East-Africa Regional Office in Nairobi Commercial Section Norwegian Embassy Phone: +254 20 76 06 100, email: [email protected]
Aug 07, 2015
East-Africa Regional Office in NairobiCommercial Section Norwegian EmbassyPhone: +254 20 76 06 100,
email: [email protected]
Commercial section of three Embassies
• Objective; • Promote trade with and investments from Norway
• Approach; • We bring EA market opportunities to Norway
• Company requests opportunities• Limited regional capacity to promote opportunities
• We research trade/investment opportunities seeking technology/know from Norway • Work with Gov. agencies, associations and investors in
EA – and Norway
Procurement or PPP
• Procuring goods and/or services as input to government led investment program
• PPP = delivery of public goods and services through a partnership contract for private sector provision of a government service• = sharing of operational risks and
responsibilities in delivery of a public service
PPP is NOT privatization
• PPP = Public Entities enter long-term contractual cooperation with private sector• Purpose; to improve delivery of public goods/services
traditionally provided by public entities. • Brings in new investment, technical solutions and/or
management practices.
• PPPs = shared risks by different forms of shared ownership and/or responsibilities
• In SSA, South Africa has been a frontrunner for PPP arrangements for public service delivery
Sample PPP
1. Private entity take over management of current public infrastructure or part of operations to improve performance.
2. Private entity lease current assets, reinvest in them to improve technical and financial efficiency of service.
3. Private entity is given concessions to invest in new infrastructure to expand service.
PPP have many dimensions to consider
• Who will have responsibility of delivering which service?
• Who will invest and have ownership of assets?
• Who will finance investments?
• Who will operate and maintain assets?
• …..
= different forms of contractual arrangements
Sample of contractual arrangements
• Service contracts
• Management contracts
• Different forms of concessions with different arrangements for ownership/lease and transfer of assets (BOOT, etc.)
Service Contracts
• A contractual arrangement for management of a particular task of a public agency.
• Bring private sector skills into service delivery.
• Public agency retains ownership of facility and equipment.
• Private contractor is paid a fee (usually performance based) to deliver service.
• Typical contract period 2-5 years.
Management Contracts
• A contractual arrangement for management of a public service agency by private sector.
• Bring private sector skills into design and delivery of service, operational control, labor management and procurement.
• Public sector retains ownership of facility and assets.
• Private contractor is paid a fee (usually performance based) to manage and operate services.
• Typical contract period 2-10 years
Build/Rehabilitate-Operate-Transfer
• A private entity resumes responsibility of some existing assets to add on or rehabilitate and operate them.
• Lease assets which is subsequently transferred back to public entity.
• Operates and maintains asset at its own risk for the contract period.
• Long term contractual arrangement 10+ years.
• A common form of PPP with public utilities.
Build-Own-Operate-Transfer (BOOT)
• Private entity receives a concession to finance, design, construct and operate a new public investment.
• Operates and maintains facility/assets at its own risk for the contract period.
• Long-term contract 10 ++ years to recover its investment, operating and maintenance expenses.
• Fees are usually increased during concession period to reach satisfactory internal rate of return.
PPP prerequisites
Transparent and predictable regulatory environment (Government).
Comprehensive market assessment and feasibility study (Government and private entity).
Design feasible and sustainable proposal (private entity).
Assessment of proposal (transaction advisor).
Clear understanding overall context, potential risks and responsibilities (Contractual arrangement).
PPP key factors for success
• Political ownership
• Public awareness• Access to evidence of improved service delivery= studies and
analyses on influences of PPP• Multi-stakeholder forums for government, private sector and CSOs
for awareness among general public, government officials and sector management/staff
• Transparency during negotiations and implementation
Suggested way forward
1. Decide on PPP arrangement to pursue
2. Decide on contractual partners to work with
3. Outline a proposal for a pilot project at sufficient scale to prove its financial and economic viability
Service Contracts
Management contracts
Lease contractsBuild Operate Transfer contracts
Concessional contracts
Scope Contracts for services such as meter reading, billing, etc.
Management of entire operation or a major component
Responsibility for management, operations, and specific renewals
Investment and operationof major component like production,distribution and/or treatment
Responsibility for all operations and for financing and execution of specific investments
Asset Ownership
Public Public Public Public/Private Public/Private
Duration 1-2 years 1–5years 10–15years Varies 5–10 yearsO&M Public Private Private Private Private Investment Public Public Public Private Private
Comm. Risk
Public Public Shared Private Private
Risk for Private Sector
Minimal Minimal/moderate
Moderate High High
Compensation Terms
Unit prices Fixed fee with performance
Portion of revenues
Fixed or variable with indicators of
All or part of revenues