a PPP is defined as a contractual arrangement between a public authority and a private entity to deliver a public infrastructure project or service. Typically, a significant portion of the financial risk associated with the project is absorbed by the private partner, along with technical, research, and operational risks. The public partner retains project oversight and safeguards overall public interest.
The defining features of PPPs revolve around the aspect of shared risk. The private partner handles financial, construction, and operational risks, while the public partner deals with regulatory and political risks.
Secondly, PPPs are often long-term agreements, generally ranging between 20 and 30 years. During this period, the private partner designs, builds, finances, operates, and maintains the asset. To safeguard the quality of the asset, payments to the private partner are often linked to specific performance standards, which the private partner must strictly adhere to. The relief on the public sector’s fiscal burden typically comes in the form of the private partner shouldering a significant portion of the project’s financing through private funding.
There are numerous PPP operating models, with no two models being exactly the same. The levels of partner involvement and the amount of risk they shoulder vary depending on the unique requirements of each project.
Types of Public-Private Partnerships
1. Build-Operate-Transfer (BOT)
The private partner builds and operates the asset for a stipulated period and then transfers ownership to the public sector. An example of this is the Lusaka-Ndola Dual Carriageway (LNDC) Project.
2. Design-Build-Finance-Operate (DBFO)
In this model, the private partner is responsible for the project’s life cycle, from design to operation. The Kenneth Kaunda International Airport in Lusaka fits this model perfectly.
3. Concession Agreement (CA)
This model deals with concessions, where the private partner handles the operations of a public asset (such as a tolled road) and collects user fees for a defined period. This is the case in the Zambia Railways network concession, where a private partner manages and operates the network to improve service delivery and infrastructure.
Are Public-Private Partnerships a New Development?
Modern times certainly require modern solutions such as PPPs. Interestingly enough, PPPs are not new. While the current iterations of PPPs possess contemporary nuances, they (in some shape or form) have existed since Roman times.
It is well recorded that the Roman Empire often had private contractors build roads, aqueducts, and public buildings. Nobles and high-ranking officials, too, would fund public works in acts of magnanimity. A famous example is Erastus of Corinth (modern-day south-central Greece), who funded a paved area northeast of the Theatre of Corinth at his own expense. An inscription dating back to the middle of the first century confirming this was discovered in the late 1920s and 1947.
These informal predecessors to modern PPPs continued through medieval Europe, where private entities operated toll roads and bridges under royal charters. This practice continued well into the 19th century when the construction of railroads and canals in Europe and the United States often involved private companies working under government concessions.
More recent references to PPPs are seen with the increased demand for modern infrastructure in the Global North. Examples include the construction of the Hoover Dam in the United States in the 1930s, which was a collaborative effort between the federal government and private contractors. Across Europe, private companies were involved in urban infrastructure projects, such as water supply and electricity networks. Like the PPPs we see today, these projects were often ad hoc and lacked the structured risk-sharing mechanisms of modern PPPs.
Public-private partnerships expanded into various sectors in the 21st century, particularly in emerging economies like India, Brazil, and China, using innovative models to address infrastructure gaps. In the 2010s, PPPs evolved with a stronger emphasis on sustainability, cost efficiency, transparency, and social considerations. By the 2020s, they played a crucial role in responding to global challenges, including the COVID-19 pandemic, supporting vaccine development and healthcare infrastructure.
Additionally, PPPs have been leveraged to finance renewable energy projects and climate-resilient infrastructure, with advancements in technology, such as blockchain and AI, enhancing transparency and efficiency in their implementation.
A Win-Win for Zambia
With PPP models fully embraced and being implemented across numerous sectors in Zambia, we stand at the cusp of a great opportunity to better the lives of Zambian communities through collaboration.
Easy wins can be had — a mothers’ shelter adjacent to a hospital children’s ward, an expansion of a narrow road in a busy neighbourhood, the construction of a sturdy bridge on a seasonally flooded stream or river, or even a green space in the community for children to play safely. The options are limited only by our own imagination.
If the joint desire to make the country better continues to thrive, the public and private sectors hold the keys to making Zambia truly amazing. With governments increasingly turning to private players for financing options to offset fiscal limitations and budgetary constraints, we can safely say PPPs are here to stay.
The model has become globally accepted, and when executed correctly, PPPs can address numerous social challenges through a bona fide, adaptable, and replicable win-win approach. From the Kenneth Kaunda International Airport to community-based initiatives like the Kalingalinga Water Project, Zambia already has successful examples that signal the beginning of greater achievements ahead.
