TRADING under the African Continental Free Trade Area (AfCFTA) has commenced and it is imperative that Zimbabwe puts in place efficient and robust infrastructure to optimise trading under the AfCFTA.
With an increase in intra-African trade, it is inevitable that bulky goods will be transported in and out of Zimbabwe requiring an efficient transportation system, which includes efficient roads, railways, ports and airports. Without this, Zimbabwe will not be in a position to take full advantage of the AfCFTA.
At present, most African countries are not adequately investing in connectivity and infrastructure, which significantly hampers regional trade.
A massive and strategic investment in connectivity and infrastructure is essential and one way of tackling this is through Public-Private Partnership (PPP) models.
PPP is an infrastructure financing trend that has gained momentum globally over the last decade as governments cannot fund the excessive needs for infrastructure.
Whilst there is no universally accepted definition for the PPP concept, a PPP can be defined as a contract between a public-sector institution and a private party, where the private party performs a function that is usually provided by the public-sector and/or uses state property in terms of the PPP agreement.
PPPs are a contractual means to deliver public assets and public services, which include developing and managing new infrastructure, contracts to undertake significant upgrades to existing infrastructure.
In most PPPs, the project risks, namely the technical, financial and operational risk is transferred to the private party whilst the public sector pays for a full set of services, including new infrastructure, maintenance and facilities management, through monthly or annual payments.
Within the PPP model, there are various types of projects based on the contractual arrangements involved, these include:
Design, finance, build, operate and transfer (DFBOT) projects;
Design, finance and operate (DFO) projects;
Design, build, operate and transfer (DBOT) projects;
Equity partnership projects; and
Facilities management projects.
The Government of Zimbabwe introduced PPPs in 1998 with the aim to attract investors into infrastructure projects and state-owned enterprises (SOEs).
Historically, Zimbabwe has a high failure rate of infrastructure development and has not made much significant investments in infrastructure.
However, there are notable PPP projects in Zimbabwe since independence that have had some success, these include the 1994 Alfred Beit Road Bridge constructed by New Limpopo Bridge (Pvt) Ltd under a 20-year build-operate and transfer (BOT) arrangement at a total value of US$18 million.
Another PPP project that was successfully undertaken by the government is the Beitbridge-Bulawayo Railway (BBR) line, which was implemented on a BOT basis by Beitbridge-Bulawayo Railway (Pvt) Ltd in 1999.
Lastly, the Mutare-Plumtree Highway 800km stretch, which was rehabilitated in 2014. This highway remains one of the best PPP undertaken in the country.
Although it is not a PPP, the Harare-Masvingo-Beitbridge Highway project has set a good precedent for future road projects. It will result in Zimbabwe leveraging its central geographical location in the Southern African Development Community (Sadc) to become a regional logistics hub.
The expansion of the road will integrate and increase intra-African trade to bolster Zimbabwe’s trade under the AfCFTA.
It is reported that about 80% of PPPs implementations in Africa fail due to capacity issues such as corruption and inadequate feasibility studies.
PPPs in Zimbabwe have not been prominent due to various reasons, such as institutional decay, high country credit risk, economic and financial instability as well as inadequate regulatory and inconsistent policy frameworks.
The overriding success of PPPs depend mainly on the presence and critical role played by the policy framework, legislation and policy institutions.
Research has revealed that lack of a legal framework to authenticate the PPP has been a major impediment to the contribution and participation of private sector in the PPP arrangements in Zimbabwe.
Thus an enabling environment such as the right economic, political, legal and financial framework needs to be put in place to make it attractive for the private sector to invest in infrastructure development.
Other countries which have implemented PPPs and have had significant success ensured that they had created an enabling environment for the private sector to feel confident in partnering with the public sector.
Between 2004 and 2011, 134 developing countries implemented PPPs and out of the 60 PPPs implemented in 35 countries, there has been significant success.
It is critical for the Government of Zimbabwe to ensure that the correct policies are formulated and implemented in a consistent, transparent and predictable manner in order to improve investor perceptions about Zimbabwe.
The long-awaited Zimbabwe Investment and Development Agency (Zida) Act (Chapter 14:37), which was enacted on February 6, 2020 has been a milestone in this regard. The new Act comes in against the backdrop of promoting the ease of doing business in the country. The main objective of the Act is to promote and facilitate investment in the country.
The Act establishes a One-Stop Investment Services Centre (OSISC), whose functions include investment promotion and coordination, assisting investors and facilitating entry and implementation of investment projects.
Of paramount importance to PPPs is that the Act repeals the Joint Ventures Act (Chapter 22:22), which used to regulate PPPs. The PPP framework under the Joint Ventures Act identified the necessity of establishing PPPs in infrastructural development but offered no clear legal or operational framework for the establishment of these PPPs.
A new entity, the Public Private Partnership Unit, will be formed under Zida to replace the joint venture unit, with various responsibilities to the investors.
The responsibilities will include considering project proposals submitted to the unit and assessing if they are affordable to the contracting authority or if they provide value for money.
The unit will further provide for the optimum transfer of technical, operational and financial risks to parties in the partnership. It will also assess if the partnership is competitive and make recommendations through the chief executive officer on such proposals to Cabinet.
The unit will develop best practice guidelines in relation to all aspects of PPPs and formulate suggested policy in relation to PPPs for adoption by government.
It will be mandated with developing awareness of PPPs in Zimbabwe as a vehicle for economic development and delivery of public services.
The Zida Act is also very progressive in other material aspects as it boasts of investment by allowing investors to expatriate profits in freely convertible currency. It also guarantees all investors equal access to law and protection. In addition, the legislation prohibits expropriation of investments except for a public purpose.
In conclusion, the Zida Act is a milestone as it provides the much- awaited PPP legal framework that is in line with international best practices. The framework is fundamental to boasting PPPs in the country.
It puts in place the overall investment governance framework and restores business confidence in Zimbabwe for purposes of attracting PPPs in the infrastructural sector. With such a framework , Zimbabwe is in a better position to fully take advantage of the intra-African trade under the AfCFTA.
Mafongoya is a practicing attorney, notary public and conveyancer. She is an expert in international trade, investment and business law. These weekly New Horizon articles, published in the Zimbabwe Independent, are coordinated by Lovemore Kadenge, an independent consultant, managing consultant of Zawale Consultants (Pvt) Ltd, past president of the Zimbabwe Economics Society and past president of the Chartered Governance & Accountancy Institute in Zimbabwe (CGI Zimbabwe). – kadenge.zes@gmail.com or mobile: +263 772 382 852