The role of Private-Public Partnerships (PPP) and innovative financial models in Sustainable Development

I am part of the Project Appraisal team for PPP electricity transmission projects with the mandate to procure transaction advisory for the new envisioned PPP transmission projects in Kenya. I have noted in my experience working and researching on the best PPP approach that, wholesome solutions to modern day problems cannot be solved by addressing one facet. Instead, governments, private sector, multilateral institutions and donors have to come together in order to make any significant and lasting changes. Leaders and technical experts responsible for policy and regulation in Africa, should be able to easily identify such synergies making progress towards achieving SDGs likely. An example would be an IFC funded private sector renewable energy project in collaboration with the government which provides tapped water and roads (via IDA/WBG funded projects) to supply cheap energy to poor communities, critical to poverty eradication.  

This can be seen in Rwanda’s energy sector, which has leveraged the PPP agenda by implementing a strategy that focuses on increasing electricity access to the most vulnerable and poor communities. One element of the strategy was the development of mini-grids by the private sector with the Government playing a key role in identifying sites and establishing a framework to ensure financially viable investments. The Kigali waste to energy project involves the recycling all non-solid waste matter at Nduba dump site to produce energy. Private companies submitted proposal to the government to provide technical and financial investment in the project which went to hire hundreds of locals. The energy generated from the project was to be injected to the grid to provide cheap energy. Ultimately young African energy experts who have experiences in these different sectors are best suited to identify these opportunities and propose viable solutions.

As developing countries strive to anchor investments from traditional and nontraditional financiers, PPPs help governments leverage the expertise and efficiency of the private sector, raise capital, and spur development. They also help allocate risk across the public and private sectors to where it can best be managed and ensure that resources are astutely distributed in addressing the most urgent development needs. Increased private investment will not materialize simply because large financing gaps are present. Investments will flow only where the return on capital meets the necessary threshold, and where risks are adequately mitigated. Where public and private interests are well balanced, contracts are less likely to unravel and projects are more likely to have a positive impact across the board. 

One noticeable challenge with PPPs is the lack of capacity of contracting authorities in municipal and county levels that can effectively guide the transaction process. PPPs are largely intended to be guided by contracting authorities in the public sector. Authorities in the energy sector, roads, health and housing sectors drive the contracting obligations. In Kenya for example, the PPP amendment bill, 2017 contains provision for county governments to enter into PPP opportunities at county level. The challenge is, at county level, there is lack of sufficient contracting authorities’ capability to procure and manage PPPs effectively. The PPP unit charged with providing technical support still has to engage transaction advisors whose suitability and qualification in some cases is questionable. Therefore, building capacity for contracting authorities at county level is a priority. 

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Public health notes