Lessons from South Africa

Image: Flickr, Chris Eason
Image: Flickr, Chris Eason

To better manage public-private partnerships, the South African government set up a dedicated unit to control major deals in the national Treasury. eAfrica spoke to its director of business development, Kogan Pillay.

Q: Is the idea of public private partnership just a fad, given that governments have procured products and services from businesses since the beginnings of government?

A: We don’t think so. We have started to follow an international trend for governments to augment its service delivery capacity and, given the backlogs South Africa had from the apartheid days, PPPs seem a reasonable approach to take. We looked at Brazil, Mexico, some of the southeast Asian countries, and there are about 500 PPPs in Britain. We hardly consider that to be a flavour of the month. What PPPs ultimately do is let government be assisted in delivering its core services. Government is not good at constructing buildings, for example. But business is.

Q: What does utilising PPPs imply about changing the relationship between government and the private sector?

A: It means the two parties have to understand what the other wants. The private sector wants long-term profitable contracts and government wants enhanced service delivery using some of the skills and financial resources of the private sector and most importantly risk transfer to the private sector. What it implies is neither of the partners enters deals out of an altruistic sense of the world. There must be a stable relationship and it must be profitable. You can’t ask the private sector to lock itself into long-term service delivery relationships without profit. And government expects to get high levels of service delivery. It also implies a new way of private and public sector understanding each other. In the past there was a high level of distrust. But it is up to government when starting PPPs to reach out to the private sector to say this is the model we are going to use and how we want to work. It takes a fair amount of openness from government.

Q: How can developing countries hope to use PPPs, which are chosen on complex criteria other than simple price, if they don’t first sort out effective, transparent practices for basic tendering?

A: People have to realise that PPPs imply a completely different and more rigorous procurement process. In South Africa we have prescribed the process in detail in the regulations. We have technical teams – legal, financial, design – looking at different aspects of a PPP tender. They report to a higher level committee. We don’t even allow members of one committee to know who is on the other committees. Because it is so rigorous, we think it highly unlikely for there to be corruption.

Q: If the process is so rigorous, why are there problems with other government tenders?

A: The gap is in governance of the procurement process, and government has spoken clearly about those problems. The view of the national treasury is we think our normal procurement systems could learn from how we govern PPPs. The independence of the teams and the scoring mechanisms make it much less likely for people to collude with each other to commit fraud.

Q: What advice would you offer to other countries considering using more PPPs?

A: Governments must start with leadership before writing legislation. If you have rules and no one follows them, it doesn’t matter how rigorous a process you have on paper. It starts with the president working from the top-down setting standards for procurement and anti-corruption. And then, quite frankly, you have to publicly prosecute those people who commit transgressions. What that does is it makes senior government officials responsible for their actions, and that is the message I would like to send.

Q: If you have to have specialised contract lawyers, engineers and sector specialists, doesn’t getting into PPPs imply first building up a core of highly experienced specialists within government just to negotiate effective deals?

A: Absolutely. We do that in two ways. We hire a set of transaction advisors to help government conduct a feasibility study before a deal is put to the market. And each of those advisors must have specific knowledge of the sector in question. We wouldn’t use the same consultants on health as we would on a computer systems deal.

Q: How important is transparency to preventing corruption and maintaining public trust?

A: It is extremely important. In PPPs and tendering two things must go together: transparency and accountability. Under the South African procurement policy, any losing bidder for a tender has the right to open up the procurement documents and see why they did not win. In places where there is real transparency and accountability, it is much less likely that politicians won’t make the best deal for the people of the country.