Public Private Partnerships (PPP) in Ghana - Panacea for bridging infrastructure gap, opportunities and recommendations

The periodic increase in the population of Ghana and the inability of successive government’s fiscal policy to adequately address the needs of people in the country coupled with constraints associated with shortfalls in public revenue for infrastructure and services delivery brought in its wake a widening infrastructure and services delivery gap. For many who do not know, it is the prime responsibility of the government to provide public infrastructure and services for the country.

More importantly, to accelerate the growth and development of any country, the provision of strategic infrastructures and service delivery measures are key to boosting economic growth.

What can Ghana do as a country to address these challenges?:

The question was answered in the affirmative through the introduction of an innovative and viable concept known as Public Private Partnership (PPP) for public infrastructure and service delivery in Ghana.

To effectively operationalize the concept, the Public Private Partnership (PPP) law, PPP Act, 2020 (Act 1039) was developed in December 2020 to give relevant legal backing to activities categorized as PPPs in Ghana.

What is Public Private Partnership as a concept in Ghana?:

In paraphrasing what constitutes Public Private Partnership (PPP) as legally defined by the PPP law of Ghana and as recognized by the World Bank, there is a need to make the reader understand that there is nothing incapable of being understood by the individual with little or no education let alone persons with relevant education, who on their own volition seek knowledge on Ghana’s PPP processes.

Public Private Partnership (PPP) therefore, is a long-term contractual arrangement between a government or public entity (Ministries, Departments, and or Agencies in Ghana) and a private party (a company or firm) with clear and shared objectives for the provision of public infrastructure and or services traditionally provided by the public sector, and in which the private party bears significant risk and management responsibility over an agreed period as stated in the agreed contract of the parties.

In seeking clarity in respect of matters of risk allocation, the private party must understand that, under the concept of PPP in Ghana, the private party shall perform part or all of the government's service delivery functions and shall assume the associated risk for a significant period.

However, in return, the private party shall receive benefits as predetermined in the agreed contract and according to predefined performance criteria, derived either entirely from service tariffs or user charges, entirely from the government budget (fixed payment, or periodic payment - annuities, contingent,) as the case may be.

Non-tradable features of all proposed Public-Private Partnerships to pass the test of scrutiny to be allowed for implementation in Ghana is that the proposed project must be financially, economically, and socially viable. The proposed project must have value for money, demonstrate long-term affordability by end users, and allocate risk to the party best able to control and manage the risk in ways that maximize value for money.

Furthermore, the proposed project must facilitate the promotion of local content and technology transfer, adhere to laws protecting the environment, demonstrate the promotion of climate change and social safeguards, and also follow the procedural rules regulating PPPs in Ghana as enshrined in the PPP Act, 2020 (Act 1039).

Policy Analysts globally share the view that Public Private Partnerships in Ghana will provide long-term solutions for public infrastructure and services for the country. They also hold the firm view that PPPs will lower funding pressures on the government, achieve value for money, and improve accountability and transparency in the provision of public infrastructure and services. As a matter of evidence, PPPs will create opportunities for the government of Ghana to harness private sector innovations, technology, and skills, and more importantly, increase private sector financing for investments in this regard.

As a result of the unique benefits associated with well-structured PPPs, the government of Ghana developed a legal and Regulatory framework for Public-Private Partnerships in Ghana. The framework was designed to ensure the effective and efficient implementation of PPPs in the country.

Reasons for the choice of the concept PPP by the government of Ghana:

In significantly bridging the ever-widening gap in infrastructure and service delivery in the country, the government of Ghana is mindful of the fact that the concept of Public Private Partnership, although here to stay, is not the only avenue to explore to end the challenges faced in respect of raising adequate funding for the development of public infrastructure. Rather, the government of Ghana sees the concept as an opportunity to cease and a sure means to an end. Thus, in partnering with a private sector participant, the government of Ghana recognizes advantages such as;

The provision of better infrastructure and services through private sector-led resources,

Fiscal space is created for the government to prudently utilize tax revenue on other pressing public goods,

Provides opportunities for growth of local industries since it gives local businesses a platform to participate in tendering for competitive projects,

Value for money, and

Transfer of useful technology to the state.

Meaning and use of the word “Party” in line with the concept of PPP in Ghana:

The meaning of the word Party in respect of a PPP arrangement is strictly a legal construct that connotes a private entity or government entity seeking to enter into a partnership agreement solely for Public public-private partnership.

This legal construct which is carefully used either in agreement or as provided for in the PPP Act qualifies an entity or government seeking to enter into a partnership arrangement. Take for instance, the wording “a party seeking to agree with government or contracting authority as a special purpose vehicle (SPV) for the PPP shall be incorporated in Ghana. It is important to state here that” the reference or use of the word party, therefore, strictly means, a legal construct identifying known natural and artificial beings to a PPP contract.

The legal and regulatory framework for public-private partnership in Ghana:

To encourage contractual arrangements between private parties and government, attract private sector resources meaningfully, and provide adequate legal protections to parties to a PPP contract, the government of Ghana through the Public Private Partnership Office (PPPO) developed the Public Private Partnership Act, 2020 (Act 1039) to regulate public-private partnership arrangements. The PPP Act 1039, among others, is designed to promote the use of private sector resources for the provision of infrastructure and services that are public.

To complement the effective operationalization of Act 1039, the development of regulation is currently underway and at the finalization stage for AG’s approval. Furthermore, the ease of doing business in Ghana through PPPs has been made much more flexible through the development of standard form documents (PPP contract, PPP procurement: Request for Qualification - RFQ and Request for Proposal – RFP) for Public-Private Partnerships.

The Public-Private Partnership Act, 2020 (Act 1039) is the current statute in force chiefly regularly for all public sector projects undertaken in the form of partnership arrangements between Contracting Authorities (CA’s or government entities – by extension government of Ghana) and private party participants. The use of the word chiefly, advisably so, is to emphasize the fact that laws in Ghana do not work in isolation. Laws in this country work hand in hand with other laws in the country.

Mindful of the aforementioned, the framers of the PPP Act 1039 ensured the provision of limitation clauses to allow the Act to operate within defined limits. Examples of such limiting clauses are; the PPP Act does not apply to the grant of mineral rights under the Petroleum Exploration and Production Act, 2016 (Act 919), outsourcing of government services which does not transfer the financial and operational risk to a private party, procurement of goods works and services with public funds, noncommercial activities that are the exclusive preserve of the security services in Ghana, and the divestment of ownership or equity of state-owned enterprises.

Essentially, the Act applies to all Contracting Authorities or public entities, commercial arrangements carried out through partnership arrangements, public sector projects undertaken in the form of partnership arrangements between a Contracting Authority and a private party, and functions that relate to the identification, studies, document preparation, structuring, bidding, evaluation, award, implementation and monitoring of partnership arrangements.

The Public Private Partnership Act 1039 also makes provision for new and existing institutions of state to assist with the implementation of PPPs in the country. Existing institutions such as;

Parliament: – responsible for approval of contracts by Articles 174 and 181 of the 1992 constitution of Ghana. These constitutional provisions relate respectively to matters seeking approval for the imposition of taxes or approval for international business transactions.

Cabinet:responsible for approving PPP contracts with a threshold or project estimated capital cost exceeding two hundred million dollars (USD 200m) or its cedi equivalent.

Ministries or contracting authorities: They have the responsibility for the management of each phase of a partnership project.

Public Private Partnership Office (PPPO): The PPP Office is responsible for the provision of technical support and guidance to all Contracting Authorities (CA’s) and the private sector in the structuring, procurement, implementation, and evaluation of PPP projects in the country.

Controller and accountant general:Shall ensure adherence to public sector accounting standards relating to PPP arrangements and projects.

Office of Regional Coordinating Council: As legally required, the Regional Planning Coordinating Unit of the RCC is mandated to be the appraising authority for the local government authorities within their jurisdiction.

General Assembly of District Assembly: Is responsible for approving all PPPs by the first schedule of the PP Act 1039. For the avoidance of doubt, the General Assembly of the District Assembly can only approve all PPP projects

Audit service: Shall ensure compliance of contracting authorities to the provision of the PPP Act 1039, the regulation, and guidelines. It is also required to audit matters relating to PPP projects.

These institutions are to operate within their respective functions to ensure the implementation of PPPs in Ghana as recognized by the PPP Act 1039.

As part of the institutional arrangement for PPPs in Ghana, the PPP Act 1039 also established the following;

Fiscal Commitment Technical Committee (FCTC): Serves as the technical advisory committee to the PPP Committee on matters of fiscal risk to a PPP Project.

Complaints panel: Established to entertain matters relating to complaints in respect of the bidding process.

The Public Private Partnership Committee (PPP committee): Is responsible for approving PPP contracts with a threshold or project estimated capital cost not more than two hundred million dollars (USD200) or its cedi equivalent. and

The Public Private Partnership Office (PPPO): Located within the Division responsible for Public Investment and Assets in the Ministry of Finance, and under the supervision of the Chief Director of this Ministry.

To ensure concentration on and oversight responsibility for the implementation of public-private partnerships in the country, the Act establishes Public Investment Units (PIUs) in all Ministries, Departments, and Agencies to report to the PPP Office on all matters relevant to partnership projects.

As important as development is at the local level, the PPP Act makes provision for infrastructure development by the local government authorities. At the local level, the Planning Coordinating Units in the Metropolitan, Municipal, and District offices shall be the focal unit legally mandated to handle functionally required tasks relating to PPP project preparation, appraisal, and among others.

The importance of these Units cannot be over-emphasized. They exist to serve as the focal unit for PPP projects for contracting authorities. The composition of the staff strength in all these Units shall consist of individuals skilled in any of the following fields of learning; law, project finance, procurement, economics, finance, and or project management.

The Public-Private Partnership process in Ghana:

Proposed PPP projects either originate from a private party and take the form of an Unsolicited proposal or from the Contracting Authority and take the form of a Solicited proposal.

For unsolicited proposals, the private party is required to develop a Project Concept Note (PCN) of the proposed project. As an integral part of the PCN, the proposed project must be in the medium-term development plan of the Contracting Authority to which the private party is seeking to enter a PPP agreement. More importantly, the unsolicited proposal must demonstrate innovation.

The Public Private Partnership process is a three-stage process namely;

The project preparation stage – in summary, a contract for a PPP project can either originate from a private party or the Contracting Authority.

Where a Contracting Authority (CA) seeks to undertake a project through PPP, the process is termed Unsolicited Proposal. Here, the Contracting Authority is required to prepare and submit to the PPP Office a comprehensive project concept note (PCN) and a pre-feasibility study report.

Upon acceptance and approval of these documents, the PPP Office shall write to the Contracting Authority requesting it proceed to undertake a full feasibility study of the partnership project to determine the technical, economic, legal requirement, environmental, social, appropriate risk transfer, value for money, financial viability, affordability, and the appropriate PPP model to be used for the project.

The contracting Authority is at this stage of the project preparation, required by law to engage in extensive and adequate stakeholder consultation. What is more, it is also allowed to, where necessary, procure the services of a Transaction Advisor for the feasibility study.

The CA upon appraising the feasibility study for the partnership project is required to submit both the final feasibility study Report and appraisal Report to the PPP Office for consideration by the PPP Committee for approval. Upon approval by the Committee, the CA is allowed to proceed to the procurement stage.

Now, where the proposed PPP project is at the instance of the private party, the Solicited Proposal procedure is adopted. Here, the private party is required to submit an Initial Business Case (IBC) to the appropriate Contracting Authority (CA) detailing the following; the private party company profile and experience, the problem the project seeks to address, the objective of the project, how the project aligns with the government’s strategic plans and priorities, the history and origin of the project.

In addition to these, the IBC must describe in detail, the project location, scope, service to provide, technical components, design options, performance indicators, payment mechanism, legal and regulatory implication of the project, a study encompassing an appropriate financial model, and the type of PPP model to be used.

The private party seeking to use the Solicited Proposal procedure for PPP projects must ensure that the project offers the best value for money, is affordable, requires no government support in the form of a viability gap funding or tax exemption support, is in line with Article 36(5) of the 1992 constitution, is consistent with the National medium-term development plan and infrastructure plan of the country, the proposal must demonstrate innovation, must be economically and financially viable.

In following the procedural rules, the private party is required to submit a copy of the Initial Business Case (IBC) to the appropriate Contracting Authority (CA) and a copy of the same is made available to the PPP Office. The CA upon receipt of the document shall conduct a preliminary review to ascertain whether or not to accept or reject the IBC.

Outright rejection of the document (IBC) with reasons, shall be made in writing by the CA to the private party. Where the CA approves the IBC through its preliminary review, it shall notify the PPP Office of the decision in writing, attach the IBC, and a review report of the IBC detailing reasons for considering the IBC as the case may be.

Upon receipt of these documents (IBC and the Review of IBC Report), the PPP Office shall register the project and notify the CA in writing. The CA on the other hand, after receipt of the letter from the PPP Office will write to the party of its decision to promote the proposal and also to notify the private party to undertake a feasibility study on the project.

The feasibility study developed by the private party is required to be submitted to the CA for appraisal. After appraisal and approval by the CA, a feasibility study Report, a copy of the feasibility study, and an appraisal Report will be submitted to the PPP Office by the CA for consideration and approval by the PPP Committee. Based on approval, the CA will move to the next stage and may conduct an open bidding process to enable interested parties to make technical and financial bidding in conformity with the PPP Act 1039.

The procurement stage: – the procurement process for PPP in Ghana is a two (2) state process (Request for Qualification - RFQ and Request for Proposal - RFP) that accords relevance to practices is fairness, transparency, competitiveness, and cost-effectiveness. Furthermore, the process encourages maximum use of local content and transfer of technology.

The contract and post-award stage: The Public Private Partnership Office developed standard form documents for PPP contracts and PPP procurement. These documents are currently in the Attorney General’s (AG) Office undergoing review. These standard form documents if approved shall facilitate ease of PPP contract documentation. Nonetheless, CA’s are required to prepare partnership agreements in collaboration with the PPP Office and AG’s Office.

The CA is mandated to oversee the management of the partnership contract or agreement. It is important to state here that, once the PPP contract or agreement is executed, amendment of the contract or agreement is only plausible based on proper application made by a party to and approval by the PPP Committee.

Dispute resolution mechanism:

To prevent disputes of any form from disrupting the smooth flow of the PPP process, the Public Private Partnership Act 1039 makes provision for complaints procedure. The Act establishes a Complains Panel to entertain disputes about public-private partnerships to reach an amicable resolution. In creating the needed flexibility, the Act empowers CA’s and private parties to determine in the PPP contract or agreement, the dispute resolution mechanism by which parties to the contract or agreement shall adopt for settling of dispute.

In the absence of any dispute resolution mechanism in the PPP agreement, the PPP Act makes the application of the provisions in the Dispute Resolution law, Act 789 mandatory.

Parties providing services to the general public through a PPP contract or agreement, on the other hand, are required by the PPP Act 1039 to set up complaints and claims mechanisms for lodging complaints by end users.

Types of Public-Private Partnership arrangements in Ghana:

Build, Operate and Transfer (BOT)

Build, Own, Operate and Transfer (BOOT)

Build, Own Operate (BOO)

Build, Transfer and Operate (BTO)

Concession

Design, Build, Finance, Operate and Maintain (DBFOM)

Develop, Operate, and Transfer (DOT)

Operation and Maintenance (O&M)

Rehabilitate, Operate and Transfer (ROT)

Opportunities:

The case has been made with lucid clarity that Public Private Partnership in Ghana as a concept for public infrastructure and service delivery and as regulated by law is here to stay. Thus, opportunities abound for the country and parties interested in investing their funds through PPPs using Ghana as a haven. Notable among these opportunities respectively for the investor and the country are;

Financing opportunities: Public-private partnership presents an exceptional opportunity for the government of Ghana to leverage private sector capital, expertise, and technology to accelerate the development of needed infrastructure and provision of services delivery in the country.

Public Private Partnership offers an alternate funding source by attracting private sector investments to fund public projects without putting an onerous burden on the public purse;

Enhanced project efficiency: It is trite learning that public-private partnership as a concept promotes efficiency through the involvement of private sector entities, resulting in quicker project delivery and improved quality. Private sector entities are equipped with relevant skills, innovative technology, and exceptional managerial style capable of effectively streamlining implementation. PPP offers an exceptional avenue for private sector participants to implement these on a large scale;

Risk sharing: Public-private partnership allows for a sharing of risks between parties to a PPP contract. In Ghana, the practice in conformity with the law has been, that the government and private sector entities shall share the risk to the party best capable of handling the risk. This helps in serving as a mechanism to mitigate financial, operational, and construction risks.

Accelerate economic growth and job creation: The critical role played by the provision of infrastructure in any country cannot be underestimated. Adequate provision of required infrastructure in a country resulting in a significant bridge of gaps is crucial to accelerating economic growth and job creation. Public-private partnership projects at both construction and operation stages contribute to economic activity by attracting private investments, boosting local businesses, and generating employment.

Transfer of knowledge and Capacity building: By partnering with private sector entities, the government can access their technical expertise, project management skills, and best practices in infrastructure development. This facilitates knowledge transfer, builds local capacity, and enhances the capabilities of government agencies involved in managing infrastructure projects.

Improved service delivery: PPP projects often focus on providing efficient and sustainable services to the public. With private sector participation, there is a greater emphasis on customer satisfaction, improved service quality, and timely maintenance. This can lead to enhanced service delivery in critical sectors such as transport, energy, water, and healthcare.

Safe investment avenue: Public Private Partnerships in Ghana offer safe and good avenues for private sector participants to undertake investment because the practice of PPP in Ghana is underscored by proper application of laws, careful planning, transparency, and effective governance structures. In addition to these, the country enjoys stable democracy, macroeconomic environment, and political security, which are crucial to ensure the successful implementation of PPPs and the long-term sustainability of investment.

Conclusion:

Revenue constraints faced by the country coupled with the government’s inability to provide infrastructure on a timely basis due largely to inadequate tax revenue created a gap in infrastructure and services delivery. This widening gap is negatively impacting the acceleration of economic growth.

To prevent exacerbation of the situation, the government of Ghana in its wisdom came up with an innovative concept known as Public Private Partnership (PPP) to leverage private sector resources for infrastructure development without necessarily putting an onerous burden on the public purse.

Today, Ghana is using the concept of PPP to bring together a diverse group of private creditors for investment in the country’s infrastructure and services sectors. As a result, private investors globally are welcomed to Ghana in this regard.

For ease of doing business in Ghana, the PPP Office developed the PPP Act 1039 to aid the PPP process, protect private sector parties, and also to protect the interest of Ghana.

Accordingly, pressure on speed for priority must be brought to bear on the PPP Office and CA’s to expedite action on the passage into law of the PPP Regulation, approval of standard documents, and the development of a contract management framework for PPPs.

It is expected that the government of Ghana will continue to sustain the enabling environment created for the delivery of public infrastructure and services through the engagement of the private sector. Greater protection by government and private parties, however, is to be given to contractual arrangements for the sanctity of the PPP process to be maintained.

Overall, PPP can be a valuable concept for infrastructure development in Ghana, as it provides a means to overcome financial barriers, harness private sector expertise, and drive economic growth.

This article, therefore, is inviting all private sector participants globally to take advantage of Ghana’s Public Private Partnership concept to invest in Ghana.

Recommendations:

The importance of the introduction of the concept of Public Private Partnership (PPP) in Ghana to deliver on the provision of Infrastructure and Services in the country cannot be over-emphasized due mainly to its positive impact on bridging the current widening infrastructure gap in the country. The passage into law of the PPP Act 1039 was very timely considering the significance it creates for the needed enabling environment for Public-Private Partnerships. This article, therefore, makes the following recommendations: Key influencers to drive the need for the promotion of Public Private Partnerships in Ghana;

The Public Private Partnership Office is implored to expedite action on the approval of standard documents for PPPs and develop and ensure the passage into law of the Regulation for PPP activities in Ghana. The draft Regulation should be couched and presented in a language understood by investors, and stakeholders, and the language must be driven by the country’s quest to breach the infrastructure gap through PPPs;

Revisiting education of stakeholders on the introduction, value, objective, and proper application of the Concept of PPP and the law (Act 1035, the Regulation and relevant laws) through nationwide sensitization to help streamline of same, increase investment in the PPP Pipeline projects and reduce the cost associated with project execution, contract renegotiation, among others;

Leverage local knowledge: This can be achieved by leveraging local and regional insights in sustainable investment to develop new global best practices;

A case must be made for the PPP Office to organise an international public-private partnership conference for West Africa to present Ghana’s concept for sustainable investment in infrastructure and service delivery; case to make the proposition that Ghana as a country is ready and a safer area for investors to do business through PPPs since the concept has the potential to generate increased returns for private parties, and attract investment for the country;

As a matter of urgency, the PPP Office should be decoupled from the Ministry of Finance of Ghana. Accordingly, section 26(1) of the Public Private Partnership Act 1039 should be expunged and replaced with the following; There shall be an Office responsible for Public Private Partnership as established by this Act.

The point to make is this; By the operation of Law, it is extremely unconscionable to have an established Office with vast statutory function to be reduced to a Unit located within a Division. The current wording under section 26(1) of Act 1039 is doing the PPP Office a great disservice and not serving the purpose of any legal engineering;

The PPP Office should, as a matter of urgency, organise an international Road Show with a team of experts to countries like the USA, UK, Norway, Canada, China, Japan, UAE, and South Africa, among others to strategically make the case for Ghana’s PPP as a concept for attracting investors. It behooves the PPP Office to do this;

Staff of the PPP Office should be given exceptional, relevant, and tailor-made training on a regular (short to medium term and long term). In this regard, the exercise of Article 296 of the 1992 constitution of Ghana must be paramount;

Establishment of thresholds and benchmarks by approval Authorities in respect of SR investment; and

The Public Private Partnership Office conducts thorough feasibility studies, engages stakeholders, and develops robust frameworks to select, structure, and monitor all projects under PPP.