Sunday, May 31, 2009

The irony of private sector involvement in infrastructure sector in SSA

Kate Bayliss finds that by encouraging private sector involvement (by reducing their risk exposure) in utility provision in Sub-Saharan Africa, risks are simply transferred to governments, taxpayers, and end-users. Private sector is supposed to bet on risks, make smart investment and profit from it. However, it seems that the private sector engagement in utility provision in the developing countries is leading to a situation where benefits are reaped by them while risks are being heaped upon consumers and taxpayers.

a plethora of donor initiatives have emerged with the aim of bringing private investment into the region, and these too focus on reducing risk for the private sector. As a result, on offer to the private sector are the least challenging and most lucrative aspects of delivery, which are tightly ring-fenced and bound by guarantees. In industrialised economies, discussions of the merits of PSP highlight the importance of transferring risk to the private sector in order to generate efficiency gains. In contrast, as regards attracting PSP into utilities in SSA, the focus is on reducing the risk to which the private sector is exposed. But this risk is not reduced, it is transferred. As a result, African governments, taxpayers and end-users bear high levels of risk in order to accommodate the priorities of investors.