ALL over the world there is a growing appetite for Public-Private Partnership (PPP) as a vehicle for the financing of public infrastructure.

While developing countries in Africa, because of the enormous government responsibilities as well as the huge infrastructure deficit, require off budget revenue sources to augment the lean government revenue for infrastructure development and service delivery, developed countries such as America equally require private funds at the least to rebuild deteriorating infrastructure in order to retain her competitive position.

PPP  known as Private Finance Initiative (PFI) was invented in Australia in the late 1980s but  pioneered by the John Mayor Government in the UK in 1992. This initiative eventually spread to other parts of Europe, Australia, Canada, South Africa and various Asian countries. In recent times PPP has been used to deliver various public infrastructures such as highway construction, mass transport development, airports, seaports, hospitals, schools and utilities of various kinds.

Specifically,  M25, one of the busiest motorways in UK, where over 200,000 vehicles ply daily, is presently being expanded  from three lanes to four lanes in both direction through PPP to enhance  traffic management.

In South Africa, the 80-kilometre mass transit railway system in Gauteng province aimed at relieving traffic congestion in Johannesburg and Pretoria province is one of the successful PPP projects that has delivered public services to the masses.

In general terms, PPP is a contract between a public sector institution (government) and a private party in which the private party assumes significant  project risk (financial, technical and operational risk) in the design, financing, building and operation of a project.

Some of the common terms associated with PPPs include Private Finance Initiative (PFI) – UK, Japan and Malaysia; Private Sector Participation (PSP) – development banks; Private Participation in Infrastructure (PPI) – World Bank; Private Financed Projects (PFP) – Australia and Public-Private Partnership (P3) – North America.

There are also various PPP models that can be  employed in structuring a transaction ranging from equity participation (joint ventures), various leasing options, franchising, concessions, and variants of the Build-Operate-Transfer (BOT) model.

PPP offers a timely and cost-effective alternative approach to financing, building, operating and maintaining infrastructure. And beyond  the benefit of mobilizing private capital for the speedy delivery of public infrastructure, PPP has a considerable number of other benefits which perhaps is why it is becoming a popular tool for infrastructure finance.

Aside from offering policy makers the opportunity to improve the delivery of services and the management of facilities, the thoroughness of the PPP process that ensures  realistic debate on project selection as well as the proper identification and  allocation of the risk to the appropriate party, enhances the efficient use of resources. It  thus minimizes waste and tendency for project to fail by allocating risk to the party most suited for it.

This has particularly been proven to be true with the 12.15MW Independent Power Plant built by the Lagos State Government along with Oando Power. The objective of the project is to provide uninterrupted power supply   at the Lagos State Water Works in  Adiyan/Iju so as to boost the volume of water generated.

Since operation, this  PPP initiative has helped government to save the sum of N49.2 million monthly  by switching  from diesel generating  to  gas powered plant. Similarly, it improved citizens access to potable water by 42 per cent, bolster service delivery to end users and ultimately enhanced revenue collection from service users.

PPP  also encourages competition and transparency through open tender procurement process and thus allows for the selection of best solution to problems. It thus encourages creativity and innovation because unlike the traditional form of procurement which lays emphasize on input, PPP lays more emphasis on output, thereby allowing proponents to look for creative solutions.

In the same vein, PPP minimizes the tendency  of a project’s  failure because each party knows it will be prosecuted for non-performance if it breaches service agreements. The private party particularly is compelled to deliver service in line with the service level agreed upon because their capital is exposed to performance risk.

It is, therefore, not a surprise that the Lagos State Government in line with its vision of “making Lagos State Africa’s Model Megacity and Global Economic and financial hub that is safe, secured, functional and productive”, has joined other progressive countries of the world  by adopting PPP as one of the public sector vehicle for facilitating infrastructure development and service delivery.

Mr. ABIODUN DINA, an author,  writes from Lagos.