With more than P100 billion worth of infrastructure projects targeted for NDP11 (2017/8 – 2023/4) Botswana cannot afford the wastage and failed projects that characterized the last 15 years. Procurement has been a challenge with corruption, cost overruns and failed projects a norm. This has impacted on service delivery and the life of the average Motswana. This has also meant the Government purse has been stretched and therefore other projects deferred also adding to poor delivery of promises. This state of affairs has forced the Government to look at alternative systems of procurement and PPPs are widely touted as a good alternative to traditional procurement.

Public Private Partnerships (PPPs) has been a buzzword in Botswana Government and political circles for the past 15 years but with most of the citizenry having a very limited understanding of the “issue”. This buzzword started gaining popularity after 2000 when Botswana’s Privatization Policy was adopted. It was only in 2009 though that a proper PPP Policy and Implementation Framework was put in place and this gave birth to the PPP Unit in the Ministry of Finance in 2016. (Try to ignore the lengths of times in between each milestone). That said, 2 projects had been executed using a loose PPP model: Office of the Ombusdman and the SADC Head Office in CBD.

So what is a PPP? The following definition is taken from Botswana’s PPP Policy and Implementation Framework:

“A PPP involves a contractual arrangement between a Government institution and a private party whereby the private sector party provides public infrastructure and/or infrastructure related services and where the provision of such infrastructure and/or infrastructure related services is

a) Based on measurable output (and result) specifications;

b) Governed by a payment mechanism that provides payment only on delivery of services at required standards;

c) Accompanied by a transfer of financial and operational risks with consequential financial effects; and

d) Demonstrates value for money to Government.”

In laymen terms it means the government would be seeking private sector partners to deliver on infrastructure projects in order to lean on the private sector’s financial, technical and operational resources. It also means the focus moves away from focus on inputs in procurement but rather outputs of service. A practical example would be a hospital. In our current procurement, we give a construction company designs and specifications of materials for them to build the hospital and hand back at completion. A PPP contract and award would focus not on whether you’ve built a hospital according to what plans, designs the Government stipulated, but rather would focus on whether the services promised are delivered. The request from Government would be focused more on a company delivering a hospital with X number of beds, servicing Y number of patients a day with Z number of days allowed on down times in a year. Government would police the service delivery rather than whether the building was built according to specification.

What would the implications mean for procurement? The main implications relate to the 4Rs: Resources, Risks, Responsibilities and Rewards.

Resources:

In the case of the example above, Government wouldn’t be the one providing resources in designing of a hospital and paying upfront for the delivery. Depending on agreements, Government might not even provide the human resources to run the hospital when completed. Government would give a terms of reference on how and what the hospital would deliver and the private contractor would design its own hospital, find its own construction company, buy its own equipment for the hospital, hire and manage its own workers, find financing for the project and agree with government on a monthly payment for delivery of the service. (It is possible to have a PPP where the agreement removes hiring and management of nurses but rather the service is based on the operation of the building e.g. cleaning, maintenance etc. In this instance Government would provide the nurses and doctors but would expect them to have all resources they need in a timely manner to be able to work). Government therefore wouldn’t need to lay out P300 million or so for building of a project to be given to contractors. Government would simply sign a contract for the service delivery and the winning company would go and find funds to make the project happen using the contract from Government.

Risks:

PPPs main function is to manage risks in procurement. In a traditional set up mentioned above Government bears the risk of bad designs, cost overruns and poor workmanship and/or construction. The losses resulting from bad maintenance and non-delivery of service are borne by Government. In a PPP set up, Government transfers these to the private party. The contracts put in place would pass all of these to the service provider with the provider being penalized for delays or under delivery of service e.g. every month the parties would meet and look at deliverables and penalties would be imposed on whoever has not met their side of the bargain.

(That said, because risks are passed to the private contractor, it follows that they must be remunerated for the risks they take. So on the surface it will look like the costs of the project will increase but this argument normally ignores the cost overruns, delays and maintenance which we incur from bad tendering. Case in point: 15 years ago when procurement of Morupule B Units 1-4 was done, the Chinese company looked like the cheapest. How has that worked out 15 years later? We would have incurred much less cost had we been paying according to electricity generated rather than by whether construction was finished).

Responsibilities:

In traditional procurement the Government is responsible for design, procurement of contractor, raising financing for the project, supervising and then delivery of services. Under PPPs, Government would be responsible for defining the scope and then making sure services are being delivered as agreed and lastly paying for the delivered service. Therefore the other responsibilities would fall to the private player. The private partner would decide how big the hospital needs to be, how to design and arrange the wards, who would build the hospital and where they’ll get the money for it. If the project also includes delivery of service, they would hire and manage the hospital staff as well.

Rewards:

All of the above changes would mean that the private player is taking on more things and hence has to cost these responsibilities and get paid accordingly. Excellent service delivery with managed costs would therefore allow the private company to be profitable off delivering to the citizenry.

So what are the key benefits of this PPP approach to government and to us the people in Botswana?

– Better service delivery as a result of more efficient and professional delivery. The average Motswana would therefore receive service equal to that of private hospitals at a government one. (hopefully. Assuming the contracts and scopes are written well and executed)

– Reduced responsibilities on government.

– Implementation of more projects i.e. Government would commit to smaller payments over a longer period rather than having to make big cash outlays at once

– Increased stimulation of the private sector. This would mean we would develop expertise in delivery of services such as health care, education, tourism etc.

– Stimulation of specialist services such as transaction advisory and contracts management.

– Stimulation of capital markets. With private players requiring funding, they would tap into abundant financial resources available in the country. With increased projects, this would allow more responsible potential to “bring back our pension resources” to the country.

Of course though this sounds very rosy, it is highly complicated. PPPs are only as good as how bankable (profitable) they are and how well the scopes are defined, contracts written and enforced. If the initial scopes were poor and unmanageable then execution will be poor. A quick google search will demonstrate the many failed attempts at PPPs in various countries because of the poor work done at feasibility studies, scoping and contract negotiation and execution.

So what next for Botswana in the PPP Journey?

As at early 2019, the PPP Unit had increased pace and capacitation of ministries to understand the scope and landscape of this procurement method. Currently 16 projects across ministries have been identified to be done as PPPs. These include 4,000 teachers housing, the Glen Valley Waste Water treatment plant, the new Francistown District Hospital, Prisons Headquarters and Sepopa Prison as well as the Gaborone Tourism precinct among others. So after years of stagnation, the policy is now in full swing.

This means as Batswana we must prepare ourselves for the resultant needs i.e. the necessary skills, the development of specific industries and possibly the resultant change in dynamics of the job market.

NB: Visit the Ministry of Finance and Development Planning for an excellent thorough information source on the PPP in Botswana, its implications, processes to be followed, structure and full list of projects being considered.