Privatisation in Malawi: PPPs shift to distort PC’s funding mechanism

GOVERNMENT’S planned shift from privation to Public Private Partnerships (PPPs), currently awaiting cabinet approval, will affect traditional funding mechanisms for the Privation Commission (PC) as it places more responsibility on PPP-sponsoring ministries.
This contrasts sharply with present trends, where the PC sources its funds through appropriation of proceeds. This is done with prior approval of the Ministry of Finance, and is provided for in the Public Enterprises (Privatization) Act.
Under the PPP, however, it is intimated that the bulk of transactions’ costs will be identified by the sponsoring ministries because PPP projects will be conceived by government ministries and departments.
Sponsoring ministries are ministries under which government departments or statutory corporations fall. For instance, the National Lotteries Board (NLB) is a statutory corporation that falls under the Ministry of Finance (MoF). MoF is thus NLB’s sponsoring ministry in cases of PPPs transactions.
According to the PC’s 2008 Annual Report, the new arrangement will make it possible for ministries to opt for donor funding in case of huge transactions whose funds may not be sourced locally. Operational costs that may necessitate donor interventions will include complex feasibility studies, value for money assessments, management and procurement initiatives.
“(In fact) a Project Development Facility will be established by the Ministry of Finance to co-ordinate funding requirements for various PPP initiatives. It is envisaged that the MoF will mobilize donor funding to meet transaction costs in various ministries,” reads part of the report.
Malawi has intensified efforts towards establishing a PPPs framework, with the MoF taking the lead. The ministry currently leads a steering committee that is coordinating implementation of the framework.
Members of the steering committee include MoF (Chair), Office of the President and Cabinet, Ministry of Economic Planning and Development, Ministry of Industry and Trade, Office of the Director of Public Procurement and the Privation Commission.
The committee’s main task has been to draft a national PPP Policy and Bill, which has since been prepared and submitted to cabinet for approval. This came about after a comprehensive review of legal, institutional and regulatory frameworks.
The World Bank, through the Public Private Infrastructure Advisory Facility, has been in the fore-front bankrolling the review programmes. The bank was also instrumental in funding the Privatization and Utility Reform Project (Purp) in 2007, a programme remembered for two things back home: building capacity interventions that saw most professional staff at PC being equipped with PPPs management skills, and the dismissal of 10 staff members from the privatization implementation agency.
“The winding up of Purp saw the reduction in the Commission’s (PC) staff complement from 30 to 20,” says PC’s Chief Executive Officer Jimmy Lipunga in the report.
The report indicates that, while more work has already been done, more remained in the pipeline. After the draft bill and policy have been approved by cabinet, for example, there will be need to define the extent to which the PPP approach will be applied within the public sector.
This will be followed by a comprehensive public awareness campaign aimed at acquainting Malawians with the new concept as well as its role in public policy. It is hoped that this will help clear misconceptions about privation.
Already, the privatization programme, now wobbling through its last days, has been heavily criticized for creating job losses and creating less employment opportunities as some of those engaged are expatriates with questionable credentials.
Consumers Association of Malawi Executive Director, John Kapito, is less charitable in his appraisal of the programme. He says privatization has not translated into the much-needed improvements, in terms of customer service delivery and satisfaction.
“There are many areas that (still) leave a lot to be desired in terms of service delivery,” said Kapito.
The PC has, however, often cited the many privatized companies that are doing well on the market as the silver lining of the whole programme. These include S&A Cold Storage, Bakhresa Grain and Milling, Chitakale Tea Estates.
Indications are that the Ministries of Health, Transport and Public Works, Housing, Education and Tourism could generate a significant number of PPPs.
“This is (PPPs in these ministries) in keeping with the spirit of the Malawi Growth and Development Strategy, which places much emphasis on infrastructure as a means of attaining economic growth and poverty reduction,” says Lipunga.
Adds Lipunga in the report: “Studies have shown that investment in infrastructure creates positive effects on not only the economic well being of citizens but also nearly all the social indicators. To the extent that the PPP policy framework will stimulate growth in infrastructure it, therefore, means that the quality of livelihoods at grass root level will, of necessity, improve- an essential ingredient in the attainment of Millennium Development Goals.”
The PC points at the Shire-Zambezi Waterway and its accompanying sub-projects, Mtwala and Nacala Development Corridors, Kapichira Power Plant, Cape Maclear Tourism Developemnt, rehabilitation and refurbishment of terminal and runways at Kamuzu and Chileka International Airports, Lilongwe and Blantyre Water Boards, strategic fuel reserves in Liwonde and oil pipeline from Nacala/Beira as some of the potential candidates for PPPs.