Foreign capital can develop local infrastructure

14 November 2017 | Business

AUGETTO GRAIG - “There is an international appetite for investment in infrastructure but it is important that projects are bankable.” This was the message delivered last week at the third annual public-private partnership conference by the former mayor of London, Sir Michael Bear. The conference was hosted by the ministry of finance, PwC Namibia and Standard Bank Namibia.

Bear presented lessons learned from the United Kingdom’s infrastructure financing and public-private partnership (PPP) experiences over the last 20 years.

In that period the British government has partnered with the private sector to sign agreements for 722 projects worth £57.7 billion (N$10.9 trillion), he said. Of these 679 are already operational.

According to Bear the UK has become a leader in modernising the way in which public infrastructure and services are delivered and in finding new ways for the government to work with the private sector.

“Successful public-private partnerships enable the public sector to access the discipline, skills and expertise of the private sector in delivery of infrastructure and public services,” he said.

Preferred models for the achievement of these goals have shifted from privatisation to joint risk sharing and the development of private finance initiatives.

‘Significant’

Since 1990 when Britain instituted only a couple of these projects each financial year, the appetite for such partnerships shot up in 1995 and peaked in 2003 with close to 70 partnership agreements implemented, and in 2008 when the total value of ongoing agreements surpassed £8 billion for the year.

Recently there has been a significant decline in both the number and value of such projects.

However, according to Bear, the role of the British Infrastructure and Projects Authority (IPA) is still very significant in providing infrastructure in the UK.

The authority reports directly to the British cabinet office and treasury and is similar to the PPP Unit which has been created in Namibia’s finance ministry.

“The IPA is the government’s centre of expertise for infrastructure and major projects. We support the successful delivery of all types of infrastructure and major projects, ranging from railways, schools, hospitals and housing, to defence, IT and major transformation programmes.

“Our purpose is to continuously improve the way infrastructure and major projects are delivered, in order to support government priorities and improve people’s lives.

“We aspire to create the best-performing project system of any country in the world,” said Bear.

Priorities

He elaborated that the priorities followed by the IPA in implementing projects start with the set-up.

“Success or failure of a project is often determined by how it is set up. We help set up projects for success by influencing the policy environment, deploying our expertise as early possible, developing tools and standards to ensure realistic project objectives are established at the outset and helping projects access the resources they need,” he said.

The next step is creating confidence in the project.

“We need a confident private sector to help deliver and invest in infrastructure and major projects. We create confidence by providing foresight and transparency on the future pipeline of projects, establishing financial policies and products to support private investment and ensuring government priorities are consistent and clear so the market can plan.”

Ensuring great project leadership is essential.

“Great project leaders deliver great projects. We develop project leadership in government and build delivery capability by providing world-class leadership programmes, developing career pathways, leading the project delivery and project finance professions and developing government to act as an exemplary client,” Bear said.

Finally, the need to measure and continually improve on performance is paramount.

“We do all we can to help infrastructure and major projects deliver their intended benefits for society and provide value for money for the taxpayer.

“We seek to measure the performance of projects over time, to understand what is necessary to improve performance of the system and adjust the system accordingly,” said the former mayor of London.

Lessons

In terms of lessons learned over the years, Bear highlighted the need for proper sharing of risk versus reward in terms of equity and finance.

Competitive terms are a must while appropriate risk allocation helps optimise value for money.

Accelerating delivery to be faster and cheaper is important while flexible service provision can be achieved through efficiency and an open-book policy.

“Greater transparency improves the flow of information and finances,” Bear said.

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