East-Africa Regional Office in NairobiCommercial Section Norwegian EmbassyPhone: +254 20 76 06 100,

email: IN-EA@innovationnorway.no

Commercial section of three Embassies

• Objective; • Promote trade with and investments from Norway

• Approach; • We bring EA market opportunities to Norway

• Company requests opportunities• Limited regional capacity to promote opportunities

• We research trade/investment opportunities seeking technology/know from Norway • Work with Gov. agencies, associations and investors in

EA – and Norway

Procurement or PPP

• Procuring goods and/or services as input to government led investment program

• PPP = delivery of public goods and services through a partnership contract for private sector provision of a government service• = sharing of operational risks and

responsibilities in delivery of a public service

PPP is NOT privatization

• PPP = Public Entities enter long-term contractual cooperation with private sector• Purpose; to improve delivery of public goods/services

traditionally provided by public entities. • Brings in new investment, technical solutions and/or

management practices.

• PPPs = shared risks by different forms of shared ownership and/or responsibilities

• In SSA, South Africa has been a frontrunner for PPP arrangements for public service delivery

Sample PPP

1. Private entity take over management of current public infrastructure or part of operations to improve performance.

2. Private entity lease current assets, reinvest in them to improve technical and financial efficiency of service.

3. Private entity is given concessions to invest in new infrastructure to expand service.

PPP have many dimensions to consider

• Who will have responsibility of delivering which service?

• Who will invest and have ownership of assets?

• Who will finance investments?

• Who will operate and maintain assets?

• …..

= different forms of contractual arrangements

Sample of contractual arrangements

• Service contracts

• Management contracts

• Different forms of concessions with different arrangements for ownership/lease and transfer of assets (BOOT, etc.)

Service Contracts

• A contractual arrangement for management of a particular task of a public agency.

• Bring private sector skills into service delivery.

• Public agency retains ownership of facility and equipment.

• Private contractor is paid a fee (usually performance based) to deliver service.

• Typical contract period 2-5 years.

Management Contracts

• A contractual arrangement for management of a public service agency by private sector.

• Bring private sector skills into design and delivery of service, operational control, labor management and procurement.

• Public sector retains ownership of facility and assets.

• Private contractor is paid a fee (usually performance based) to manage and operate services.

• Typical contract period 2-10 years

Build/Rehabilitate-Operate-Transfer

• A private entity resumes responsibility of some existing assets to add on or rehabilitate and operate them.

• Lease assets which is subsequently transferred back to public entity.

• Operates and maintains asset at its own risk for the contract period.

• Long term contractual arrangement 10+ years.

• A common form of PPP with public utilities.

Build-Own-Operate-Transfer (BOOT)

• Private entity receives a concession to finance, design, construct and operate a new public investment.

• Operates and maintains facility/assets at its own risk for the contract period.

• Long-term contract 10 ++ years to recover its investment, operating and maintenance expenses.

• Fees are usually increased during concession period to reach satisfactory internal rate of return.

PPP prerequisites

Transparent and predictable regulatory environment (Government).

Comprehensive market assessment and feasibility study (Government and private entity).

Design feasible and sustainable proposal (private entity).

Assessment of proposal (transaction advisor).

Clear understanding overall context, potential risks and responsibilities (Contractual arrangement).

PPP key factors for success

• Political ownership

• Public awareness• Access to evidence of improved service delivery= studies and

analyses on influences of PPP• Multi-stakeholder forums for government, private sector and CSOs

for awareness among general public, government officials and sector management/staff

• Transparency during negotiations and implementation

Suggested way forward

1. Decide on PPP arrangement to pursue

2. Decide on contractual partners to work with

3. Outline a proposal for a pilot project at sufficient scale to prove its financial and economic viability

Service Contracts

Management contracts

Lease contractsBuild Operate Transfer contracts

Concessional contracts

Scope Contracts for services such as meter reading, billing, etc.

Management of entire operation or a major component

Responsibility for management, operations, and specific renewals

Investment and operationof major component like production,distribution and/or treatment

Responsibility for all operations and for financing and execution of specific investments

Asset Ownership

Public Public Public Public/Private Public/Private

Duration 1-2 years 1–5years 10–15years Varies 5–10 yearsO&M Public Private Private Private Private Investment Public Public Public Private Private

Comm. Risk

Public Public Shared Private Private

Risk for Private Sector

Minimal Minimal/moderate

Moderate High High

Compensation Terms

Unit prices Fixed fee with performance

Portion of revenues

Fixed or variable with indicators of

All or part of revenues