{UAH} PPPs: Are they the answer to Uganda’s financing problems?

By Ismail Musa Ladu

Public Private Partnerships (PPP) have for long been touted as the solution to Uganda's infrastructural financing needs. But these deals have hardly been successful.

These partnerships became a big deal after the passing of the Public Private Partnerships Act, 2015, which effectively provided the legal safeguards required to do business under this arrangement.

Ambassador Nathan Irumba, the Seatini –Uganda executive director and Prof. Mwambutsya Ndebesa are skeptical about Public Private Partnerships (PPP).

Some of the PPPs in the country include the Kampala-Entebbe expressway, the New Mulago Hospital and the proposed construction of Kampala-Jinja Express highways.

Mr Irumba whose career specialises in trade negotiations among others, warns that PPP deals often agreed to hurriedly, are not usually in the interest of the country.

Speaking at a stakeholders consultative meeting held in Kampala on the changes in the Health landscape and implications to the right to health in Uganda,"Amb. Irumba, said: "PPPs tend to socialise losses and privatise profits."

Nature of agreements
He explains that the nature of PPPs endorsed here guarantee the private individuals and entities the largest chunk of profits from the venture while government is expected to absorb all the losses should the deal go bad.

Amb. Irumba and Prof. Ndebesa, believe that the PPP in its current mode leaves a lot to be desired.

Ms Flavia Rwabuhoro Kabahenda, the Member of Parliament Kyegegwa district, who is also the Uganda Parliamentary Forum on Social Protection (UPFSP) chairperson and the country Director, SEATINI-Uganda, Ms Jane Naluga, want the private entity entering into a PPP deal with the government to be unmasked ahead of any contractual commitment.

They also suggest that private entities understand what exactly they (private entities) are bringing on the table and their fate in case of default.

In the absence of the above, both Ms Kabahenda and Ms Nalunga recommend that there should not be any deal.
As for the HEPS-Uganda executive director, Mr Denis Kibira, the biggest problem is the absence of regulation which is further complicated by how the PPP deals are arrived at.

Because of that laxity, the subsidies that are supposed be accrued from the PPP arrangement are hard to see.
The State Minister of Finance for General Duties in an earlier interview said the country needs PPP to provide services that government on its own would not easily deliver.

Monster called PPP?
Private Public Partnerships (PPPs) are long‐term contractual agreements between the public and private sector for the provision of public services. It normally takes a mode of blended finance which is an approach involving a mix of both public and private sector of capital in support of development.

Traditionally, governments have been the main providers of public goods and services, but recently, this role was opened up to private sector.

Consequently, private investments in the health sector, education, transport (infrastructure), energy generation and supply services, water supply services, among other have recently grown under the arrangement of PPPs.

According to policy brief developed by SEATINI Uganda in Consultation with Civil Society Organizations in the East Africa and with support from Diakonia, PPP projects in the EAC region, as by end of 2018 were valued at $815 million (about Shs3 trillion) in Uganda, $618 million in Rwanda (about Shs2.2trillion), $2476 million (about Shs9 trillion) in Kenya, $1,488 million (about Shs5.4trillion) in Tanzania. That is a total sum of 62 projects in the four partner states of the EAC.

Challenges
According to analysts, the challenge is there is very little support to the domestic private sector for their participation in their countries' PPP projects.

As a result, it has been very difficult for local businesses to participate in PPP projects as implementation contracts are generally awarded to large, multinational corporations.

Under PPPs, the project costs for the host countries almost double the amount they would have otherwise paid if the investment contract was directly awarded to the public sector works and not to a private entity.

Also, the costs of PPPs do not only result from the direct liabilities as stated in the contractual arrangements, but also from indirect-contingent liabilities. These could include events such as a fall in the exchange rate of the host state's currency, or if the demand for the requested service or facility falls below a specified level, or during economic crises which could result into a reduction in the demand for a certain service or product being supplied by the PPP project.

Besides this, PPPs also often suffer from a lack of transparency and limited public scrutiny, which can lead to poor decision-making resulting from less oversight. This can increase opportunities for corrupt behaviour.

There are usually higher costs associated with poor transparency including in accounting for PPPs throughout the project cycle, often reinforced by confidentiality clauses.

So, whereas PPPs can provides an avenue through which developing states such as Uganda and East Africa in general can realise large investment projects, Amb. Irumba and Prof. Ndebesa argue that the nature of a number of PPP contracts could undermine the country's development.

Blended finance
In 2004, Public–Private Partnerships (PPPs) emerged as the new form/ category of blended finance. Due to tighter national budget constraints in countries such as Uganda and changes in the international aid architecture, PPPs are growing at a much faster rate than earlier anticipated.
They are now being viewed as major potential arrangements for mobilising private capital to bridge the gap in financing.

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Allaah gives the best to those who leave the choice to Him."And if Allah touches you with harm, none can remove it but He, and if He touches you with good, then He is Able to do all things." (6:17)

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