HON.MILUPI ABUSING PPP PROJECTS
By Amb. Emmanuel Mwamba
Minister of Public Infrastructure, Hon Charles Milupi has announced that the Public Private Partnership Council has approved a 25-year Concession Agreement with a Private Company called Nkula Zambia in partnership with South Africa Business Development Forum to do roads in Western, North-western and Copperbelt Provinces.
According to this package dubbed “Development of the Western Province Trade Facilitation Routes inclusive of Resettlement Schemes and Border Facilities”, the Finance, Design, Construct, Rehabilitate, Operate, Maintain And Transfer Public Private Partnership Model, will cover a total of 2,208.5 kilometres of core road network.
Some roads will be neq construction while others will be upgraded to international bituminous standards.
Hon. Milupi listed the roads as follows;
- Tapo – Kalabo – Sikongo – Angola Border Road (125km).
- Sioma – Shangombo Road (175km).
- Lufwanyama – Kankolonkolo – Kasempa Road (225km).
- Kasempa – Kaoma Road – Luampa Junction (280km).
- Luampa Junction – Machile – Simungoma Road (340km).
- Livingstone – Katima Mulilo Road (225km).
- Resettlement Roads (minimum of 500km).
- Shangombo Bridge (approximately 8.5km).
- Sikongo Border Post and Trade Hub.
- Shangombo Border Post and Trade Hub.
- Katima Mulilo Border Post and Trade Hub.
It is strange that a 25-year Concession has been given to a private company to build and run these roads in a non-competitive, opaque and non-transparent manner and whose value has not been disclosed.
The Concessionaire will seek financing and obtain a loan under the direct or indirect guarantee of the Republic of Zambia.
Looking at the roads, it appears that these are best done under public sector financing as they are non-economical but developmental in nature.
PPP roads are highly commercial and are financed by the private sector.
The return of investment is guaranteed by traffic volume that will help repay the loan through tolling or annuities.
Further, the value of the project has not been disclosed.
This is important as the private company involved will obtain the loan against the Republic of Zambia and the road assets and business plan on how to repay the loan, will act as collateral security or Government may issue a sovereign guarantee.
I noted that in South Africa, there are two models of PPP adopted for the development of national highways.
They are; Build–operate–transfer or, Build–own–operate–transfer.
This is a form of project delivery method, usually used for large-scale infrastructure projects, wherein a private entity receives a concession from the public sector to finance, design, construct, own, and operate a facility stated in the concession contract.
The mechanism to recover the investment is through BOT (Toll) or BOT (Annuity).
(a) BOT (Toll) Model: In the BOT (Toll) model, the Concessionaire recovers his investment by charging toll from the users of the road facility.
This model reduces the fiscal burden on the government while also allocating the traffic risk to the Concessionaire.
This is the model used for most of the projects and can be regarded as the default model for highway projects.
(b) BOT (Annuity) Model: Under a BOT annuity model, the Concessionaire is assured of a minimum return on his investment in the form of annuity payments.
The Concessionaire does not bear the traffic risk and the Government bears the entire risk with respect to toll income.
From the above, it is clear that until the terms and conditions are disclosed, and until the commercial viability of this project are demonstrated, this may be a conduit to obtain a large international loan on the charge of the Treasury.
Hon. Milupi or the Council of PPP should not abuse their offices.
They have a noble duty to disclose the value of this loan, and guarantees that Zambia is expected to give.
In my view, Hon. Milupi has chosen to undertake roads in his constituency and his province under an opaque process whose cost burden will be borne by the country.
If he genuinely wishes to do viable PPP projects, he should follow Zambia’s renowned trade routes such as the Lusaka-Chirundu, Lusaka-Livingstone, Lusaka-Ndola-Mufulira, Kapiri-Serenje-Mpika-Nakonde, and similar roads that are in extremely dilapidated state but are core to trade/sea routes of the country.