Attracting the private sector to public infrastructure and services

Johnson Kirangi

Across Africa, leaders vying to form the next government are pledging to boost infrastructure investment through public-private partnerships (PPPs).

For more than a decade, many governments and multilateral organizations have invested heavily in creating PPP frameworks that provide a favorable environment for project implementation with the private sector.

Despite huge investments, the progress made so far could be improved.

Why, after decades of investment, has the government failed to get it right? How can ambitious infrastructure promises be realized?

The performance of many African countries calls for an urgent need to rethink how governments engage with and deal with private sector actors in the infrastructure sector.

Unfortunately, if not resolved soon, the impact on people and the environment will be punitive and costly to fix.

Below are some thoughts on what governments need to change to attract private sector investment, especially from local sources.

First, there is a disconnect between government and private sector actors. The private sector is often poorly informed about government infrastructure plans.

Although some governments make their project pipelines available to the public, some of that information is abstract and not sufficient for the private sector to make informed investment decisions.

Governments can achieve better outcomes by speaking to private sector actors in a language they better understand.

Governments can cluster infrastructure projects and promote them to specific groups best suited to participate in those projects. For example, if a government wants to build affordable housing in urban areas, these projects can be packaged appropriately and proposed to pension funds and savings and credit cooperatives that are already working on similar projects.

Second, local private sector actors are often not adequately consulted in the identification, selection, and prioritization of projects in government project pipelines.

Governments invest little resources and time to better understand private sector interests and reservations, and therefore launch projects that generate little local private sector interest.

A quick check of each country’s pipeline shows that the majority of projects cannot be financed by local private companies. This is because the necessary funds, required experience level, and technical know-how are out of their reach and automatically locked out.

I think the government should carefully decide to include smaller projects that will help leverage and streamline the mega-projects that the government is implementing. These small-scale projects can serve as a springboard for local companies to enter the infrastructure sector.