SOEs can’t handle private sector

Government’s effort to rope in in private money to grow the economy at the back of a constrained national budget may be scuttled as most public enterprises cannot work with the private sector.

This judgement has been passed by PWC in a recently held presentation that interrogated the marriage of state-owned enterprises with private enterprises on developmental projects.

“Some of the considerations are SOEs’ capability. I will say this with some caution; we judge that most state-owned enterprises have the really little capability regarding working with the private sector. 

"They need to build this up and establish capability around private sector participation models where the needs of the private sector are not necessarily met but are understood,” said PWC’s Andrew Shaw. 

He said procurement is still at an experimental level.

“In the typical PPP model, the procurement model is very rigorous. It’s very onerous in fact. It tries to get to a point where it gets the best value for money from a particular provider of services and infrastructure,” he said. 

He pointed that in this model when a State Owned Company is often seeking a joint venture for a joint development agreement, it's very difficult to procure simply by price and service and infrastructure offering because they are not sure what the private sector may bring to the party.

“So if SOEs want to, for example, procure a process with a private sector enterprise entity, they don’t know exactly what the frame of that delivery model will be. They want to enter into engagement with the private sector before they work out what is the most effective way to deliver a particular project.”

“It is very difficult to have a structured, clear procurement model and that is an area that is the experiment that we are currently facing in the South African example,” he said.

United States ambassador to Namibia Thomas Daughton also said while Namibia has a conducive political environment and an independent professional judicial system, the small size of its market is usually a turn-off for possible PPPs arrangements. 

“Market size is a driving factor for a lot of PPPs and Namibia’s market by itself is quite small that makes more challenging the identification and realisation of particular PPP projects,” said the ambassador.

He, however, acknowledged that the country is well-positioned with access to a variety of adjacent markets.

“And as projects are looked at, especially major infrastructure projects that will be a factor in determining the marketability of such projects,” the ambassador said.

On the expectation management issue, Daughton said the perceptions of the local business community are also going to be a factor. 

“There are two trends that I have observed here in the last three years regarding local businesses when they regard economic activities that involve outside investors. 

"Some surprisingly see prospective foreign investors as competition. That is an expectation that needs to be managed when you look at developing PPPs,” he said.

The ambassador has also frowned at tenderpreneurs who do nothing but chuck tenders in the hands of foreigners only to share the spoils after.

“There is a part of the commercial sector here that has become accustomed to seeing the role of Namibian business and projects that involve the government as being passports to foreign contractors. The Namibian business’ role is to get a tender and then turn to a sub-contractor or foreign contractor. Now that, I think, is not going to be a part of the PPP process,” he said.