PPPs in the Post Covid-19 Era

A Real African Challenge

As an African by birth, I am especially concerned about the impact that Covid-19 is having on the economic development aspects of African nations and their Sustainable Development Goal (SDG) aspirations.

The pandemic and its impacts are very real to me. Many of my friends, professional colleagues and family members who are deeply engaged in “the trenches” seeking solutions for the challenges ahead, are sharing non-stories of how socio-economic life in Africa has been disrupted and how dim prospects seem.

African Call for Action

Over the weekend I received this poignant message for a highly respected African PPP practitioner and advocate who wrote the following –

Hi David: The financial situation for Govt is worrying. It was already bad before Corona and now is worse. Do you have suggestions on how a Govt can survive when it has no money, exhausted the borrowing capacity, no taxes coming in, donors can help meaningfully they are also battling with the same situation in the own countries. What can we do to survive? Do you have a suggestion?

I responded by sending a link to an article that I wrote recently to my friend titled –

The Need for a Covid-19 “Triage” Recovery Strategy for National PPP Initiatives where I recommended that governments will need to consider a triage reproach to rescuing PPPs that can be rescued, and revisiting their PPP project pipelines to determine new national development goals in the post-covid-19 era.

The friend’s response was the following –

Thank you for the article. I really like the suggestions. I think it’s not just the PPP but the whole Govt business three Triage. But the challenges we face is that there is literally zero money to even go to the red PPPs. So we will do the categorization but next is where do we get money to bail out the red PPPs when the customs money, corporate taxes have vanished, borrowing has been maxed up?

Optimism – But No Silver Bullet

I am optimistic that solutions can be found. However the problem will magically go away, nor is there a quick solution silver bullet.  What is important is that governments do not panic and make bad decisions out of desperation.  Now is the time for governments to be pragmatic about their situation, be honest to themselves and stakeholders, and find ways to work closely with the private sector in a new ecosystem of focused decision-makers that are mutually trusting and respectful of all party’s needs, concerns and recommendations.  All parties are hurting and it is not the time to point fingers and blame each other, as we are truly faced with a situation in Africa (and globally) where the sudden onset and magnitude of the pandemic has caught everyone off-guard.  It is true that Africa has made many bad decisions that have exacerbated the current situation (but this is not unique to Africa) and which should not be a crutch for decision paralysis and inertia.

Protecting All Parties

As African governments fight the battle, it is important that they focus on protecting all parties.  If things go wrong and governments try to protect themselves at the expense of their PPP project stakeholders, they will find themselves digging an ever-deeper ditch that will bury their plans for a sustainable and resilient future. Evidence of equitable enabling environments that emerge stronger and which embrace strategic collaborative and cooperative decision making by governments in partnership with development institutions and investors will go a long way.  It is important to remember that investors are not sentimental and will be looking at how governments navigate the current situation.  They will be perception driven. If governments generate bad perceptions and make bad decisions investors will go elsewhere – even to their neighbours who might seem more alluring.

Global Competition for Scare Resources

It is important that African governments address global competition for foreign direct investment (FDI) in a competitive and transparent manner.  Hiding truths will not help, as sophisticated investors will discover hidden secrets and this will only exacerbate funding gap challenges.  It is important that honesty prevails in an environment of an honest partnership seeking where reputable investors/developers are enlisted who can offer pragmatic mitigation solutions to the current situation in the short-term and sustainable, resilient and regenerative strategies in the long-term.

More importantly, it is critical that governments seek investment partners from countries that do not require them to mortgage their futures for ill-conceived projects that serve the geopolitical objectives of project sponsors that are not aligned with the sovereign national development goals. It is increasingly critical that governments consider future forward-looking strategies that will avoid projects driven by political or prestige motivations which often result in projects that are not sustainable nor resilient.

Need for Data for Decision Making

Effective decision making cannot be made with a deficit of data.  The Economist magazine published an article in its May 9th, 2020 edition titled “Africa’s Data Deficit – Start Counting.”  The article discusses how many African countries have to make decisions in the dark. The article also points out that making policy without reliable facts is common in Africa, and that a paucity of data has left governments guessing where to build critical infrastructure.  This is also relevant for PPP recovery actions and future pipelines.  However, I maintain that we know the situation is really bad and we should accept this and rather divert our attentions to project-specific recovery actions in the short term.  There is value in understanding the magnitude of the current health of PPP projects for purposes of short-term triage actions; however, there is also value in having a future-focused attention on what we are going to do in the next few years to revive national PPP markets.

Limits of Studies

International studies of the COVID-19 pandemic era will serve as useful reference points for future actions, but it will also be critically important that African realities – at country scale – are also considered.  It is imperative that African recovery is not focused on masses of situational studies, but is focused on developing strategies that offer meaningful mitigations of impacts. Africa is vast, so we need to be careful of high-level generalities that ignore local conditions.  Aggressive condition audits of current PPP project conditions (that are not sugar-coated) will allow governments to make better decisions on individual PPP project mitigations.  Investors will take note. Pulling the wool over the eyes of the inquisitive regarding the true state of affairs will be counterproductive.

National Harmonization – Need for a PPP Recovery Ombudsman

It is critically important that national governments also seek to harmonize their recovery initiatives across all line ministries at both the national and subnational level.  If this proves difficult it is my recommendation that an impartial ombudsman is selected who drives a PPP recovery strategy forward and who recalibrates and reprioritizes national pipeline projects which match the existing resources of both the public and private sectors.  It is clear that we do not want PPP projects to fail.  An effective recovery strategy will require innovative processes that harness alternative financing, attract investors and leverage the combined resources of both the public and private sectors.

Recovery Strategy Foundations

I firmly believe that the following foundations are necessary for any National PPP Initiative Recovery Strategy –

  • Embracing a Covid-19 Recovery “Triage” of National PPP Initiatives that address projects that can be rescued –  see the following article for further reading
  • Pragmatically addressing pandemics and the question of force majeure contract clauses in PPP contracts – see the following article for further reading
  • Finding ways to expedite the procurement of essential services, works, and goods through PPPs during the Covid-19 Pandemic –  see the following article for further reading
  • Accepting that it is too costly to allow PPPs to fail due to poor Covid-19 decisions –  see the following article for further reading
  • Understanding Covid-19 impacts on PPPs when making decisions –   see the following article for further reading
  • Developing sustainable PPP recovery strategies in a Post-COVID-19 era –  see the following article for further reading
  • Developing proactive Strategic PPP strategies in the Corona Virus Epoch  – see the following article for further reading
  • Exploring a new paradigm of regenerative PPPs (R+PPP) –  see the following article for further reading
  • Committing to building resilient infrastructure projects in the future – see the following article for further reading
  • Future-Proofing Resilient PPPs that can withstand future shocks –   see the following article for further reading
  • Ensuring that the principles of value for money (VFM) and People First PPPs are included in selections decisions for future PPP projects.
  • Revisiting current and new SDGs goals when prioritizing PPPs can help with pandemic economic recovery strategies.
  • Additionally, it is important that landlocked countries in Africa address transnational PPP projects and how countries will address divergent strategic needs in a post-COVID-19 investment competitive world

Conclusion:

I firmly believe that the existing excellent core of trained African PPP practitioners can come up with pragmatic, realistic and Africa centric solutions that will allow countries to navigate the pandemic crises.  Pandemics of this nature are here to stay – we need to think resiliently to overcome current and future events. All parties need to seek win-win solutions for all parties, even if they are painful, as there are no quick fixes

This article has been written by David Baxter.  ABiQ published this article with the author’s permission.  If you want to read the original article, please click here.

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