‘Debt accrued from PPPs must be sustainable’

BANKERS’ Association of Zambia (BAZ) says Zambia should adapt integrated policies that ensure debt accrued from public private partnerships (PPPs) is sustainable and transparent.
BAZ chief executive officer Leonard Mwanza said when he appeared before the parliamentary committee on Economic Affairs, Energy and Labour last week that there is need to consider the full fiscal implications of public borrowing and ascertain the true costs and benefits of PPPs over the lifetime of the project.
“Governments in Africa and Zambia need to disclose information on the performance and completion of public contracts and risk assessments, including environmental and social impact assessments. Governments should allow informed consultations and broad civil society participation,” he said.
Mr Mwanza observed that for PPPs to work in Africa, the risks, which include degree of skills transfer when final product is handed over to Government, exchange rate fluctuations and unanticipated costs risking the viability of the project need to be minimised.
He said few PPP projects are viable without some form of government technical or financial support, hence need the need for State support in financing the projects.
“Efficient financing of PPP projects involves use of government support to ensure that the government bears the risk which can cushion better than private investors and to supplement projects which are economically, but not financially viable,” he said.
Mr Mwanza also notes that limited local capacity to finance PPP projects by commercial banks has hampered the effective implementation of the initiative.
He, however, said financial system has evolved with institutional investors such as pension funds, insurance companies, mutual funds becoming key players in the provision of long term capital amid limited local financing of PPP projects.

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