World Bank backs Rwanda’s public-private investments

Rwanda is in a strong position to engage in public-private partnerships (PPPs) despite a number of gaps and challenges that still exist, a new report by World Bank indicates.

According to the diagnostic report on public-private sector partnerships, lack of capacity building, uncoordinated and standardized projects are some of the major challenges facing Rwanda when it comes to forging investment partnerships between government and the private sector.

The report released on Friday last week, however, noted that the country has registered key milestones over the past five years.

According to Shyamala Shukla, the World Bank senior PPP specialist, Rwanda still lacks a clear and comprehensive PPP strategy, which has made it hard to convince investors of its huge potential of the initiative.

“There is need to develop a detailed PPP strategy that will raise investor appetite for the existing projects,” he said.

He added that though there is a lot of interest from the private sector to embrace the PPP initiative, lack of information, especially on existing projects, “is still a big challenge toward building strong PPPs”.

In 2016, government enacted a public-private partnerships law to attract investments in key development projects. The law provides the legal framework concerning establishment, implementation, and management of public-private joint ventures.

Among the proposed principles is that PPP projects will be procured on a competitive basis. Transparency, fairness, non-discrimination, efficiency, protection of public property and public interest, and accountability are the other values guiding establishment of PPPs.

The New Times reports that under Article 4 of the law, the application of PPPs must be aligned to government’s development goals and strategies, with contractors opting to apply for the management of government contracts or investing in infrastructure projects either on the lease-operate-develop; build-operate-transfer, or build-operate-own basis, or any other PPP arrangement that may be prescribed by guidelines or policies supplementing the law on PPPs.

Experts, however, believe increasingly, large investment projects require that the government and private sector work together to bring them on line.

Clive Harris, the World Bank Group practice manager in charge of PPP, said the private sector plays an important role in the economic sustainability of any country, noting this can only happen by encouraging strong public-private sector partnerships.

He underscored the importance of PPPs as an opportunity to fill investment gaps that arise due to lack of enough resources to finance public development projects especially in developing countries like Rwanda.

Harris said in order to mobilise the trillions of dollars needed, for instance, to close the infrastructure gap, government should devise way to make projects “investor ready” and to develop innovative frameworks to leverage private investment. Over the past five years, the private sector has invested an average of $124 million per year in private infrastructure projects.

Harris noted that most public investments are usually costly and may not attract the private sector because of the cost involved, which requires government participation. The expert added that even when the government has resources, it may lack technical capacity to execute and operate them efficiently.

That’s why public-private partnerships can act as a tool to deliver such projects particularly infrastructure. According to the World Bank, PPPs address twin goals: eliminate extreme poverty and boost shared prosperity by enhancing the reach and quality of the delivery of basic infrastructure services.

“When designed well and implemented in a balanced regulatory environment, PPPs can bring greater efficiency and sustainability to the provision of public services such as water, sanitation, energy, transport, telecommunications, healthcare and education,” said Andrew Jones, a senior PPP consultant at World Bank.

He noted that every country has its unique challenges, priorities, and financial constraints, requiring multiple approaches, including joint ventures between government and private sector, and benefit from management, innovation and expertise of the private sector.

He, however, added that at times a traditional public sector approach may be more appropriate.

According to Diane Uwitonze, the Rwanda Development Board director for strategic investment, PPPs are not a new concept in Rwanda, though their legal, regulatory and institutional structure is ‘in its infancy’.

Prior to the enactment of the law in May 2016, Rwanda engaged in a number of contracts and awarded contracts to private operators to provide key public services through PPPs, Uwitonze added.

She explained that previously, projects were contracted by government agencies according to sector-specific legislation, as well as the public procurement law.

She said government is working with all stakeholders, including the private sector to further streamline and strengthen PPPs.

PPP projects

The country has so far managed to put forward 39 PPP projects in different sectors, including energy, water, ICT, mining and manufacturing. Most of these projects are in the energy sector, according to World Bank statistics.

Of these 39 projects, only six are currently operational, while the remaining ones are yet to be completed.

Some of the projects developed under joint ventures between government and private sector are Kivuwatt by Contour Global, an American firm, and government; Akanyaru Valley Peat project (Hakan and government); GigaWatt (Global Rwanda Limited and government), Olleh Rwanda implemented by government and Korea Telecom Corporation, and Africa Improved Foods was delivered by a consortium of Royal DSM, FMO, DIAF, IFC, and government.

Last year, the World Bank through the public-private infrastructure advisory facility extended a $399 million (about Rwf300 billion) grant to help strengthen the country’s PPP initiative.

Support for PPP initiative

Part of the money was to help review the country’s laws and policies relevant for the PPP process, highlight the gaps which would lead to carrying out a customised PPP strategy for Rwanda and help carry out capacity building in different institutions.

The funding, according to RDB, was also used to create a database of completed and ongoing PPP projects, review potential PPP projects at the national and district levels and develop PPP fiscal risk management and mitigation framework.