VISION
A well developed and maintained quality socio-economic infrastructure and related services that enhances the Zambian people’s livelihoods and effectively contribute to National Development through PPP frameworks and initiatives

RATIONALE
The Government faces challenges in the delivery of public infrastructure and services. There is an on going need for provision of new infrastructure and services, rehabilitation and maintenance of existing infrastructure and services. This is in order to deliver public services more effectively and extend access to services to the citizens. It is important to note that the increase in population has not been matched by increased capacity in infrastructure delivery and services provision by Government. In view of the fact that various sectors of the economy require resources which are rather limited, PPPs would provide Government with an alternative means of providing new infrastructure as well as rehabilitation and maintenance of existing infrastructure through involvement of the private sector that will provide requisite finance and expertise for such investments. Through these initiatives, Government can foster economic growth by developing new commercial and investment opportunities for domestic and foreign direct investment. Internationally and regionally, PPPs are used effectively as a means of providing economic assets such as roads and railways, and social assets such as schools and hospitals.

By careful design of PPPs, the delivery of public infrastructure may also be enhanced by accessing the private sector’s financial, managerial, professional and technical expertise. The necessary maintenance and operation of this infrastructure may also be enhanced by these private sector resources. This will allow the public services to be delivered efficiently and effectively thereby allowing Government to channel limited resources to areas where direct public investment and intervention is required. It is envisaged that through PPPs, there is an opportunity to develop and strengthen the local capital markets which may stimulate additional local and foreign investment. There are a lot of bond and equity investment opportunities for the institutional investors both local and international, to trade on the Lusaka Stock Exchange (LuSE), except that few companies are listed. Through PPPs it is possible to induce trading on LuSE thereby creating liquidity which is currently lacking.

PPPs would form an integral part of Government’s overall strategy for the provision of public social services and infrastructure development, across all appropriate sectors. As experience elsewhere has shown, PPPs can offer value for money benefits and also reduce budgetary pressure whilst improving service delivery. The potential advantages from PPPs may not be an answer to all Government’s project delivery needs and should be investigated in the first instance when suitable projects are being evaluated. It should be noted that not all projects will be suitable for PPP arrangement and suitability must be tested against set criteria by the PPP Unit.

GUIDING PRINCIPLES
The fundamental goals of both public authority and the private sector firm normally tend to be in mutual opposition. This is mainly due to the fact that the public authority will primarily focus on the long term which materialises through physical infrastructure that is developed by minimising reliance on public sector funding. On the other hand the private sector firm places emphasis on the short and medium term in order to get their return on investment. While the benefits and advantages of PPPs can be significant, they are not automatic. Rather, the positive outcomes have to be earned through well-designed projects, thorough due diligence and competitive and transparent procurement. There are thus certain key pre-conditions critical in delivering successful outcomes. These have been identified as:

Feasibility
A good and comprehensive feasibility study has to be undertaken to assess among other criteria:

Affordability
PPPs should be affordable. The assessment of affordability by the procuring body is as important for privately or partly privately financed projects as it is for those which are publicly financed. Affordability will need to be the cornerstone of all PPP projects. PPP options must be affordable both to Government and the general public, given other priorities and commitments. The rationale for PPPs is improved management of scarce resources, better risk allocation and more efficient and cost-effective delivery of services. It will always need to be borne in mind, however, that while the private sector may be willing to finance and deliver services through PPPs, only users or taxpayers can pay for them. Affordability thus acts as a real constraint, and public bodies will need to give serious consideration to the selection of potential PPP projects, ensuring always that their choices are in line with Government’s policy priorities and objectives. PPPs provide real, significant prospects for new forms of procurement, financing and operation in ways that are likely to result in improved management of scarce resources. Government’s PPP programme should not, however, be seen simply as an opportunity for public bodies to undertake projects that would ordinarily not get approval through normal budgetary processes.

Bankable Projects for Financiers and Developers
PPP’s should be bankable as financiers will be reluctant to commit finance when a project entails high participation costs, unreasonable risk transfer or lengthy and complex contract negotiations. PPP Projects will remain attractive to the private sector through cost recovery pricing policy and an allowance for a return on investment. This is critical to ensure that the project developer or investor is assured of steady and predictable tariffs over the life of the project in order to guarantee service delivery. In order to assure project developers or investors of the cost recovery pricing policy, it will be important to develop, implement and enforce a comprehensive and coherent legal and regulatory framework which would include: -
• Contract regulation;
• Contract transparency;
• Minimisation of contract disputes or contract breakdown; and
• Efficient and effective local dispute resolution mechanism.

Value for Money
PPP’s should provide value for money, that is good economic value which is not necessarily the same as least cost and PPP’s should focus on service outcomes or outputs rather than on the provision of assets. Value for money will be manifested through the following:
• Better coordination and greater synergy between the phases of design, construction and operation;
• An innovative design, application of reengineering principles and efficient management techniques;
• Emphasis placed on quality of service offered to the end user/ customer;
• An approach aimed at minimising total project costs throughout the entire project life cycle (capital investment + maintenance + operations); and
• A more effective use of capital coupled with the generation of revenue.

Risk Allocation
PPPs should provide for optimal risk allocation between the public and private sectors. PPP type projects always comprise a high level of risk due to the magnitude of the financial stakes involved, uncertainties over construction and operating costs, vandals, enforcement of laws, political stance/political will and revenue related uncertainties. PPPs rely on balancing the allocation of risk and enables transfer of the same to the private party when the said party is better able to mitigate/manage the risk than the public authority. In return, the public authority significantly reduces its risk exposure while overseeing project optimisation efforts.

Economic and Social Benefits
PPP projects should always be evaluated for economic and social benefits rather than focus on the financial considerations. PPPs’ underlying principle stems from the fact that the public authority remains responsible for service provided to the public, without necessarily being responsible for the corresponding investment. Through PPPs the public authority is relieved of a bulk of investment related obligations and as such is able to concentrate on service quality control, while the private operator seeks to optimise its capital outlay.

Citizen’s Empowerment
The implementation of PPP projects shall have due consideration for the empowerment of Zambian citizens as a strategy for economic growth and sustainability. As such, PPP undertakings need to provide for the participation of local investors in line with the Citizens Empowerment Act.

Decentralisation
PPPs should be extended to Local Government. Councils should be able to provide infrastructure and social services through PPP schemes at local level.

Corporate Social Responsibility
The ultimate goal of PPPs is to enable effective provision of infrastructure and related services, thereby ensuring that these amenities are also made available to all levels of society, with due consideration to the protection of the environment.

Unsolicited Bids
Potential PPP Projects will not always be known and tendered to the public for submission of bids. It is possible that a PPP Project could be initiated by the Private Sector where no bids have been requested. Such a proposal from a developer or investor will be treated as an unsolicited bid. This PPP policy will allow for unsolicited bids in line with relevant regulations. It is important to note that unsolicited bids will encourage creativity and innovation on the private sector and will lead to quality bids being submitted.