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«Ghana Public Private Partnership (PPP) Programme Partnering the Private Sector for Improved delivery of Public Infrastructure and Services BACKGROUND ...»

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Ministry of Finance

GHANA

Ghana Public Private Partnership

(PPP) Programme

Partnering the Private Sector

for Improved delivery of

Public Infrastructure and Services

BACKGROUND

The Government has over the years been having challenges with the provision and maintenance of

infrastructure for accelerated development of the country due to budgetary constraints. Currently,

addressing the country’s infrastructure deficit will require sustained spending of at least US$1.5 billion

per annum over the next decade.

Government has therefore adopted a policy to encourage the use of Public Private Partnerships (PPP) as a means of leveraging public and private sector resources and expertise to close the infrastructure gap and deliver efficient public infrastructure and services. Government recognizes the use of PPPs as a strategic mechanism for procuring, financing and delivering public infrastructure and related public services.

Policy A National Policy on PPP has been developed and was launched in October 2011. In line with this, the World Bank is supporting the Government to prepare the legal framework and administrative and management systems for the implementation of PPPs. Also it is helping to build the capacity of relevant bodies for the adoption of PPP as a major strategy to finance public infrastructure. The Bank is providing Ghana an amount of US$30million over a four-year period (2012-2016) for capacity building at various levels so that a more comprehensive programme could be put in place to fully implement PPP projects from 2017.

MoF-PID The Ministry of Finance (MoF) through its Public Investment Division (PID) is spearheading the development of PPP and is responsible for developing the legal, institutional and regulatory framework for the PPP Programme. MoF is also responsible for the issuing of Standardised PPP provisions and PPP Manual/Guidelines for effective management of PPP projects.

The PPP Concept The PPP arrangement is a long-term contractual commercial arrangement between a public entity and a private sector party with clear agreement on shared objectives and a significant degree of risk-sharing between the public and private sectors for the delivery of public infrastructure and services.

What distinguishes a PPP from other forms of private participation in infrastructure and service delivery is the greater degree of risk-sharing between the two parties. Principally, a PPP enables Government to provide better infrastructure and services through the use of private sector financial, human and technical resources, thereby freeing Government resources for other equally important uses.

Usually, in a PPP arrangement, the private sector party performs part or all of a Government’s service delivery functions, and assumes the associated risks for a significant period of time. In return, the private sector party receives a benefit/financial remuneration (according to predefined performance criteria),

which may be derived:

• Entirely from service tariffs or user charges;

• Entirely from Government budgets, which may be fixed or partially fixed, periodic payments (annuities) and contingent; or

• A combination of the above.

Benefits of PPPs

The benefits of PPPs include the following:

• Accelerated delivery of needed infrastructure and public services on time and within budget;

• Encouraging the private sector to provide innovative design,technology and financing structures;

• Increased international and domestic investment;

• Risk sharing by Government with private sector partners;

• Ensuring good quality public services and their wider availability;

• Real financial benefits reflected in reduction in the initial public capital outlay, and a better utilisation and allocation of public funds;

• Economic growth and increased and wider employment possibilities;

• Technology transfer and capacity building; and

• Improved operation and maintenance of public infrastructure.

Scope of PPP Projects PPP initiatives are intended to apply to all sectors and levels of government and shall be pursued where they represent priority projects, are affordable to the government and consumers, represent value for money and allow for appropriate risk transfer. Sector specific PPP policies may be developed to accommodate the needs of specific sectors consistent with the overall Government of Ghana PPP Policy.

National Policy on PPPs The National Policy on PPP was widely discussed with public and private sector stakeholders and the international donor community. It was approved by Cabinet in June 2011 and launched in October 2011.

This effort signals the Government’s solid commitment and political will to developing its PPP Programme.

Issues The policy caters to the various challenges that face the private sector in approaching PPPs. For instance

the policy addresses key issues such as:

(i) the critical role of the various Ministries, Departments and Agencies to be involved in the approval process of a PPP project;

(ii) a clear separation of the roles of PPP advisory and PPP Monitoring;

(iii) risk sharing and management framework; and (iv) scope of PPP projects and guiding principles for PPPs.





Government Support and Intervention

The Policy recognizes the need for Government support and intervention and has proposed the following:

• Establishment of a Project Development Facility (PDF) for upstream PPP project preparation and transaction development;

• Establishment of a Viability Gap Scheme (VGS) for supporting PPP projects that fall within the Government’s national development agenda and are economically justified but not financially viable;

and

• Establishment of an Infrastructure Finance Facility (IFF) in recognition of the need for supporting commercial long term financing in local currency to the private sector partners of PPPs.

It is Government’s intention to design these instruments, with robust governance framework, operating procedures and reporting requirements. This will assist in government efforts to mobilize other domestic and donor funding to complement any available government contributions for project development activities.

Legislation, Regulations and Guidelines Additional key initiatives being undertaken to complement, consolidate and give effect to the National

Policy and PPP Programme is the preparation of a PPP Law. This is to:

• ensure that the gaps in the Public Procurement Act, in relation to PPP procurement practices and processes, are addressed;

• provide a clear definition of PPP projects and structures in a way to distinguish them from other private sector arrangements;

• outline risk issues, responsibilities and duties; and

• provide sufficient protection to lenders, such as step in rights, security over assets, foreign currency transfers, property rights, rights to award concessions etc.

Completion of the draft PPP Law for stakeholder consultations, cabinet and parliamentary approval is expected by the end of 2014. Standardised PPP provisions and PPP Manual/Guidelines for effective management of PPP projects will also be developed accordingly.

PPP Capacity Building Strategy A major thrust of the PPP Policy is the building of capacity in the key central and line Ministries, Departments and Agencies (MDAs), leading the PPP work in the country.

The main objectives of this strategy are to enable the MDAs to

• properly manage transaction and technical advisors of PPPs;

• oversee project feasibility work;

• negotiate with the private sector; and

• to build government capacity to monitor and evaluate PPP projects after financial closure and project start-up.

Instruments

The support is being deployed through the following instruments:

(i) Technical assistance for activities such as policy work, sector analyses, embedded consultancy services, investment planning and analysis (both public and PPP) work, and other PPP-related advisory support;

(ii) Systems and equipment to enable the management and monitoring of PPP concessions, make available relevant information for specific PPP transactions (i.e. data rooms), develop a Government of Ghana (GoG) PPP website where policies, laws, regulations, guidelines and other related information will be shared with the public, and other ICT equipment necessary to implement a modern PPP communications platform;

(iii) PPP-specific training for key GoG stakeholders on both broad and sector specific topics, general economic and cost benefit assessments of all Public Investment Projects, PPP procurement methods.

This includes resources for in-house training and workshops, and international capacity building activities (training, conferences, secondments and study tours); and (iv) Outreach – support and capacity building to private sector for PPP engagement.

The Ghana PPP Programme The Ghana PPP Programme is the official Programme that has been put in place by Government to actualise the development of PPPs in the country. The Programme is in two phases.

Phase One The prime objective of the first phase is to improve the legislative, institutional, financial, fiduciary and technical framework to generate a pipeline of bankable PPP projects. This phase is to build capacity to facilitate private sector participation through legal, regulatory and institutional developments and financing of project appraisal and transaction advisory services.

Phase Two The second phase of the Programme will be triggered with the establishment of a credible and reliable enabling environment and also with the development of a soundly-appraised pipeline of robust projects for PPP financing. The particular outputs of the first phase of the Programme which would serve as

triggers for the second phase include:

i. a PPP Act;

ii. PPP regulations;

iii. at least five pre-feasibility studies;

iv. one ‘first-mover’ transaction for which an EOI has been issued; and v. at least two PFIs for the second phase.

Components of the Programme:

The first phase has three components:

1. Institutional, Fiduciary, Legislative and Financing Capacity Building for PPPs The prime objective is to build institutional, fiduciary and financing capacity of the MDAs and Metropolitan, Municipal and District Assemblies (MMDAs) in PPPs. The support provided under this component will be deployed through four instruments namely technical assistance, systems and equipment, PPP specific training for key stakeholders and outreach support and capacity building to the private sector for PPP engagements.

2. PPP Pipeline Preparation and Transaction Advisory Support The main objective under this component is to support the Government to develop commercially viable and Government-backed pipeline of competitively-bid PPP projects to financial close. The main activities include the development of concept notes, investment appraisal, pre-feasibility and full feasibility studies, transactions advisory services, safeguards preparation work for ‘First Mover’ transactions, transactionspecific market outreach activities and other specialised technical diagnostic work deemed necessary in the assessment/development of the transactions.

3. Project Management and Monitoring and Evaluation The purpose is to create the enabling environment for the effective implementation of the Programme.

The Project Implementation Unit (PIU) comprises of seven positions namely Project Coordinator, Financial Management Specialist, Procurement Specialist, Monitoring and Evaluation Specialist, Safeguard Specialist, and Capacity Building Specialist who are currently in place assisting in the implementation of the Programme.

OBJECTIVES OF THE PPP PROGRAMME

The key objectives are to:

• Leverage public assets and funds with private sector resources from local and international markets to accelerate needed investments in infrastructure and services;

• Encourage and facilitate investment by the private sector by creating an enabling environment for PPPs where value for money for Government can be clearly demonstrated;

• Increase the availability of public infrastructure and services and improve service quality and efficiency of projects;

• Ensure attainment of required and acceptable local and international social and environmental standards

• Protect the interests of all stakeholders including end users, affected people, Government and the private sector;

• Set up efficient and transparent institutional arrangements for the identification, structuring and competitive tendering of PPP projects;

• Provide a framework for developing efficient risk sharing mechanisms; and

• Encourage and promote indigenous Ghanaian private sector participation in the delivery of public infrastructure and services.

The PPP Project Processes PPPs involve a number of players from different sectors, representing a variety of interests. Therefore there is need to formalise the partnership, and clearly laid down processes need to be followed, in a systematic and transparent manner. Detailed documentation needs to be prepared at all phases of the PPP project. It is important to note that PPPs can take a long time to procure if the processes are not carefully followed. The policy objective is that PPP projects shall be selected from sectors that have been identified as within the National Infrastructure Plan (NIP) and that have the potential for development under PPP.

To improve credibility and transparency at all phases of project development, the input of both government and the private party will be assessed in terms of their compliance with the legislation, regulations and the PPP process and its components, including the bidding process, local content and the formation of Special Purpose Vehicles (SPVs).

The processes involve the following stages:



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