Public Private Partnership

Motorists use a road near the Reading Interchange in the south of Johannesburg on Thursday, 15 November 2012. Last month, the government and Sanral announced new tariffs for the proposed e-tolling of the highways in Gauteng. Public consultations on e-tolling are now taking place followed by a final decision on the tariffs. Most people attending the public meetings are angry over the implementation of e-tolling. Picture: Werner Beukes/SAPA

Is Public Private Parnership the solution to our Socio Economic Development?

Public Private Partnerships or PPPs refer to a long-term partnership between government and the private sector, whereby the latter supplies skills and also carries the risk in ensuring the delivery of well-maintained cost-effective services or public infrastructure.

This relationship is a departure from government’s traditional role of bearing the capital and operational costs, as well as alone shouldering the responsibility for cost overruns and not delivering projects on schedule.

Inkosi Albert Luthuli hospital

Also, in this traditional governmental role, while the expertise of the private sector may be used and paid for, the association ends on completion of the project.

However, PPPs have changed the landscape, so that government pays the private sector, which takes the financial risks, for a full set of services, such as infrastructure and other facilities. Government repays the private sector over the term of the PPP sector agreement. It is assumed, and practice has borne this out, that because of the financial risk that it carries, the private sector is motivated to deliver high, quality services, though not always inexpensively.

In South Africa, PPPs have taken a pivotal role in government’s commitment to bring quality infrastructure and related services on par with its commitment to improve the lives of citizens.

PPPs were established after the national Cabinet mandated the Finance Minister to look at the nuts and bolts needed to start them. At national and provincial levels, the Public Management Act (1999), known as PMA, and Treasury Regulation 16, governed under Municipal Finance Management Act (2003) (MFMA) and the Municipal Systems Act (2003) (MSA) form the main legislation governing PPPs. These laws reflect and support the government’s policy objectives in delivering infrastructure and public services, in line with its constitutional mandate.

The PFMA and MFMA fare focused on the procurement of services that bring value-for-money deliverables. Treasury Regulation16, defines two types of PPPs: namely where the private party performs an institutional function and where the private party acquires the use of state property for its own commercial purposes.

PPPs are present in many sectors of the South African economy, be it in health, transport, head office accommodation, education, tourism, tolls roads, fleet management and IT.

Examples are: municipal caravan parks; Durban Point Development; solida waste removal; sanitation; water provision; prisons such as in Mangaung; the national HIV/AIDS prevention campaign Lovelife; Cape Town Partnership and toll roads.

Other examples are Inkosi Albert Luthuli Hospital, where the private partner is responsible for the provision and regular upgrading of state-of-the art medical equipment, facility management and an IT system; IT for the Department of Labour; SanPark concessions for tourism that have led to the establishing of new SMMEs, which in turn created significant and sustainable job opportunities in the tourism sector Gautrain Rapid Rail Link, which is the largest infrastructure project in Africa delivered through a PPP.

Are PPPs the way to go? Some concerns have been raised. One is that the legislation is cumbersome and complex, thus resulting in a culture of bending the rules and a temptation to use corrupt means to get around these rules, according to a researcher.

Another concern flagged is that the legislation and policies do not protect the legitimate interests of all stakeholders in fostering partnerships. In this respect there is little provision for input from citizens and other stakeholders from inception to procurement, this effectively leaves out the very people who are supposed to benefit.

While some may argue that because the community does not speak with a united voice, and often may passively receive services, thus slowing down the PPP process, there is no excuse for bypassing the community.

A significant criticism against the successful Gautrain project is that consultations were inadequate.

Insufficient transparency and transparency in procurement have also been a problem. Treasury Regulation No. 16 states that the procurement procedure must be in accordance with a system that is fair, equitable, transparent, competitive and cost-effective. However it does not specify exactly the criteria or expectation for achieving transparency and fairness.

Corruption has also cast a shadow over PPPs. Although, the PPP Manual (2004a) and Treasury Regulation 16 make provision for accounting officers to sign off an anti-corruption policy for PPP projects, and call for forensic audits if fraud or corruption are suspected, the PPPs still offer considerable room for manipulation by companies and government officials, which is difficult for the public and anti-corruption agencies to spot. The Minister of Finance felt so serious about this that in 2009 he publicly expressed concern about the number of government tenders that had become tainted by corruption. He also lamented the pervasive influence of the culture of gifts, wining and dining, and all manner of enticement.

Fronting, the practice of appointing token directors and shareholders for Black Economic Empowerment purposes, is also a major headache.

The South African National Road Agency (SANRAL) is a perfect example of how badly wrong PPPs can go. It has tried to keep under wraps its tolling plans for the Western Cape and was forced share some of its secrets after the City of Cape Town took it to court and won. Glaring was the admission that the SANRAL Board had not signed off on the project.

And in Gauteng, the Gauteng Freeway Project, which has been criticised for insufficient public consultations, is becoming unstuck. Motorists are not buying etags, trade union federation COSATU has been a vocal opponent, as has the Opposition for Urban Tolling Alliance. Recently the organization told Parliament, while it was not opposed to the user-pay principle, it believed that the overpriced project, which was tarnished by overpricing, should be stopped. Indeed the civil disobedience shown by motorists who are boycotting etags is a danger sign for government.

What is clear is that just as there is no such thing as a free lunch, PPPs, are not always formed in the interest of the communities they are supposed to benefit. Neither are communities always adequately consulted. Where, as in the case of the tolls roads in Gauteng, business models are used that sees foreign investors raking in profits the party that carries the can just happens to be the consumer. Communities and the rest of civil society must be more vigilant. Government, too, must monitor PPS deals more carefully and insists that citizen’s Constitutional rights are not trampled upon.