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Nam infrastructure funding gap estimated at N$150 billion

by Kelvin Chiringa

Treasury has been informed that an estimate of N$150 billion is needed for the financing of infrastructure which is open to the private sector through beneficial Public Private Partnerships (PPPs). 

Finance ministry permanent secretary Ericah Shafudah said in an environment where the fiscus is constrained and coupled with the challenge that we’ve been downgraded; PPP programmes should become key to the development of public infrastructure.

She added, ““We are aspiring to see some projects being undertaken through PPP arrangements, with all these efforts that we are making, as the treasury and the government, by engaging the private sector and advocating for the private sector to actively participate in the PPP arrangements.”

Outspoken minister of finance Calle Schlettwein has said while the government has espoused PPPs as engines for economic growth, they have to be meaningful and inclusive of best practices.

The minister highlighted at this point in his opening remarks at the PPPs conference held in the capital recently.

“A prerequisite for successful PPPs is that the objectives of both the public and private sectors are common and mutually beneficial,” he noted. 

Schlettwein said they should ensure that services are delivered economically, effectively and efficiently.

He added that the interest of the public and private sectors have to be served through an appropriate allocation of risk and returns between the two parties. 

“Projects should be developed in a bankable manner such that there is a true investment opportunity for the private sector,” said the minister.

Schlettwein stressed the importance of risk management saying that risk allocation is just but one of the critical value for money drivers in a PPP.

“It allows the public party to transfer risks to the private party, relieving it of bearing the cost of risks that it cannot manage. For the public entity, efficient risk allocation is key to creating a good deal for society,” he explained. 

He said for private entities; efficient risk allocation is key to ensuring that the project is financeable and the risks allocated to it are rational and controllable.

The minister said a PPP delivery model allows specific project risks to be transferred to the private party, yet many risks are still retained by the public entity.

“Over and above the need to manage the direct financial risks of PPPs, it is essential for us to be prudent about taking on contingent liabilities induced through PPPs.

“In case of government guarantees, we are of the view that these should be extended with due caution to ensure that we manage our contingent liabilities responsibly,” he said. 

He said the government would be very vigilant in the scrutiny of all guarantee requests and that GRN must have compelling reasons for approval of these requests and take on additional contingent liabilities.

He said in the meantime, Namibia offers many opportunities for private sector investments in the green energy space.

“At the moment, Namibia is a net importer of electricity from some of the neighbouring countries. The public sector alone cannot respond to the enormous investment needed to meet the growing demand for electricity,” said Schlettwein.