ABiQ outlines the top 3 benefits of public private partnerships for development in Africa.
A public-private partnership (PPP) is a contract between a public entity and a private organisation. PPPs combine the resources and experience of the two sectors to deliver infrastructure or services at a lower cost. African governments are turning to PPPs to fulfill rising infrastructure demands, while economically recovering from the COVID-19 Pandemic. Below are some of the benefits that PPPs can provide:
1. Access to much needed finance
Many African governments are cash strapped. PPPs provide access to much needed private capital. PPPs give African governments the opportunity to reallocate resources for investments in sectors where private investment is not possible.
2. Reduced risk
One of the primary incentives created by PPPs is the transfer of risks to private partners. This can result in better control over the overall project cost, delivery schedule, and output quality. Through PPPs, the public sector mitigates and manages risk levels. This risk management strategy distributes risk to those parties most qualified to manage them.
3. Quick turnaround times
PPPs include time-to-completion as a metric of performance and, consequently, of profit. This leads to quicker project completions and fewer delays on infrastructure projects. Some PPPs may also include early completion bonuses. Early completion bonuses are used as an incentive towards increasing efficiency.
Africa’s infrastructure funding needs are predicted by the African Development Bank to reach $170 billion annually by 2025, with an annual financing deficit of up to $68 to $108 billion. By encouraging private sector investment in infrastructure, PPPs are seen as an essential tool for reducing this gap.
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