Analysis of critical success factors for public private partnerships in the SA infrastructure development

Abstract

ABSTRACT Critical success factors for Public Private Partnership (PPP) projects in infrastructure development have been widely studied across the globe. PPPs provide governments across the globe with opportunities to develop public infrastructure by collaboration with private sector partners. The advantage for the public sector in this arrangement is that they are able to access resources that reside within private sector. PPPs also provide governments with opportunities to share investment risks with private partners. To ensure that PPPs are implemented successfully, governments are responsible for creating an environment that is attractive to the private sector. Research shows that South African PPP environment lags behind those in developed economies; however it is progressing at a fast rate. This research demonstrates perceived shift in the factors that defines South African PPP environment. Factors investigated in this research reveals that PPP environment is SA is maturing. These findings are based on comparisons with research conducted in the early days of PPPs in South Africa. Implementation of PPP approach in SA dates back to the late 1990s and early 2000. A number of research studies were conducted on these projects by contemporaries such as Fourie (2008), Hlala (1999), Ahwireng-Obeng and Mokgohlwa (2002). This research investigated similar Critical success factors (CSFs) in order to examine the changing environment of PPPs in South Africa. The research is aimed at identifying wide a range of critical success factors for PPP projects in infrastructure development both in developed and developing economies. These factors would then be tested in the South African environment. A research sample was therefore South African based; targeting participants who had experience in PPP projects or alternatively were working in the sectors that have a strategic fit with the PPP approach for infrastructure projects. The participants were in sectors such as energy, transportation, mining and financial services. A survey questionnaire was developed and sent out by email and hand delivered where possible. The questionnaire had three sections; the first sections ii addressed participant’s demographic profiles, the second section had 20 critical success factors to be ranked on the level of importance and the last section requested participants to respond to three open ended questions. The responses were analysed using quantitative statistical method known as Normal Distribution Fitting Algorithm. The tool was used to ultimately rank the critical success factors according to the perceived level of importance. Vital findings were that three critical success factors were found to be significantly more important than the other factors. The three factors were; first was project technical and financial feasibility; second was strong contract management control that ensures contract compliance; and the third was strong experienced private consortium with technical strength. These factors highlighted a shift from earlier studies where factors external to projects such as macro-economic or political stability factors were more important. The other crucial findings came through the open question where the participants unanimously shared a view that PPPs are central to the future of infrastructure development in South Africa as they allow the government to overcome challenges of skills shortage and budgetary constraints by collaborating with private sector. The three factors demonstrate that the South African environment share similar challenges with those in developed economies. For successful implementation of PPP, it is important that primary stakeholders in the public and private sector align their objectives. They must cooperate to ensure a feasibility analysis of each project is conducted before committing to a PPP approach. They must put in place sound management systems for the full project life cycle. The primary stakeholder must apply thorough screening processes when forming a consortium and selecting one. These processes will ensure that the private sector participants have resources, both finance and technical skills to deliver the projects and the public sector sets clear objectives and is able to hold the private sector accountable and prevent unforeseen escalating capital and operational costs during the project life cycle.