Public-private partnerships (PPP) are a financing method that allows a public authority to approach private service providers to finance or manage a facility intended for public service. They differ from traditional public procurement methods in several ways. In a PPP, the public and private sectors work together to build public infrastructure projects such as roads, railroads, hospitals, schools, hydroelectric dams, etc.
It is a long-term contract between a public authority (the Authority) and a private sector company (the project company or the private partner) aimed primarily at providing services and transferring to the private partner certain risks associated with the project, including its design, construction, management or operation, maintenance and financing.
The project company may be remunerated directly either by the users of the project or by the Authority through the payment of a service fee or by a combination of these two sources. A PPP contract is a win-win partnership in principle.
PPPs are, however, more complex than traditional modes of public procurement. They require detailed preparation and planning, as well as proper management of the contracting phase to stimulate competition among candidates. They also require rigorous drafting of the terms of the underlying contracts, particularly with regard to the establishment of performance criteria for the services provided by the project, the remuneration of the private partner and the allocation of risks. PPPs therefore require skills within the public sector that are not necessarily required by other public procurement methods.
PPP projects have a particularity linked to the fact that a preponderant place is given to the provision of services and to performance objectives. They are based on obligations of results rather than obligations of means as is the case for traditional public contracts. As a result, PPPs imply fundamental changes in the preparation of projects and the information that the Authority must provide to the private sector. They require the definition of precise criteria for the provision of services, which will be contractualized in the PPP contract. Because PPPs are results-oriented in nature, the bulk of the design activities will generally be performed by the private partner.
In the world of public-private partnerships two modes of contractualization of PPP projects currently exist with the BOOT mechanisms, i.e. Build-Own-Operate and Transfer, which provides for the transfer of the know-how and ownership of the financed assets to the public authority at the end of the contract period, and the State does not participate in the capital, and the BOO type, i.e. Build-Own and Operate, where the State participates in the capital with the creation of a mixed company.
The PPP approach leads the State to concentrate more on its regalian functions and to stimulate and supervise the private sector in the financing of public infrastructures and the production of certain services.
The concept of PPP contracts is relatively recent in Burundi. The Government of Burundi has put in place a flexible and attractive legal framework to demonstrate its firm commitment to promoting both domestic and international private investment and to ensure greater collaboration between private partners and the Contracting Authority. Law No. 1/19 of July 19, 2019, amending Law No. 1/14 of April 27, 2015, on the General Regime for Public-Private Partnership Contracts, sets out the general rules of procedure applicable by the contracting authorities to the award, execution, monitoring and evaluation of public-private partnership contracts.
Like other countries in the world, the government of Burundi has understood that the PPP mechanism constitutes a tool of public order to stabilize the development of administrative entities and offer in Burundi as elsewhere in other States, especially in the developing world, an opportunity to improve the provision of public services and the management of infrastructure.
Currently, several PPP contracts have been signed between the State of Burundi and the partners, but no PPP contract exists between a decentralized territorial entity, in this case the communes, and the partners, even though since the communal law of 2005, 2014 and even the 2020 law currently in force, the communes have legal personality, of organic and financial autonomy and have the competence to ensure the management of local communal interests of the population of its jurisdiction (see Article 1 of the organic law n°1/04 of 19 February 2020 modifying certain provisions of the law n°1/33 of 28 November 2014 on the organization of the communal administration). Communes should benefit from this economic development mechanism.
To make the public-private partnership mechanism effective in Burundi, the government has set up the Support Agency for the Realization of Public-Private Partnership Contracts (ARCP).
The Support Agency for the Realization of Public-Private Partnership Contracts is a public service expert in the development of PPP contracts. It is the guarantor of the structural transformation of the national economy as it is reflected in the law of July 19, 2019 on the General Regime of Public-Private Partnership Contracts. Its main mission is to support the Government, the decentralized entities of the State, the Companies with public participation in the definition of the vision, the policy as well as the legal framework in terms of Public-Private Partnership Contracts; the Planning, the Design, the negotiation, the conclusion and the follow-up of the Public-Private Partnership Contracts and the regulation and the protection of the rights of the users of the Public-Private Partnership Contracts in all their cycle
The ARCP intervenes jointly with the contracting authority, at all stages of a PPP contract during the preliminary evaluation of the public-private partnership project, the selection of co-contractors, the negotiation and the monitoring of PPP contracts. Moreover, the above-mentioned law of 2019 reinforces the attributions of the Agency by indicating that the contracts concluded before the date of its promulgation remain valid for their duration. They remain governed by the laws and regulations under which they were established. These contracts are however subject to evaluation and monitoring by the ARCP.
Apart from the PPP law, the ARCP relies on the investment code which grants fiscal advantages to the partners and ensures the respect of the commitments of the parties to the public-private partnership contract since its signature, its execution and its closing. It informs the Government, through the sectoral ministries, of any breach of the contract or of any imbalance in the contract, which may lead to a renegotiation of the contract. In this case, it is the interlocutor attracted between the parties to the PPP contract in all its phases and remains impartial in the choice of partners and blocks the road to corruption and money laundering.
The Agency’s activities are in line with the overall framework of the Sustainable Development Goals (SDGs) and the National Development Plan (NDP) and it intervenes in several sectors of the country’s economic life by supporting the sectoral ministries to increase the production and potential of the private sector to meet the challenges of development without budgetary input from the State. It contributes to the strengthening of private sector investments.
Briefly, the public-private partnership (PPP) is a win-win contract concluded between the State and a private company, under which the private company finances, builds and operates a public service and the private company is remunerated over several years, either through fees paid by the users, or through payments paid by the public authority, or a combination of both. The ARCP is the expert body in the development of public-private partnership contracts.
GENERALITIES ON PPP
Public-private partnerships (“PPPs”) can be an effective way to build and implement new infrastructure or to renovate, operate, maintain or manage existing transport infrastructure facilities. In both areas PPPs can be a mutually beneficial way to solve critical transportation problems.
Transportation infrastructure (airports, ports, rail, roads, urban transport…) is indispensable to sustainable socio-economic development and trade. They link peoples and regions and connect firms to markets. Efficient transportation infrastructure is a major contributor to enhanced productivity.
It is anticipated that very significant investments will need to be made in the transportation sector globally over the next 20 years to meet the increased demand arising from population and economic growth. This will entail both the construction of new infrastructure, as well as the refurbishment and expansion of existing infrastructure, to accommodate both increased traffic flow and the increase in the size of transports (e.g. larger planes and ships). While the greater part of this demand is expected to come from developing economies, the infrastructure that will be required in developed countries is also forecast to be substantial.
At the same time, improved energy efficiency in the transportation sector will also be a key part of mitigating climate change. This will require innovative solutions.
PPPs provide a useful avenue for governments to access additional capital as well as technical expertise in the private sector to meet the very substantial demand from their populations for new and expanded transportation infrastructure in the coming decades.
As the transportation sector encompasses a number of subsectors, different considerations apply to PPP structures, depending on the subsector. Nonetheless, a number of thematic issues are relevant to all subsectors:
- Transportation infrastructure is by its nature monopolistic assets. Accordingly, the regulation of competition and public access in respect of the infrastructure will have important economic implications.
- The private consortium’s ability to impose tariffs on users of the infrastructure is another important structural consideration, as it directly impacts both public amenity and the private consortium’s ability to recover its investment.
- The allocation of revenue / demand risk for the infrastructure is another core negotiation point between the host government and private consortium in transportation sector PPPs.
What Are Public-Private Partnerships?
Public-private partnerships involve collaboration between a government agency and a private-sector company that can be used to finance, build, and operate projects, such as public transportation networks, parks, and convention centers. Financing a project through a public-private partnership can allow a project to be completed sooner or make it a possibility in the first place. Public-private partnerships often involve concessions of tax or other operating revenue, protection from liability, or partial ownership rights over nominally public services and property to private sector, for-profit entities. Public-private partnerships typically have contract periods of 25 to 30 years or longer. Financing comes partly from the private sector but requires payments from the public sector and/or users over the project’s lifetime. The private partner participates in designing, completing, implementing, and funding the project, while the public partner focuses on defining and monitoring compliance with the objectives. Risks are distributed between the public and private partners through a process of negotiation, ideally though not always according to the ability of each to assess, control, and cope with them.
In its most basic sense, a partnership is any business or institutional association within which joint activity takes place. A PPP exists from the moment one or more public organizations agree to act in concert with one or more private organizations. PPPs embrace public-sector partnerships with both businesses and organizations in civil society, including community organizations, voluntary organizations, and nongovernmental organizations (NGOs).
The partnership involved in a PPP is not equivalent to any simple contractual relation. Although such relations are sometimes labeled “partnerships” by the parties concerned, they do not by themselves constitute a genuine PPP, which implies a triadic relationship between the public authority, the private-sector partner, and members of the public concerned with the service. A PPP is—or should be—a mutually beneficial agreement directed toward serving a social purpose.
But it is also true that a multiplicity of agreements or contracts, more or less formal in nature and sometimes very informal, may give rise to a genuine partnership. The most-institutionalized forms of partnership may evolve into formalized permanent structures. In practice, PPPs tend to change over time, because it is in the nature of a partnership to develop and to adapt to the special circumstances of its particular field of operation. In the latter regard, political cultures and traditions have considerable impact.
- Public-private partnerships allow large-scale government projects, such as roads, bridges, or hospitals, to be completed with private funding.
- These partnerships work well when private sector technology and innovation combine with public sector incentives to complete work on time and within budget.
- Risks for private enterprise include cost overruns, technical defects, and an inability to meet quality standards, while for public partners, agreed-upon usage fees may not be supported by demand—for example, for a toll road or a bridge.
- Despite their advantages, public-private partnerships are often criticized for blurring the lines between legitimate public purposes and private for-profit activity, and for perceived exploitation of the public due to self-dealing and rent seeking that may occur.
Advantages of Public-Private Partnerships
Partnerships between private companies and governments provide advantages to both parties. Private-sector technology and innovation, for example, can help improve the operational efficiency of providing public services. The public sector, for its part, provides incentives for the private sector to deliver projects on time and within budget. In addition, creating economic diversification makes the country more competitive in facilitating its infrastructure base and boosting associated construction, equipment, support services, and other businesses.
BENEFITS OF PUBLIC-PRIVATE PARTNERSHIP
The PPP arrangement is beneficial to a country and justifiable in view of the potential benefits that accrue to all parties. The potential benefits include:
Facilitating creative and innovative approaches in stimulating private sector to engage in specific PPPs; with the government allowing bidders to compete on the basis of their ability to develop unique and creative approaches to the delivery of a required output;
Enhancing government’s capacity to develop integrated solutions that effectively addresses public needs;
Reduced costs of implementation and realization of quality products and services attributable to economies of scale and operating efficiency;
Accessing technical and managerial expertise, financial resources and technology from the private sector;
Facilitating large scale capital injections while reducing public debt and dependency on aid;
Better responsiveness to consumer needs and satisfaction of those needs;
Fostering economic growth by developing new investment opportunities and increasing provision of public goods and services; and
Ensuring fulfillment of the best interest of the public and private sector through an appropriate allocation of risks and returns
PUBLIC – PRIVATE PARTNERSHIP AUTHORITY
The PPP Authority is a Specialized Unit within the Ministry of Finance, Budget and Economic Planning established under the Statute and the Law regulating PPP in Burundi. The PPPA serves as the secretariat to the PPP National Committee and is responsible for the systematic coordination of all the PPP projects review and approval process, geared towards promoting the flow of bankable, viable and sustainable projects that further the National Policy on PPP. It is the specific responsibility of the PPP Authority to assist each contracting authority to identify, select, appraise, approve, negotiate and monitor PPP projects throughout their life cycle.
Public-Private Partnership Authority is an expert public service in the development of contracts related to public-private partnership. It is the key of the structural transformation of national economy as shown through the Decree signed in 2019 concerning the General Regime of Public-Private Partnership.
The Public-Private Partnership Authority was created by Decree n°100/12 of January 06th, 2016.It was given the stint to bolster the Government of Burundi, decentralized public entities and Societies in:
●Defining the vision, politic and legal framework in terms of public-private partnership contracts
●Planning, conception, negotiation, conclusion, following up and evaluating all public-private partnership contracts
●Regulation and protection of the users of public-private partnership contracts
●Transparency and notification
●Access to public command
●Equality in treatment
●Objectivity of procedures
●Fight against bribery and
ATTRIBUTION OF PPP AUTHORITY
The Public-Private Partnership Authority regularly proposes to the Government, for adoption, all documents of the vision, politic and necessary reglementary and legal reforms to develop public-private partnership contracts.
The PPP Authority fastens the spreading, to the public and partners, of the vision, politic and all governmental programs to be put in the regime of PPP and the legislation existing in Burundi in the domain of Public-Private Partnership
ATTRIBUTION OF PPP AUTHORITY IN THE FACET OF, CONCEPTION, NEGOTIATION AND CONCLUSION OF PPP CONTRACT
The Public-Private Partnership Authority centralizes all propositions of programs to be made in the regime of public-private partnership from sectoral ministries
The PPP Authority ensures the spreading of the governmental programs to be put in PPP Contracts to the public and investors
The PPP Authority proposes to the Government the strategies that attract investors in the domain of public-private partnership
ATTRIBUTION OF PPP AUTHORITY IN THE DOMAIN OF REGULATION AND PROTECTION OF THE USERS OF PPP
The PPP Authority watches to the abidance of the parties’ engagements to the contract of public-private partnership from the beginning, during execution till the enclosure of the contract.
The PPP Authority informs the Government through sectoral ministries on all forms of violation of the contract and all eventual imbalances that arouse a renegotiation of contract
WHO SIGN A PUBLIC-PRIVATE PARTNERSHIP CONTRACT
A PPP Contract is signed by a sectoral Minister, Minister of Finance, Budget and Cooperation for Economic Developmentand the society of project after adoption by the Ministers’ Council.
WHAT DOES THE PPP AUTHORITY DO IN CASE OF MISSES TO THE PRIVATE PARTNER’S OBLIGATION
The PPP Authority gives injunctions to the private partner to comply with all dispositions of the PPP contract and the laws of Burundi
The PPP Authority gives him penalties stated by the contract related to the damages and interest.
REASONS TO INVEST IN BURUNDI IN THE DOMAIN OF PPP AND CLIMATE OF AFFAIRS
●The Government of Burundi is stoutly engaged in the dynamic of infrastructures to hit the Sustainable Development Goals
●Burundi displays a steady will to promote national and international private investments
●Burundi picks out a liberal economic orientation
●His smooth and attractive climate of affairs
●Burundi has adopted:
-A law that modifies the law concerning the General Regime of the contracts related to Public-Private Partnership and the law regarding Code of Investments in Burundi
-Decree regarding the Statute of the Public-Private Partnership Authority
-Decree regarding the Applicable Procedures in delivering public-private partnership contracts
●Burundi develops and promotes little and middle enterprises
●Smooth collaboration of the Government and private partners
SECURING OF OUR PARTNERS INVESTORS
–Laws that protect partner’s investors and the users of contract of public-private partnership
-Contract signed between the Government of Burundi and the partner
-Organ of evaluating the exploitation of the project
-A signed note that ensures that the partner will execute the project with faith and in accordance with the law relating to public-private partnership contract.
BURUNDI PPP STATUS
|POLICY, LEGAL AND REGULATORY FRAMEWORK
|The PPP framework is very nascent in Burundi. The Ministry of Finance, Budget and Economic Planning issued the PPP framework policy to put in place an enabling environment that will stimulate investments in public infrastructure and related services, encouraging private sector investment and participation in public infrastructure and related services.
|The Public – Private Partnerships Law 2019 was published and governs the procurement of PPP project. Other laws which favor and has relevance to PPP law were published. The Decree that create institutional unit in charge of PPP and the decree that states the procedures of procurement of PPP contracts. Relevant sectoral law on PPP were published for instance , Electricty law 2015 and Investment Promotion 2021.
|The PPP law 2019 provides guidelines on how PPPs are conducted in Burundi. As noted at the starting point of the law, aside to the institutional framework, the objective of the law includes the role of private sector, guidelines to be used in evaluating bidders for PPP projects, inception and feasibility study of PPP projects, guidelines for agreement, monitoring of the project, outlines bidding methods and procurement procedures of PPP projects. The law specifies clearly infrastructural projects under which the PPP law will apply i.e socio – economic infrastructure and related service.
|PPP Framework law sets out contractual obligations that PPP agreement will be required and the PPP National Committee is responsible for approving standardized bids
|Clear institutional framework for the development and approval of PPP projects are PPP Secretariat, PPP National Committee and the Contracting Authority after approval of the Ministers Council.
|PPP Contract Management
|The PPP Authority was established by the Statute in 2016 to spearhead by these efforts of the Government, under the Ministry of Finance, Budget and Economic Planning, it has been serving as the secretariat and technical arm of the PPP National Committee. The Unit receives projects proposal and screams them, assesses their legal and commercial viability development projects to further the National Development Plan.
|The PPP framework law states a serie of selection criteria and privileges competition. The procuring entities are responsible for the conceptualization and identification of PPP projects. Procuring entities are responsible for the development, tender and implementation of projects.
|Ministry of Finance, Budget and Economic Planning is responsible for advising the government on the financial implication of any PPP project. No explicit mention of contingent liability. However, approved PPP projects receives guarantee from the Contracting Authority.
|The PPP Unit is hosted under the Ministry of Finance, Budget and Economic Planning, assigned to provide technical support and expertise in implementing PPPs, monitoring and evaluating Burundi’s PPP projects. The PPP Coordination Unit has two sections: the secretariat and the National PPP Committee.
|The Government of Burundi has put in place PPP Unit. The Unit functions as a resource center, coordinates and monitoring and providing advice, is responsible for identifying and developing PPPs, analyzes PPPs before submission to National Committee. It provides to the public sector the technical expertise in planning, negotiation, conclusion and monitoring and evaluation of the implementation of the PPP Contracts.
|Unsolicited proposals may be considered by Contracting Authorities as long as they do not relate to a project for which selection procedures have been initiated or announced. If the project is potentially in public interest, Contracting Authority can invite the proponent to give detailed information. In collaboration with the PPP Unit, a full competitive tender is required (proponent shall be invited to participate in competitive selection procedure with no advantage mentioned in law). In exceptional circumstances, projects can proceed to direct negotiation
|The PPP bill contemplates different types of government support as possibilities, although specifics on how this would be done, the roles of the Ministry of Finance are not yet available. There’s no cross-sector subsidy funds on PPP projects
|The PPPsconcepts are still new in Burundi. The PPP Unit faces the same capacity challenges. The personnel for managing the PPP are limited in numbers and expertise in covering all the investment areas as identified in the government’s work plan that covers all the ministries. The lack of capacity on both sides, particularly within public sectors to structure and negotiate PPP contracts that deliver value for money for the state and its citizens.
|Private Sector Capabilities
|The private sector is faced with difficulties in accessing credit, non-payment or delay in settling debts to the State and insufficient savings. The insufficiency of national private capital does not favor the development of PPP. This is due to the non-existence of a real policy of industrialization. This coupled with insufficient financing of activities, the weak technical and financial capacities of private sector support and promotion structures.