What is a Public-Private Partnership (PPP)?
A public-private partnership is a partnership between the government and a privately owned business. PPP’s can be used to finance, build and manage projects like building a hospital, new roads, bridges, etc. A partnership like this is useful for the development of large projects which requires a lot of funding and highly skilled workers.1 It is a good method for the government to make use of PPP in order to gain good quality infrastructure services to clients. PPP can supply efficient and sustainable services to the public, for example, transport and energy solutions as well as healthcare and education possibilities.2
Starting a PPP Project
PPP contracts are usually long-term contract spanning over 15 to 25 years or even more. During this time, technology, politics, etc. change which means the contract has to be adjustable to certain situations. These changes should not at any time affect the stability and sustainability of the project too much. At the same time, it is very important that the private partner deliver the service they offered in order to guarantee the public party a good result. All of this requires time and developing skills.
Other Existing PPP’s in the Health Sector
PPP’s are often used to improve the development of the health sector all over the world. Whether it is the construction of hospitals, developing medical resources, financing, etc.
The Inkosi Albert Luthuli Hospital was the first South African hospital that was developed through a PPP. The hospital is based in Durban, KwaZulu Natal in South Africa and is big enough to offer medical services to the whole province. The hospital is fully equipped with computerised technology which enables a fast and modern diagnosis in diverse departments of the hospital.6
A PPP for medical waste management was also developed in Lesotho, a small country inside South Africa. Due to the high demand for healthcare services, the government started working on developing the healthcare sector in the country. One of the goals was to improve medical waste management. This is when a PPP was developed in order to test the management of medical waste in different districts of Lesotho where around 300 000 citizens live. A coalition between two companies – Ditau Health Solutions, a South African company and Matsete Investments, a company based in Lesotho- won the tender for this PPP. A pilot round for the waste management service was started.7
A mobile health service was developed in Namibia through a PPP. This service is especially helpful in rural areas where people do not have access to medical care. The medical services available are found in bigger cities or towns far away and with the poor road conditions or even no transport option, it is not always possible for people from rural areas to travel to doctors or hospitals for medical care. Mister Sister the mobile health service with support from the government, therefore has a big impact on the health service in these areas.8 It is basically a hospital or clinic on wheels which is easily accessible in areas where usually no health care is available. In this Youtube video, you can read more about Mister Sister Mobile Health Service: https://www.youtube.com/watch?v=enE6En-cYbU
In order for a PPP to be implemented, of course, bankable funds are needed. After all, the responsibility of a PPP is to provide funds for the development of a project.
Contributions to funding could be done through shareholder funds and share capital. This could include project participants, local investors, the local government, other interested governments, institutional investors and mutual organisations. 9
In some cases, the government might provide direct support for a PPP project through subsidiaries or equity investments.10 The type of finding can be very useful when the PPP project does not achieve enough bankable funds. In cases like these, developing countries are more in need of government support when it comes to PPP.
PPP in Developing Countries
PPP’s have been used for many years now to support developing countries to develop and improve their different sectors, for example, health, infrastructure, as well as their economic growth and this method, is still increasing today. 12 But the success of these projects do differ from those in developed countries. 13
Due to a lack of capital market discipline, developing countries need clear regulations. These regulations often lead to certain challenges since a large group of the clients are not financially stable and not as up to date to project management regulations, the service rates are also low and a lot of decisions and information on the project is not shared as it should be. This can all be due to limited resources, political situations, difficulty in attracting and keeping skilled staff. 14
In order for PPP projects to be sustainable, financial support from the government is very important in the public service sector, since the financially unstable group of the population is depended on this sector which will continue to be so in the future wand could have a big impact on the long-term success of the PPP. At the same time, loyal political engagement plays a big role in the development of the PPP and whether all regulation policies and finances are carried out effectively. 15
Sectors included in PPP
Sectors in which PPP development is found are mostly the ones with insufficient investment capital. Usually, PPP’s are used for the development of infrastructure, for example, building bridges, roads, power supply, etc. where investments are needed. Sometimes social infrastructure like the health and education sectors also make use of PPP’s but this is not as common as the other sectors. Manufacturing development which could be beneficial in the private sector, are mostly the main focus for PPP projects. 16
Difficulties creating PPP cooperations
Developing a PPP project requires a big group of individuals and a lot of time and money. A PPP project could take years to be completed and it is really expensive. Half of the PPP projects that are proposed are never implemented and cease to develop as planned. 17
How does PPP partnership work in countries with corruption?
If a PPP is not planned thoroughly, it could create possibilities for corruption. In order to prevent this, different approaches and measurements need to be taken. Decreasing PPP corruption could be done by encouraging honesty and clear communication during the different stages of the project.
To prevent PPP corruption, the following measurements are taken worldwide:
During this stage, it is important to ensure that all costs or investments made for this project are socially and economically confirmed in order to provide the best end result. It could be helpful to rely on a second opinion through public consultations for example in order to have their view on a proposal.
In many countries, rules have been made in order to avoid corruption in the tendering stage. These rules have been implemented to require competitive tendering to obtain public services via PPP, competent advertising of tender calls and enough time to prepare the proposals. Another method is to make use of auditing which could be helpful to ensure that the most valuable company will win the project.
Contract execution stage
In this stage, different rules have also been implemented to avoid corruption. In order to prevent bribes, the use of standardised contracts is required. Incentives not to make false claims are also offered to public officials which enables them to take the money rather than be corrupted. 18
PPP in Dialysis
Here are some examples of already existing PPP’s in the dialysis field.
Patients from third world countries who suffer from chronic kidney disease and acute kidney injury especially have to deal with many health issues due to the lack of treatment in these areas. For this reason, a PPP was established in Ayder Comprehensive University Hospital based in Mekelle, Tigray, Ethiopia. In this hospital, there was no renal replacement therapy available for patients. Not until a senior physician decided to make it a priority to assist patients with kidney disease. The goal of this PPP was to enable a service that included the infrastructure, personnel and sharing of maintenance costs. After a few attempts, the hospital administration and the local university proposed a model of the PPP. A company named Mahal Medical Center PLC who was already providing haemodialysis services in a private hospital in Addis Ababa was chosen as a partner for the PPP. In 2013 Ayder Comprehensive University Hospital, the local University and Mahal Medical Center PLC started the haemodialysis service at the Ayder Comprehensive University Hospital. This dialysis staffs many trained individuals which include 11 dialysis nurses, a general practitioner, a doctor as well as support staff. They have 5 dialysis machines which offer daily sessions twice a day. This project has resulted in 101 patients receiving haemodialysis treatment.3
In South Africa, the department of health is responsible for public health services. And although there is a high number of natural deaths caused by kidney disease in the Limpopo province 4, there used to be minimum access to dialysis treatment by the public health sector in this part of the country. The main obstacle was the financial costs to enable such medical services to people without medical aid. After a meeting arranged by the National Department of Health in 2015, different methods were considered to make dialysis treatment accessible for all. One strategy was to start a PPP project at the Pietersburg hospital. This was realised and the dialysis unit was developed. It is the first and only renal dialysis unit in the public health sector in Limpopo, and the only PPP dialysis unit in South Africa.5
In 2013 a PPP dialysis project was started in Dehli in order to provide high-quality haemodialysis treatment to patients in need. This PPP project enables haemodialysis treatment in the following 3 hospitals in Dehli: Lok Nayak Hospital, Rajiv Gandhi Super Speciality Hospital and Dr. Hedgewar Arogya Sansthan. 6
https://www.researchgate.net/publication/24111613_Public-Private_Sector_Partnerships_in_Developing_Countries_Prospects_and_Drawbacks PDF to be found here: file:///C:/Users/EC%20Admin/Downloads/Public-Private_Sector_Partnerships_in_Developing_C.pdf
On the endogenously determined degree of corruption in regulatory hiearchies, see Tirole (1992), Kofman and Lawaree (1996), Auriol (2006), Lambert-Mogilianski (1998) and Martimort and Straub ´ (2009).