Photo Credit: J Endres via Flickr Creative Commons
I’ve spent the last 18 years in Sub-Saharan Africa working with governments on making public-private partnerships (PPPs) work for their countries. My interest is not just professional. My wife is Cameroonian and we live with our children in Senegal. I love this region! So I have a deeply personal connection that drives me, and it is important that my work has a positive impact. But the countries I work in are typically very difficult for businesses and investors to operate in and tend to have regulatory systems and investment climates that dissuade private sector investment, which is critical for PPPs to succeed. So, even though it is personally rewarding, this is not an easy job.
Despite these challenges, there has been great progress made in the region over the past decade on building new infrastructure and partnering with the private sector to improve the delivery of much needed services to a fast growing population. So when people ask me, “How do you get stuff done in tough countries?” I don’t have to think about it too hard. Things can move slowly, and there can be many roadblocks on the path to success, but the fact is that we are getting things done, thanks to the hard work and dedication of our great African partners, as well as the support of other international organizations.
One recent example is the power PPP in Guinea, a management contract signed in June 2015 to turnaround the national electricity utility. The story of power distribution in Guinea will sound familiar to many in the industry: infrastructure is in terrible shape, investment and maintenance is completely inadequate, and management of the system is weak. Power is routinely stolen and sold illegally. Blackouts are common. Only 17% of urban areas have access to electricity; in rural areas, the figure is 3%. And to make things worse, poor collection rates and a tariff structure out of sync with the market are starving the availability of funds needed to address these problems.
The International Finance Corporation (IFC) served as the Guinean government’s transaction advisory for the deal, working closely with the government, the Electricity Company of Guinea (EDG) and the World Bank’s Power Sector Recovery Project (PRSP). The details of the process can be read in this PPP Story, but I would like to share a few personal observations with anyone trying to tackle a tough project in a challenging environment:
In this case, 10 donors, including the World Bank, were working with the government on an energy sector recovery plan. This created valuable momentum where private sector involvement was seen by the government and other partners as a critical component for its success. The lesson: look for opportunities in places where reform is underway and where a PPP can help the public sector achieve the desired outcomes.
It helps tremendously to work with a government that has a clear view of its own strengths and weaknesses, is looking to bring together a team of experts, and weighs all advice in making key decisions. This attitude makes constructive advisory services possible, which is an essential part of any PPP deal.
Look into performance-based contracts. There is often the fear, or perception, that the private sector is only focused on profits and not results. So, we developed a contract that used Key Performance Indicators (KPIs) to trigger incentive payments to the private partner, and the KPI’s were based on specific government objectives for improving the utility and people’s access to energy. Unless performance targets are met, the private partner does not get the incentive payment. This gives governments the public assurance that the private sector is working for them.
- A transaction advisor is essential. The expertise commonly needed spreads across various fields such as technical, financial, regulatory, legal, environmental and social, and engineering. This knowledge also needs to be complemented with practical project management, contract negotiation, and “deal-making” experience. In most cases, public authorities don’t have this range of skills readily available in-house. A transaction advisor can look at any given situation and bring together the right team to work through the issues at hand and develop viable solutions. This is where IFC played an invaluable role.
An IFC SmartLesson on the Guinea project is available to the public for anyone who would like to dive more deeply into this particular project. Another useful resource is the issue on PPPs & Reconstruction published by IFC in 2013.