Establishment of the PPP Centre in full gear!

Source: Doing Business Tanzania Magazine

?INVESTORS looking to venture into partnerships with the Tanzanian government in the implementation of mega projects have all reasons to smile as plans to launch an autonomous Public Private Partnership (PPP) Centre are in full gear.

?The establishment of the PPP Centre is a vital step in addressing the long-term challenges faced in implementing Public-Private Partnerships in Tanzania under the previous legal regimes, which were deemed too bureaucratic by investors.

?The establishment of the PPP Centre is also a positive step towards bridging the infrastructure deficit in Tanzania.

?The move comes after President Samia Suluhu Hassan signed into law the amended Public Private Partnership Act in July 2023. These were the third amendments since the first PPP Act was enacted in 2010. The Act was also amended in 2014 and 2018.

?“We expect that the Centre will be up and running before December this year (2023),” said Mr Kafulila, the PPP Commissioner, in an exclusive interview with the Doing Business Tanzania Magazine in July 2023.

?The Centre, which traditionally has been a department under the Ministry of Finance, is being established to independently provide technical analysis of projects submitted by the government institutions (Solicited) and those from the Private sector (un-solicited) to establish whether they are in line with PPP legal frameworks.

?In addition, the Centre’s responsibilities include coordination and support of investors to swiftly access the PPP projects Pipeline, project guarantees, viability gap funding, obtain streamlined information, and access facilitation services.

?Mr Kafulila who was appointed the PPP Commissioner in January 2023 said they are currently busy with setting up institutional and regulatory instruments before starting.

?The PPP Centre will encompass four strategic departments: Project Development and Appraisal, Legal Directorate, Planning, Monitoring, and Evaluation, and Corporate Services. Each department will play a crucial role in facilitating successful and transparent PPP projects across various sectors.

?Some of the tasks being currently undertaken towards the installation of the Centre include mobilization of financial and human resources, capacity building and amendment of the PPP Regulations to reflect changes that were made in the PPP (Amendment) Act of 2023.?

?“We are currently working with a consultant from the World Bank to review the PPP Regulations and the various PPP Guidelines such as Fiscal Commitment and Contingency Liability (FICCL),” the Commissioner said adding that the regulations could also be ready before December 2023.

?As part of activities to operationalize the Centre officials are also creating a PPP Centre’s Business Plan, establishing the PPP Centre website, project portal, and Source platform to streamline communication and collaboration with stakeholders.

?Highlighting the meticulous approach taken in setting up the PPP Centre Mr Kafulila says: "The PPP Centre's operationalization involves various key steps, including the preparation of a Service Scheme, mobilization of human resources through new hires, onboarding talent from Development Partners, and engaging external advisors."

?The goal is for the PPP Centre to become a Centre of Excellence, embodying the country's commitment to successful Public-Private Partnerships. "With the PPP Centre's operationalization, we will have a dedicated entity to drive our PPP initiatives and ensure effective coordination among various stakeholders," Kafulila noted with optimism.

?According to Commissioner Kafulila, the Five Years National Development Plan III (FYDPIII) has assigned the PPP Center to mobilize TZS 21 Trillion in private capital over five years. “This represents 51% of the private capital target and 17% of the total development budget for FYDPIII.

?As of May 2023, a total of 25 projects had been identified out of which 13 projects got funding for preparation under the FY 2023/2024 budget. About 3 projects secured the commitment of Development Partners for appraisal support.

?Priority PPP projects

?According to the PPP Centre’s strategy, Transport and Energy have been identified as priority sectors for the PPP Centre, considering their significance in fostering economic development and meeting future demands. However, these sectors require substantial financial investments. For instance, in the 2022/2023 budget, the Ministry of Works and Transport received 9.3 percent of the total budget, a significant increase from the previous fiscal year.

?"Transport is one of the priority sectors, but transport projects need a lot of money," Mr Kafulila says, highlighting the need for public-private partnerships to mobilize the necessary funds and expertise for successful implementation.

?The emphasis on these sectors stems from the country's higher urbanization rate than the average in the Southern Sahara region. As of 2022, Tanzania's urban population stood at 36.7 per cent of the total population, and with further urbanization expected, strategic investments in infrastructure become essential to support population growth and enhance the quality of life for citizens.

?PPPs have been successfully implemented in Tanzania's education, health, and water sectors for many years, leading to improved service delivery and increased investment in critical areas. However, the performance in other sectors has been mixed, primarily due to the complexity of projects and the lack of clear guidelines.

?As Tanzania progresses towards becoming a middle-income country, PPPs will play a vital role in achieving sustainable and inclusive growth. The PPP Centre will serve as a focal point for PPP initiatives and will facilitate coordination among various stakeholders, including government agencies, private sector entities, development partners, and civil society organizations.

?This coordinated approach is expected to enhance project efficiency, promote transparency, and ensure the effective utilization of resources.

?The priority sectors identified for the PPP Centre, including Transport and Energy, hold strategic importance in driving economic growth and improving the overall well-being of citizens. By attracting private investment in these sectors, the government aims to address infrastructure gaps and meet the increasing demands arising from population growth and urbanization.

?Tanzania's decision to invest in strategic infrastructure through PPPs aligns with the global trend of leveraging private sector resources and expertise for public projects. Many countries have successfully implemented PPPs in various sectors, delivering quality services and improving infrastructure assets.

In addition to infrastructure development, PPP projects have the potential to generate employment opportunities and transfer valuable skills and knowledge to the local workforce. This spillover effect will contribute to the overall economic development of Tanzania.

The establishment of the PPP Centre and the enactment of the new PPP Act amendments mark a significant milestone in Tanzania's journey towards inclusive and sustainable development. By leveraging private sector resources and expertise, the country can bridge its infrastructure gaps, stimulate economic growth, and improve the well-being of its citizens.

?Available PPP projects

?The following is a list of some projects available at different stages of the procurement:

·?????? Development of oil Jetty and Tank Farms – Dar es Salaam Port

·?????? Development of a Four-Star Airport Hotel at JNIA

·?????? Development of a Commercial Complex at Julius Nyerere International Airport (JNIA)

·?????? Development of Cargo Terminal with Cold Storage Facilities at Songwe and Njombe Airports

·?????? 60 MWA Zuzu Solar Power Generation

·?????? 50 MWA Same Solar Power Generation

·?????? 100 MWA Manyoni Solar Power Generation

·?????? 358 MW Ruhudji Hydropower Project

·?????? 222 MW Rumakali Hydropower Project

·?????? Dar es Salaam, Lindi and Mtwara Gas Distribution

·?????? 82 km Tanzania – Malawi Interconnector Project

·?????? Dar es Salaam Commuter Railway Services

·?????? Mtwara – Mbamba Bay Rail

·?????? Railway Rolling Stocks

·?????? Development of the Bagamoyo Port

·?????? Construction of the Igawa – Tunduma Expressway

·?????? Kibaha – Chalinze – Morogoro Expressway

·?????? Inner and Outer ring roads in Dodoma and Dar es Salaam

·?????? Island/Mgao area - Mtwara Dry Port

·?????? Lake Victoria Port and Nansio Port Ukerewe

?Changes made in the new Act

?The enactment of the new PPP Act amendments signifies the government's commitment to creating a conducive environment for private investment and efficient project implementation. The introduction of enticing incentives, such as tax benefits, government guarantees, and assistance securing capital through the Viability Gap Funding (VGF) framework, is expected to attract more private investors to participate in PPP projects.

?The comprehensive oversight provided by the amended PPP Act will ensure that the interests of all stakeholders are protected, and projects are executed with transparency and accountability.

?Furthermore, the elimination of excessive fees and reduction in project preparation costs will encourage increased private-sector investment in Tanzania's development. This cost-reduction measure will undoubtedly boost investor confidence and incentivize more businesses to engage in PPPs.

Investor empowerment is a key feature of the new PPP Act amendments, enabling investors to negotiate with the government effectively. This provision will foster a collaborative approach between public and private sectors, leading to mutually beneficial partnerships, according to analysts.

?"The amendments will empower investors, streamline processes, and ensure comprehensive oversight, ushering us into a new era of infrastructure development and investment potential for Tanzania," says David Kafulila, highlighting the commitment to leveraging expertise and experience from both domestic and international sources to ensure the PPP Centre's effectiveness.

?The amendments also include provisions for accelerated procurement, allowing Contracting Authorities (CAs) to procure partners directly. This significant change eliminates delays in the procurement process, ensuring the timely execution of PPP projects and efficient delivery of benefits to the public.

?One of the key amendments is the provision allowing private sector partners to bring disputes before international courts for resolution, providing a mechanism for swift and impartial resolution of investment-related conflicts.

?Some of the other significant changes in the amended PPP Act are the detailed provisions about the types of financial assistance approved under the Loan, Guarantee, and Grant Act. This clarity will facilitate smoother financial arrangements and reduce uncertainties for private investors participating in PPP projects.

?The new Act also introduces a revolutionary provision that permits direct procurement of private sector partners by government authorities. This change eliminates unnecessary delays and bureaucracy, enabling faster and more efficient project implementation.

?"I firmly believe that these groundbreaking changes mark the beginning of an exciting new phase for investments in Tanzania. The amendments to the PPP Act create numerous opportunities for developing infrastructure and attracting investments in our country," Kafulila explained.

?Public Private Partnership Project Investment Procedures

?Investment procedures in PPP projects vary based on whether the project is solicited or unsolicited, according to PPP Commissioner Mr David Kafulila. A solicited project is a project prepared (with feasibility studies) by the government and is promoted to investors. Unsolicited projects are those in which the initiative comes from the private sector.?

?Mr Kafulila explains that in PPP projects, private investors engage with the respective government entities responsible for the projects. The PPP Centre plays a crucial role as the principal technical advisor to both government entities and investors on PPP projects.

?Unsolicited Projects:

In this scenario, a private investor identifies an opportunity and prepares a concept note, which is then submitted to the relevant government entity. If the government entity agrees to collaborate with the investor, they request the preparation of a pre-feasibility study.

?Steps taken by the investor:

1. The investor's pre-feasibility study is submitted to the respective government Ministry through the institution which the project falls under.
2. If the ministry (the minister) approves the pre-feasibility study, it forwards it to the PPP Centre for technical analysis and comments to ensure compliance with PPP legislation.
3. The PPP Centre then presents the project document to the PPP Steering Committee, chaired by the Permanent Secretary to the Treasury.
4. Feedback is provided to the government entity or investor, guiding them in preparing the feasibility study or refining the pre-feasibility study.
5. Upon completion, the investor submits the feasibility study to the relevant government entity, which further forwards it to the responsible ministry (minister).
6. The ministry sends the study to the PPP Centre for technical analysis.
7. If the proposal meets all requirements, it is presented to the PPP Steering Committee for approval.
8. Following approval, the project proceeds to the market for final discussions between the government entity and the investor, culminating in the implementation stage.

?Solicited Projects:

In the case of solicited projects, the government entity initiates the pre-feasibility study, comprehensive feasibility study, and financial model, aiming to attract the best project developer. The selection process often involves a bidding process to identify the most suitable investor.

?Steps taken by the government entity:

1. The government entity prepares the pre-feasibility study and submits it to the responsible ministry.
2. After ministerial approval, the study is sent to the PPP Centre for technical analysis and comments.
3. Once feedback is received, the entity proceeds with completing the feasibility study and returns it to the PPP Centre for assessment.
4. If the study meets the required standards, it is forwarded to the PPP Steering Committee.
5. Upon the Committee's satisfaction, the entity obtains approval to proceed with the procurement stage.
6. The government entity then issues a Request for Qualification (RFQ) publicly, inviting interested investors to apply within 30 days. The entity then shortlists qualified investors.
7. The selected investors are provided with a Request for Proposal (RFP) and given 60 days to respond. Additional time may be granted based on the complexity of the project.
8. After receiving the investors' proposals, an evaluation is conducted to determine the most suitable investor for the project.

?General Idea for Solicited Projects:

For instance, in a solicited real estate project, the government organization prepares concept notes, allocates land, and initiates the bidding process. The chosen investor then enters into a PPP agreement with the government entity, outlining the financial model for capital investment recovery.

Ends

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