PARIDAD DEL PODER ADQUISITIVO

Nyagwachi and Smallwood (2006:1) contend that “SA has developed a robust policy and

regulatory framework for PPPs; has an inadequate level of PPP awareness and training,

and lacks project management capacity to facilitate deal flow”. Based on their findings,

they constructed a systemic model for PPP planning, implementation and monitoring. The systemic model applies Project Management Body of Knowledge principles (PMBOK). The model proposes a project management system and maps ‘if-then’ causal relationships on the inputs, processes, outputs and impacts of the PPP cycle (Nyagwachi & Smallwood 2006:1).

The model is isolated to the infrastructure sectors and does not provide specific recommendations for multiple sectors. Moreover, the model does not provide performance indicators or criteria (Nyagwachi & Smallwood 2006:1). Based on the systems model and the generic systems engineering flow chart; the systemic model maps out an integrated management process for the project manager. Nonetheless, the model does not provide for strategic risk management processes and internal controls. This study aims to build on the success of the abovementioned model. In addition, this study

126 aims to improve the model and provide recommendations on risk complexities and the management thereof.

Jooste et. al. (2009:4) explores the “problem of institutional capacity shortfalls that

governments face when they employ PPPs”. By applying organisational field analysis,

Jooste et al. (2009:4) explores a diversity of organisational forms (which the author refers to as ‘governance bridges’), and also identifies the institutional forces that these organisations are subjected to. Jooste et. al. (2009:5) concludes that there is a need for ‘new types of capacities’ in order for PPPs to be successfully implemented (referred to by the author as capacity gaps).

Jooste et. al. (2009:5-6) identifies three types of capacity gaps. These include development capacity, internal sustainability and external sustainability. Jooste et. al. (2009:5-6) explains that development capacity entails the “resources and specialised

expertise to develop and set-up the PPP arrangement”. This would include choosing the

assets, services, resources, transactions, modality type, formulation, bidding process and the contract award process (Jooste et. al. 2009:5-6).

Internal sustainability entails the ability to manage and maintain the contractual agreement between the partners internally. This would entail performance management and monitoring, negotiations and so forth (Jooste et. al. 2009:6).

External sustainability would encompass the capacity to manage challenges posed by the external environmental, and would include for example public-opposition, non- payment, political interference, corruption and so forth (Jooste et.al. 2009:6). Jooste et. al. (2009:6-14) identifies a number of organisations that play a significant role in overcoming the abovementioned capacity bridges. The organisations include private consultants, private individuals, government bodies and multilateral bodies. These organisations typically range from both local and global organisations and include the following:

 Public Regulators which typically include government agencies that regulate the private providers;

 Non-public Regulators is an outsourced function of government that regulates the performance of private providers;

 Transaction Advisors who provide advisory assistance to public actors;

 PPP Coordination Agencies (or referred to as PPP units) are established by government as agencies to coordinate and develop PPP arrangements nationally; and

 Local, Regional and Multinational Development Agencies assist both public and private sectors to develop PPPs (Jooste et. al. 2009:6-14).

The primary aim of this study is to provide recommendations for best practice and good governance of PPPs. Capacity to govern determines the quality and efficiency of governance in PPPs. Therefore this study applies the above capacity gaps in the SA context in order to determine the capacity shortcomings in the SA PPP environments and suggests recommendations accordingly.

Overall, Levinsohn and Reardon (2007:5-6) identify the following factors that are required to improve the SA PPP environment:

 The additional capable utilisation of resources by government to source the necessary skills lacking at municipal level (SPAID 2007; Levinsohn & Reardon 2007);

 encouragement of real political championship (SPAID 2007; Levinsohn & Reardon 2007);

 ensured bankability of municipal PPPs through the correct credit enhancement (SPAID 2007; Levinsohn & Reardon 2007);

 formation and funding of specialist teams to work with municipal agencies or bodies to drive PPPs to financial closure (Levinsohn & Reardon 2007:5-6).

SPAID (2007) endorses the above claims and identifies the ensuing challenges for the successful implementation of PPPs in SA:

 there is a lack of PPPs in the transformational infrastructure sector;

 many of the greatest infrastructure needs are within sectors controlled by local government;

128

 implementing agencies experience difficulties due to a lack of resources,

“knowledge, skills, time and confidence”;

 municipalities also lack monies (more specifically, for municipalities, certainty of cash flows to pay for long-term PPPs over the term of the contract), and “municipalities also face: conflicts between laws affecting municipal governments

(MSA, MFMA and WSA), and ambiguity in the MSA, where no regulations or guidelines have been written for the law” (SPAID 2007).

SPAID (2007) puts forth a number of recommendations in order to improve on the delivery of PPPs in SA. These recommendations include:

 “establish a sector-specific project planning pipeline for transformational infrastructure;

 apply even-handedness in considering service delivery modes for transformational infrastructure;  clarify an operational definition of PPPs in transformational infrastructure;

 create transaction champions for PPPs in transformation infrastructure; and  simplify oversight”.

In addition, the findings of a case study on the PPP at Humansdorp District Hospital, Universitas and Pelonomi Hospitals, and Inkosi Albert Luthuli Central Hospital present a number of recommendations for the successful delivery of PPPs in SA (Wits Business School 2007). These recommendations include:

 “a thorough understanding of the contract;

 an understanding of the nature and demands of the private sector;

 sufficient status and credibility in the public sector and with the private sector to have de facto and designed authority;

 strong interpersonal skills;  strong analytical skills;

 a commitment to ensuring that the PPP is sustainable and that it continues to deliver value for money to both the public sector and the private sector; and

 a willingness to advocate for the PPP to ensure that it does not garner a poor reputation amongst stakeholders and to rectify problems that might be causing a poor reputation” (Wits Business School 2007:7).

SA should align its governance structures to overcome the aforementioned practical and institutional difficulties. In order to so, SA should implement strategic controls and systematic best practice to develop the current PPP market.

3.8 Conclusion

With the increasing development of a network society as a result of globalisation, there is a great need to build strength in both the public and the private sector and to foster PPPs for development. Current public management practice is characterised by an increase in partnership and cooperation between the public and private sectors. However, sometimes the dichotomy between different modes of PPPs presents a challenge. This is because at times the extension between the public and private sectors is not understood. Therefore, there is a need for both the private sector to cooperate on sharing roles and responsibilities. Nonetheless, there is no ‘one size fits all’ modality for the design and operation of PPPs. Therefore, public managers should be responsible for developing their own technologies to compete at the global level. The benefits of competition are innovation and sharing of resources through cooperation. The rationale of PPPs is that it enhances sustainable development through leveraging the private sector to achieve social objectives. This is because efforts are placed on the resources and capacities that already exist in the private sector.

The problems of society are too extensive to be addressed by the public sector alone, and thus government requires cooperation with other actors in order to enhance its own capacity.

This study aims to bridge the gap between the appreciation of theory and practice for the effective management of the relationship between risk management and best PPP practices which is critical to the successful outcomes of PPPs. Moreover, this study aims to determine whether risks can be effectively mitigated through a combination of best practices in risk management and performance management approaches.

130 Effective strategic control of PPP projects necessitates systematic integration of strategic planning, risk management and internal control of such projects. Risk management is a main part of an organisation’s activities and its main aim is to assist all other management activities to reach the organisation’s goals. Therefore, public managers’ tasks should include risk management in their strategic planning and day to day operations. Risk management is the planning, organising, leading, and controlling the resources of an organisation so as to reduce the possible effects of risk on the entity. Risk management as a process includes the assessment of risk, entailing risk identification and the analysis thereof, and a response to risk in the event of occurrence.

This chapter has supplied an overview of the theoretical and practical structuring of PPPs. The chapter also provided an overview of international best practice as guidelines for successful PPP implementation. In addition, this chapter identified the important determinants for effective PPP development and the general challenges and impediments to PPPs. The key factors in successful PPP delivery include cooperative governance, comprehensive risk conceptualisation, planning management and evaluation. An introduction was provided to the legislative background and regulatory environment of PPPs in SA. The following chapter outlines the research methodology and design followed in the preparation, execution and finalisation of this study.

CHAPTER 4

RESEARCH DESIGN AND METHODOLOGY