The performance of traditional and non-traditional forms of infrastructure procurement options in Africa

Abstract

Africa’s infrastructure financing deficit has been large for most countries for a considerable amount of time. Many African countries have historically depended on their government’s resources to meet the important infrastructure needs. However, public finances are wholly insufficient to meet the growing infrastructure financing gap. Financing sources for infrastructure can be broadly delineated in public, private and donor sources. A growing source of infrastructure procurement is through public private partnerships (PPPs). The underlying rationale for a procurement approach is that it must offer value for money in terms of the outputs provided when compared with the investment made. There is a prevailing notion the PPPs provide greater value for money than projects implemented by governments through their own financial and technical means. This view has been strongly advocated by the developed markets and adopted in developing countries. Thus, the growing adoption of PPPs in Africa has been adopted based on this rationale that PPPs offer greater value for money. However there is a limited evidence base of empirical studies confirming that this notion holds in Africa. This dissertation focuses on examining whether this well argued notion holds true in reality in Africa. Firstly, it assesses the framework by which value for money should be considered – either through a narrow shareholder or a broader stakeholder view, Secondly, the study assesses the drivers for value for money for PPP and government projects. Importantly, the study interrogates the evidence base of PPP and government projects to determine whether PPPs have indeed resulted in greater value for money for a sample of infrastructure projects in Africa. Through these lines of inquiry, the study contributes to knowledge by deepening the understanding of how PPP and government procured projects have performed in Africa. Broadly, the results show that PPPs cannot be categorically said to always deliver greater value for money. PPPs are relevant to the narrow value for money but contrary to expectations have an adverse impact. Certain additional factors, such as the project’s cost, sector and scale appear to be more important in determining whether value for money is achieved. Importantly a country’s iii initial conditions, such as the existing infrastructure endowment, GDP per capita and GDP growth have some relevance to achieving value for money at a project level. Further, the study then identifies the drivers of value for money, showing that not only technical and financial factors are important, but also social and political factors play a role, particularly for government implemented projects. The findings reveal important implications for how infrastructure procurement should be approached, based on a more comprehensive evidence historical base of previous projects, but also drawing on a keen understanding of the drivers of value for money and specific contextual factors such as a project sector, scale as well as the prevailing economic and institutional conditions in a country.