METHODOLOGY
The overall aim of this comparative analysis is to highlight some key findings that arise from analyses of the relevant data pertaining to the PPP legal frameworks of the countries surveyed. Given the level of detail within PPP legal and institutional frameworks , the findings are necessarily limited and intended only to give a flavour of the type of analyses and comparisons that are possible. The analyses are also limited to the provisions in the applicable legislation, without a detailed analysis of the related implementing regulations. No further on the ground research was carried out for the purposes of this analysis. Furthermore, the applicable legislation noted includes relevant legislation available as of 30 June 2023. As a result, any regulatory reforms or changes that may have occurred after that date are not taken into account. .
CHAPTER 1 : LEGAL AND INSTITUTIONAL PPP FRAMEWORKS
This section provides an overview of the legal and institutional PPP frameworks in the African jurisdictions surveyed by the ALSF. It assesses how common and civil law jurisdictions regulate PPPs in Africa through specific PPP laws, regulations and public procurement regimes. It additionally analyses some of the enactment trends in the countries that have adopted a PPP law and concludes by providing an overview of the main government entities responsible for promoting, facilitating, or assessing PPP projects across the African Continent.
1.1 PPP Legal Frameworks in Africa
Civil and common law are the main current legal systems in Africa.
- Common law countries tend to govern PPPs through policy statements, guidance materials, and contract law.
- Civil law countries are more inclined to develop specific PPP laws.
The PPP Country Profiles show that 42 of the 54 African countries have a law on PPPs. Of these 42 countries 24 (57%) are of civil law tradition, 13 (31%) have a common law system, and 5 (12%) have a bi-jural system.
Regional variations
Western and Central Africa have the largest proportion of economies that have enacted specific PPP laws.
African countries that have not enacted specific PPP laws include:
Yearly enactment trends
In terms of yearly enactment trends, the period between 2015 and 2017 marked the highest rate, with 16 countries enacting PPP laws over a three-year period . The first country to enact a specific PPP law in Africa was Mauritius in 2004 while the latest is the Republic of Congo in 2022.
PPPs are an essential format for procuring and financing infrastructure projects in Africa:
- Countries without specific PPP legislation tend to govern PPP contracts through their public procurement regime. This is the case in countries like Botswana, Comoros, Lesotho, Seychelles, South Sudan, and Eswatini.
- In other countries, laws specific to PPPs may coexist alongside the public procurement regime . This is the case in countries like Burkina Faso, Burundi, Mali, Mauritania, Mauritius, and Morocco.
- In South Africa, instead, PPPs are governed by the Public Finance Management Act.
Overall, 43% of African countries govern PPPs through their public procurement regimes.
The Western African Economic and Monetary Union (UEMOA) issued a directive (Directive N. 01/2022/CM/UEMOA) on the legal and institutional framework for PPPs that is currently being implemented in member states. The Central African Economic and Monetary Community (CEMAC) is also working on a directive that will specifically include PPPs as a form of public procurement.
1.2 PPP INSTITUTIONAL FRAMEWORKS IN AFRICA
To ensure the effective implementation of PPPs, most countries in Africa have a PPP Unit typically attached to the Ministry of Finance.
PPP Units may be set up as departments within government ministries or agencies and are composed of government teams focused on PPPs. Their functions vary, but when attached to Ministries of Finance, they usually perform gatekeeping functions by advising on the overall approval process of PPP projects.
- In Liberia , where concessions are used, the Public Procurement and Concessions Commission exercises its supervisory powers over concessions and all forms of public procurements.
- According to the PPP Country Profiles data, 41 of the jurisdictions surveyed have one or more dedicated PPP Units.
- Some are independent institutions with full legal personality akin to other government departments, such as South Africa’s Government Technical Advisory Centre (GTAC) and Nigeria’s Infrastructure Concession Regulatory Commission (ICRC).
- In other cases, PPP Units are either attached to Ministries of Finance, within Prime Ministers’ offices, in Presidents’ offices, or in other technical ministries.
The PPP Units in Africa with project approval functions are commonly located within Ministries of Finance, whereas PPP Units that provide technical assistance may be housed centrally. Instead, PPP Units with a promotion focus are typically part of investment promotion entities. The table below assigns typical functions to PPP Units based on their location. Wherever a PPP Unit is located, PPP Units may perform more than one of these functions.
Country Snapshot: Senegal’s Public Private Partnerships Unit |
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In Senegal, the Directorate of Finance and Public Private Partnerships (DFPPP) serves as the primary operational unit within the Ministry of Finance for managing PPPs. The DFPPP participated in the development of state policies, guidelines, instructions, and dissemination of best practices for the financing, design, implementation, and management of PPP projects. DFPPP advised and assisted the departments of Ministries, local authorities, national companies, public limited companies, agencies and public institutions in the preparation, implementation and monitoring of PPP transactions. In March 2021, a new law named Public Private Partnerships Contracts Law was adopted in Senegal (the “PPP Act”). The PPP Act repeals Act No. 2014-09 of February 2014 related to PPP contracts. One of the main innovations in the PPP Act relates to the establishment of a new National PPP Support Unit, which provide advisory opinions on PPP projects. The role of the National PPP Support Unit consists of assisting and advising contracting authorities in the identification, preparation, negotiation, and monitoring of PPP transactions. |
In most of the jurisdictions surveyed, Ministries of Finance also play a key role in supporting a PPP program by identifying infrastructure priorities within the national budget and public investment management constraints. Additionally, they ensure that PPP projects meet relevant financial criteria.
Other key governmental stakeholders involved in PPPs include Contracting Authorities, being the entities empowered by the legal framework to enter into PPP arrangements with Private Partners.
Contracting Authorities in the African jurisdictions surveyed include:
- Government Ministries
- Departments and Agencies
- Local authorities
- Municipalities
- State-owned enterprises
chapter 2 :Criteria for defining Public Private Partnerships in Africa
2.1 PPP Definition
The term “Public Private Partnership” (PPP) is used to refer to a wide variety of contractual arrangements through which the public and private sectors collaborate towards a common purpose. Given that there is no internationally accepted definition of a PPP covering all possible variants, the term is usually assigned different meanings depending on the jurisdiction in question.
- In South Africa: A PPP is defined as a contract between a public-sector institution and a private party, where the private party performs a function that is usually provided by the public sector and/or uses state property by agreement.
- In Nigeria: A wide range of contract forms fall within the scope of a PPP. It can be said to include outsourcing and partnering, performance-based contracting, design-build, finance-operate (or build-operate-transfer) contracts and, sometimes, concessions.
- In civil law jurisdictions: When an entity other than a public authority provides a “public service”, it usually requires an authorisation by the relevant governmental body. In these jurisdictions, governments often differentiate between two types of PPPs – concessions and partnerships . Concessions involve the concessionaire primarily generating revenue from payments made by service users. Partnerships involve the public authority paying a fee to the Private Partner in exchange for the performance of a service.
2.2 Public assets and services
Central to the definition of a PPP is the description of the underlying public asset or infrastructure facility. In most African jurisdictions surveyed, the PPP legal frameworks use the term “infrastructure,” meaning infrastructure in the broad sense, as the type of public asset normally procured under a PPP.
PPPs may also be defined by reference to the infrastructure sector in which they occur.
- In South Africa, PPPs are encouraged in the transportation, energy, water, and social infrastructure sectors. Some countries, on the other hand, identify specific sectors in which PPPs may not be used.
- In Senegal, the PPP law of 2021 establishes that PPPs may not be used in the energy, mining, and telecommunications sectors.
With regard to the definition of “service ”, some countries establish that PPPs can be used for the development of a “public service”,rather than just a “service.” Approximately 65% of the surveyed jurisdictions adopt this approach.
- In Ghana , the PPP Act of 2020 defines a PPP as a form of contractual arrangement to provide “public infrastructure” or “public services.” The interpretation of “public service” is narrower than “service.”
The applicable laws also clarify whether PPPs may be used for the construction and operation of new infrastructure facilities (greenfield projects) or the maintenance, repair, refurbishment, expansion, and operation of existing infrastructure facilities and systems (brownfield projects).
The increasing use of PPPs for technological advancements. In Africa, PPPs are a solution to the lack of investments in the Information, Communication and Technology sector. They have been used to create fiber optic backbone systems, satellite systems, mobile mast networks and video and telephony services, amongst others.
2.3 REMUNERATION OF A PRIVATE PARTNER
Another defining feature of PPPs consists in establishing how the Private Partner is remunerated. In Africa, like elsewhere, Private Partners are remunerated by collecting fees from service users, by government or both. The payment mechanisms are normally structured so that remuneration is linked to performance.
Common law countries tend to distinguish between government pays-PPPs and user pays-PPPs arrangements through a common definition of PPPs, by establishing that Private Partners may receive compensation from Contracting Authorities or collect tariffs or fees from service users.
Civil law jurisdictions, where a legal distinction exists between government-pays PPP and concessions or user-pays PPPs, may subject the two types of arrangements to different laws.
In Benin, law 2016-24 establishes the legal framework for PPPs, while the public procurement code (law 2009-02) establishes the framework for concessions and the delegation of public services.
2.4 PPP PROJECT DURATION
Most PPP projects present a contractual term between 20 and 30 years; others have shorter terms and in some cases PPP projects may last more than 30 years.
- In Lesotho, the PPP Policy establishes that PPP arrangements can take the form of short-term (1-3 years) service contracts or longer-term (7-35 years) agreements such as concessions.
- In Kenya, the PPP Act of 2021 establishes that contracting authorities are not to enter into PPP arrangements for a period exceeding 30 years.
- In Eswatini, the PPP Policy specifies that concessions are typically for periods of over 20 years.
Rather than specifying a project duration, some countries like Benin, Chad, and Mauritania require the period to be determined depending on the amortization period of the Private Partner’s investment
In Senegal, the duration of PPP contracts is fixed not only depending on the amortization period of the PPP investment but also by:
- reference to the nature of the services requested;
- time needed to achieve the Private Partner’s objectives
- the associated performance commitments.
2.5 PPPs in African Civil Law Jurisdictions
In civil law countries, where the operations of government are codified through administrative law, PPP agreements tend to be governed by specific administrative law provisions.
The regions that govern PPP agreements through administrative law provisions include the following countries:
However, not all civil law jurisdictions frame PPP agreements through administrative law provisions as PPP agreements are sometimes also treated as private law arrangements.
| Did You Know? |
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That in civil law jurisdictions PPPs usually display the following characteristics: |
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Other defining features of PPPs
Other defining features of PPPs include the range of PPP contracts and the size of projects (e.g., in terms of capital expenditure or whole life cost).
- In Ghana , the PPP Act of 2020 specifies the types of PPP contracts that can be entered into. A wide range of PPP contract types are included such as Build, Operate, Transfer (BOT); Design, Build, Finance, Maintain and Operate (DBFMO), Operate and Maintain (O&M). To maintain flexibility and the ability to adapt to changing needs more easily, the Ghanaian PPP Act of 2020 establishes that the listed contract types are indicative and may evolve to suit the specific circumstances of each project.
When determining the size of a project, the laws sometimes establish a minimum investment threshold to ensure that a project delivers value for money. On some occasions, laws also establish a threshold for small-scale projects and empower PPP Units to grant exemptions from implementing any specified procedure.
- In Ghana , the threshold for small-scale projects is set at US$ 2 million.
- Tanzania sets a much higher threshold for small-scale projects, at US$ 20 million.
chapter 3: project preparation
The project preparation stage begins with the identification of projects that may be implemented as PPPs. Potential PPP projects should be compared with other public investment priorities based on an integrated infrastructure plan.
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In Kenya , under the PPP Act of 2021, Contracting Authorities must prepare a list of projects that can potentially be carried out as PPPs for the PPP Directorate’s approval. Any project on the list must be part of the National Development Agenda.
- In Rwanda , according to the PPP Operational Guidelines of 2018, contracting authorities identify projects by conducting a sector assessment. Contracting authorities can also select projects from national and sector level development plans, or through a needs assessment for a given service.
The criteria that governments consider to determine whether a project can succeed as a PPP have been categorized in five main groups
- Identification, assessment, and preemptive allocation of project risks ;
- Feasibility and economic viability: including an assessment of whether a project makes sense from a technical, legal, social, financial and economic perspective;
- Environmental impact assessments;
- Comparative assessmentwith the traditional procurement option (also known as a value for money assessment); and
- Fiscal affordability assessment: which includes checking a project’s fiscal costs and assessing whether these can be accommodated within a government’s budget
3.1 Environmental Impact Assessments
The data compiled identifies environmental impact assessments (EIAs) as the most commonly required type of assessment.
In so far as PPP legislation is concerned, a legal requirement to conduct an EIA (or other type of environmental study ) is present in 86% of the jurisdictions surveyed. The complementary social impact assessment , instead, is required in 62% of the jurisdictions surveyed.
3.2 PPP FEASIBILITY ANALYSIS
The second most required type of assessment are PPP feasibility analyses. PPP feasibility analyses (or other forms of generic studies to assess a project’s viability) are required in 76% of the jurisdictions surveyed.
PPP feasibility analyses should constitute the basis for the decision by a Contracting Authority to proceed with procurement and project implementation.
Despite the importance of this assessment, not all countries in Africa require Contracting Authorities to conduct a feasibility study.
Some countries on the continent cite the lack of funding as the main reason for not conducting PPP feasibility analyses. One way to address this problem is by establishing project development funds to meet the upfront costs of developing a PPP, providing a framework for effective project preparation
Project development funds can also be used to finance feasibility studies for unsolicited proposals, especially when the Contracting Authority leads the project development process.
| Ghana’s Project Development Facility |
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| In Ghana, the PPP Act of 2020 establishes a project development facility as a revolving fund within the Ministry of Finance. The sources of funding for the fund include loans and grants from development partners, as well as fees paid by winning bidders at financial closure. Under the PPP Act of 2020, the project development facility is mandated to finance project structuring and preparation activities. |
3.3 Identification and Assessment of Project Risks
Some African countries require the identification, assessment, and preemptive allocation of project risks during the project preparation stage.
- In South Africa , under Treasury Regulation 16, issued under the Public Finance Management Act 1999, PPP feasibility analyses must set out the proposed allocation of financial, technical, and operational risks between the institution and the private party.
- In Rwanda , the PPP Guidelines specify that key project risks must be identified and allocated through the risk allocation matrix as part of the pre-feasibility and feasibility studies.
3.4 Value for Money Assessments
As far as primary legislation is concerned, the least required form of assessment in Africa is the value for money assessment. 31% of the surveyed economies prescribe it.
However, many African countries set out detailed requirements for value for money analyses in secondary instruments, rather than primary legislation.
- In South Africa, the value for money analysis is outlined in the South African PPP Manual and the Municipal Service Delivery and PPP Guidelines.
- In some countries, the criteria applied in a value for money assessment involves a financial or economic comparison based on a predominantly quantitative basis. In others, the scope is a broader mix of quantitative and qualitative criteria.
- In Ghana , under the PPP Act of 2020, Contracting Authorities are required to conduct a qualitative and quantitative assessment of value for money as part of the feasibility study. The assessment, which should be repeated at each stage of the project development process, must demonstrate that there is greater value for money than the best realistic public sector project designed to achieve similar service outputs.
- In Kenya , the PPP Act of 2021 mandates that Contracting Authorities must assess the value for money proposition of a proposed project before initiating the tender process. Lesotho has implemented a similar requirement through its PPP Policy.
| Delivering Value for People: Public Private Partnerships 2.0 |
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| Rather than solely focusing on delivering Value for Money, PPP projects should also prioritize delivering value for people, to contribute to the achievement of the United Nations Sustainable Development Goals. Value for people refers to establishing whether the net benefits directly linked to a particular PPP project (economic, social, environmental, and other broader benefits in the territory) are enough to offset the financial burden that users or taxpayers will experience during the life of a project. |
3.5 Fiscal Assessments
PPP legal frameworks should prescribe methodologies for assessing the fiscal commitments that a PPP project will generate, determining whether they are affordable, and specifying how they will be accounted for.
Approximately 70% of the countries surveyed assess fiscal risks from PPPs by requiring approval from the Ministry of Finance (or other central budgetary authority) before a project goes to tender or by requiring Contracting Authorities to clarify the fiscal obligations that a project will generate within government’s budgets.
- In South Africa,the National Treasury’s PPP Manual sets rigorous risk assessment standards that government will use to make affordable project choices that best leverage private investments. During project preparation, a signed letter from the relevant treasury stating that a project is affordable must accompany the submission of the feasibility analysis.
- In Kenya,government entities are required to consider a project’s affordability during the feasibility assessment, while the Cabinet Secretary is responsible for approving a limit on any PPP contingent liability that may be incurred.
- Tanzania and Ghanahave institutions and provisions in place for the monitoring of PPP fiscal risks and in Angola, the PPP law requires that PPPs conform to the government’s fiscal program.
3.6 Direct and contingent liabilities
The wide range of fiscal commitments that a PPP project can generate can be categorized as direct and contingent liabilities.
• Direct liabilities are liabilities that are expected to materialize in the normal course of a project such as availability-based payments.
• Contingent liabilities are payments that will only be made if certain future events occur, such as payments that may have to be made under a minimum traffic guarantee.
PPP legal frameworks should prescribe methodologies for valuing both direct and contingent liabilities. These risk management methodologies are typically outlined in secondary instruments.
•In South Africa, the National Treasury utilizes a four-stage approval process to ensure the acceptability of contingent liabilities and monitors these liabilities on an ongoing basis. A PPP manual and a set of standard contractual terms guide the development of PPPs. As a result, the contingent liabilities that Contracting Authorities can incur are limited
3.7 Fiscal assessments across different regions in Africa
Out of the countries that assess fiscal risks from PPPs some regional variation emerges.
However, while most of the countries require an approval by the Ministry of Finance (or central budgetary authority) before embarking on the procurement process , not all countries require a second approval by the same authorities before the PPP agreement is entered into.
3.8 Accounting and disclosure treatment of PPPs
PPP projects should be clarified within the government’s budget and in accordance with the accounting standards adopted by the government in question.
The budgetary treatment of PPP liabilities can take different forms, but in general, it should recognize the long-term impact of PPP liabilities.
- Sierra Leone has adopted the International Public Sector Accounting Standard Financial Reporting System (IPSAS). Under IPSAS, most PPP projects are expected to impact a country’s aggregate public debt. According to IPSAS, PPP-related assets and liabilities should be included in a government’s balance sheet if the government retains control of the service provided and has a residual interest in the project.
3.9 Disclosing PPP Liabilities
Like other jurisdictions worldwide, most countries in Africa should improve their disclosure system in relation to PPP fiscal commitments and contingent liabilities. Disclosing PPP liabilities involves publishing clear reports on the fiscal commitments generated by a PPP project.
• In Kenya the PPP Act of 2021 requires government entities to publish key information about project agreements, including any government support measures provided and the amounts of any public funds committed to a project.
• Nigeria, through the Infrastructure Regulatory Commission, has also developed a PPP disclosure framework to ensure that PPP projects are managed as transparently as possible.
Chapter 4 : PROCUREMENT
4.1 PPP Procurement Methods Used in Africa
In the PPP Country Profiles, data was collected regarding the availability of two common procurement methods: two-stage and restricted tendering.
- In a two-stage tendering process, bidders are invited to pre-qualify before the issuance of the request for proposals.
- In a restricted tendering process, bidders are typically qualified simultaneously with the bidding process.
Overall, the restricted tendering process is the more commonly used PPP procurement method. 87% of the surveyed economies prescribe it. Two-stage tendering, instead, is currently used in 59% of the surveyed economies.
Most of the surveyed economies tend to give an option between the two procurement methods, which are set as default procurement methods rather than just being made available.
The competitive dialogue process , instead, is an option in certain jurisdictions. Overall, 37% of the surveyed economies prescribe it. Pre-qualified bidders are invited to participate in a dialogue to determine the means best suited to satisfy the Contracting Authority’s needs. Of the countries that offer competitive dialogues as a procurement option, 68% of the jurisdictions are civil-law based, 16% are common-law based, and 16% have a mixed legal system. Some countries also allow various forms of negotiated procurement processes to take place. In a negotiated procurement process, Contracting Authorities enter into negotiations with one or more Private Partners to reach a mutually agreed position.
In Gabon, negotiations (with or without prior advertising) are allowed for reasons related to emergencies, national security, or when the operator has exclusive capacity to deliver a project.
Some countries in the region also allow their procurement processes to align with those of international organizations.
- In Madagascar , the PPP Act of 2015 establishes that if an international organization participates in financing a PPP project, the procedure for awarding the PPP contract may be adjusted to consider the procurement process of the international organization in question.
- In Nigeria , invitations for bids are advertised in accordance with the Infrastructure Concession Regulatory Commission Act 2005 and the Public Procurement Act 2007. Advertisements are published in at least two national newspapers, one relevant international publication, and on the websites of the procuring authority, the Bureau of Public Procurement, and the procurement journal.
4.2 Non-competitive Procurement/Tendering Methods
Whenever a government allows direct procurement, the justification and associated criteria should be clearly spelled out in the PPP legislation.
- In Congo , the PPP Act of 2022 allows for direct procurement following a non-objection from the PPP Technical Committee if the project implementation presents a strategic urgency related to national defense and security. The PPP Act of 2022 also allows for direct procurement when the Private Partner has already carried out similar projects on behalf of the public entity or when the Private Partner has exclusive experience in the field of the project.
Less utilised grounds to justify non-competitive procurement processes in Africa include ensuring the continuity of the public service, unsatisfactory tendering results, and low value for money thresholds.
A competitive selection process is always the recommended route for PPP projects. If conducted fairly and transparently, competition increases the value for money in a project because it allows Contracting Authorities to select the best proposals.
- In Ghana , the PPP Act of 2022 does not mention the types of non-competitive procurement processes discussed above. Instead, a project may be procured through the Ghana Infrastructure Investment Fund, a fund used to catalyze private sector investments in infrastructure projects, if the competitive procurement method proves unsuccessful or if there is an urgent need to execute the project to serve a strategic national interest. .
4.3 UNSOLICITED PROPOSALS
Overall, 80% of the surveyed African jurisdictions regulate unsolicited proposals (USPs)Overall, 80% of the surveyed African jurisdictions regulate unsolicited proposals (USPs) . One reason often cited for regulating and potentially allowing USPs, is to address an infrastructure need that a Contracting Authority has not yet identified.
- In Ethiopia , Contracting Authorities may review and accept USPs provided that such proposals do not relate to projects that have already received approval for implementation as a PPP.
Some countries further establish that USPs may be considered if they do not impose significant financial commitments on Contracting Authorities or involve the use of new concepts or technologies.
- In Ghana , USPs must demonstrate innovation and should not impose onerous conditions on Government.
On the other hand, depending on the legal context, countries that choose not to regulate USPs may, in some cases, be considered as prohibiting them since their legal frameworks do not provide a way for Contracting Authorities to manage them
4.4 Submission requirements for unsolicited proposals
Almost all countries that regulate USPs have submission requirements for USPs.
- In Guinea , a government decree (decree 2021/041) regarding the application of the PPP Act of 2017 establishes that the initial proposal must include a description of the proposed project, details about the project site, a statement of the proponent’s previous project experience, and an estimate of any financial commitments required by the Contracting Authority.
Once a USP has been submitted, Contracting Authorities should inform project proponents whether there is a potential public interest in the project. If the Contracting Authority reacts positively, project proponents are usually invited to submit a formal proposal, including a feasibility assessment.
In some cases, countries choose to have the feasibility assessment conducted by the Contracting Authority . Having the feasibility assessment carried out by Contracting Authorities is likely to maximize private sector interest in the bidding process.
Some countries empower PPP Units to manage part or all of the USP process.
- In Malawi , project proponents may initiate an unsolicited bid by notifying the PPP Commission in writing rather than the relevant Contracting Authority.
Requiring PPP Units to manage the USP process might prove beneficial, particularly in non-mature PPP jurisdictions, where the capacity of Contracting Authorities to deal with the USP process can still be limited.
4.5 Competitive Procedures for Unsolicited Proposals
If a government receives a USP that it is interested in pursuing, it should convert the USP into a competitive tender to give other bidders the opportunity to compete with the USP proponent.
Having a competitive tender is beneficial as it increases the transparency of how USPs are handled and enhances the value for money in a project.
Most countries that adopt a competitive tender process provide some sort of compensation or advantage to the USP proponent for developing a project.
The most commonly used form of compensation in the African jurisdictions surveyed is reimbursement of the developer’s fees .
Chapter 5 : PPP Contract
Domestic legislations in Africa often include provisions that deal with the content of the PPP contract.
- In some countries, the law only refers to the need for an agreement between the Private Partner and the Contracting Authority.
- In other countries, the legal framework includes extensive mandatory provisions regarding the content of clauses that must be included in the agreement
An intermediate approach is taken by those countries that list topics that should be included in PPP contracts without regulating in detail the content of the clauses.
In Sierra Leone, the scope of the PPP contract is regulated generically without fine-tuning the details of its clauses.
Irrespective of how different jurisdictions in Africa regulate the content of PPP contracts, the contract between the Contracting Authority and the Private Partner will not be the only contract involved in a PPP transaction.
In some projects, governments might need to enter into direct (or “tripartite”) agreements with lenders (when a project is financed on a project financing basis), leases, or other land-property related agreements, as well as government and credit support instruments.
5.1 Contract Approvals
Most jurisdictions surveyed require the PPP contract between the Contracting Authority and the Private Partner to be approved before being executed. In certain countries, approvals are needed from multiple government entities.
In certain countries, approvals are needed from multiple government entities.
- In Mali, before being signed, PPP contracts that receive government guarantees must be approved by Contracting Authorities and the Minister of the Economy and Finance.
Approval requirements may also depend on the size of a project.
- In Ghana, PPP projects with an estimated capital cost exceeding US$ 200 million require approval from the Cabinet. Projects below that threshold require approval from the PPP Committee, while projects regulated by the Ghanaian Constitution require Parliamentary approval.
Some countries also introduce contract approval requirements once a PPP contract is signed. In most jurisdictions surveyed, post signature approvals are usually needed to ensure the contract is properly considered as it enters the contract management stage.
5.2 POWER TO CONTRACT
PPP institutional frameworks should clearly define which government entity will have the authority to enter into the PPP contract with the Private Partner.
The power to bind the relevant Contracting Authority is usually delegated to designated officials.
- In Uganda , under the PPP Act of 2015, the Contracting Authorities’ accounting officers are responsible for executing PPP agreements.
- In some countries, the legislation establishes that the PPP contract can only come into effect after certain formalities have been completed, such as the PPP contract’s publication in the official gazette.
5.3 STANDARD CONTRACTUAL TERMS
Some jurisdictions require PPP contracts to be developed based on standardised contractual provisions.
- In South Africa, the National Treasury issues standardized PPP provisions that prescribe how key issues should be addressed in PPP contracts. These provisions form the basis of most draft PPP agreements.
The responsibility for drafting standard contractual clauses and related guidance materials is typically assigned to a country’s PPP Unit.
- In Ghana , the PPP Unit established within the Ministry of Finance is responsible, in consultation with the Attorney General’s and Ministry of Justice’s offices, to generate standardised partnership agreements that contracting authorities must adapt prior to the initiation of the PPP procurement process. In the absence of any standard agreement, Contracting Authorities in Ghana are required to submit all PPP agreements to the PPP Unit for approval before use.
5.4 PPP Contracts’ Governing Laws
PPP legal frameworks will, in most cases, outline the governing law applicable to PPP contracts.
Examples of countries that allow the public and private sector partners to choose the law that will govern the PPP contract include Chad in Central Africa, Côte d’Ivoire in Western Africa, and Madagascar in Southern Africa
In countries where the choice of governing law is not regulated , the absence of a specific governing law clause could result in the automatic application of domestic law
Overall, 50% of the countries that do not regulate the matter are from common law jurisdictions, 40% are from civil law jurisdictions, and 10% have a mixed legal system.
5.5 Contract Management
During the contract management stage, it is common to find performance monitoring and reporting obligations outlined in local laws.
- In Togo , the PPP Act of 2021 grants Contracting Authorities the power to exercise control and ensure the proper implementation of PPP contracts. Private partners must also submit annual performance reports that contain the necessary information for Contracting Authorities to exercise control effectively
- In Benin , according to the PPP Act of 2016, PPP contracts must establish the durations and control mechanisms necessary to ensure the contract’s effective performance. During the project construction and operational phases, a report must be prepared by the Private Partner to measure a project’s performance. Under the PPP Act of 2016, Contracting Authorities and Private Partners must also hold regular meetings to monitor the implementation of the PPP contract.
5.6 Contractual Terms Regulated by Local Laws
To support the entering into of PPP contracts, in some cases, jurisdictions regulate key contractual terms through the applicable legislation
In Kenya, minimum contractual obligations for PPP contracts are specified under the Third Schedule of the PPP Act of 2021. These include, by way of example, methods of dispute resolution, early termination events, and local content requirements. The Kenyan PPP Act of 2021 also establishes that whenever a project’s revenue performance meets or exceeds the target return on investment, parties to a PPP contract must make provisions for revenue sharing mechanisms between the Private Partner and the government.For the purpose of this comparative analysis, an analysis was performed to assess whether the applicable laws and regulations regulated the following key contractual terms:
- Transfer of Shares by the Private Partner
- As far as PPP legislation is concerned, the transfer of shares by the Private Partner is the most widely regulated provision. 67% of the surveyed jurisdictions address this provision.
- In Sierra Leone , under the PPP Act of 2014, a transfer of shares that leads to a transfer of control of the project company can only be carried out with the approval of the Contracting Authority.
- Contract Termination by Public Parties
- The second most widely regulated provision is the termination of contracts by public parties. Contract termination by public parties is addressed in 62% of the countries surveyed. Contract termination by public parties is usually attributed to three categories of circumstances: serious breaches by the Private Partner, Private Partner’s insolvency, or reasons of public interest.
- In some cases, the right to terminate for reasons of public interest can be exercised if expressly provided for in the relevant legislation. Common law jurisdictions typically adopt this approach. In civil law countries, however, such a right may be implied in a government’s contracting power even without a specific legislative provision to that effect.
- Step-in Rights Provisions
- Step-in rights provisions (whether by Contracting Authorities or lenders) are addressed in 48% of the jurisdictions surveyed.
- In Ethiopia , the PPP Proclamation of 2017 establishes that Contracting Authorities have the right to temporarily take over the operation of a project in the event of a serious failure by the private party to perform its obligations after having given notice to that effect.
- In Djibouti , the PPP Act of 2017 establishes that Contracting Authorities may agree with the lenders to replace the Private Partner in the event of a serious breach of contract. When exercised by the lenders, step-in rights provisions should be formalized through a “direct agreement” between the lenders, the Private Partner, and the Contracting Authority. Not many countries in the region regulate lenders’ step-in rights. However, when doing so, local laws should clearly define the scope of what is permitted, granting Contracting Authorities the authority to enter into Direct Agreements.
- State Equity Participation Provisions
- State equity participation provisions are addressed in 24% of the jurisdictions surveyed.
- In Tunisia , the PPP Act of 2015 establishes that public entities may share in the equity of project companies and, therefore, have the right to be represented in the company’s management.
- Ghana also regulates state equity participation provisions by establishing that a public entity may be included as a shareholder in the project company.
Out of the countries that regulate state equity participation provisions, 80% are from civil law jurisdictions, 10% are from common law jurisdictions, and 10% have a mixed legal system.
| Force majeure, material adverse government actions and changes in the law |
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How countries in Africa regulate changes in circumstances under the contract due to force majeure events, material adverse government actions, and changes in law varies. .
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5.6 Dispute Resolution Mechanisms
Dispute resolution mechanisms are regulated in nearly all of the jurisdictions surveyed. Some of the main mechanisms used to resolve contractual disputes include non-judicial means such as arbitration and mediation and judicial means like courts.
An analysis was performed to assess how arbitration, mediation, courts, and other dispute resolution methods agreed upon by the parties were regulated by the applicable legislation.
Under local legislation, using a dispute resolution mechanism usually does not preclude resorting to other forms of dispute resolution processes. Parties may, therefore, be required to enter into mediation or arbitration proceedings and only use courts as a last resort.
Approximately 60% of the jurisdictions surveyed allow public and private sector partners to select the dispute resolution mechanism through the PPP contract.
- In Malawi , under the PPP Act of 2022, PPP contracts are required to include dispute resolution mechanisms in the event of a breach of contract or a misunderstanding between the parties. While parties can choose their preferred dispute settlement method, the PPP Act 2022 establishes that parties should try to resolve any dispute through amicable conciliation, mediation, or arbitration.
- In Mali , dispute resolution mechanisms agreed by the parties may include arbitral tribunals under the conditions laid down by the Organization for the Harmonization of Business Law in Africa (OHADA) Uniform Act on arbitration.
5.7 Alternative Dispute Resolution Mechanisms
Overall, arbitration is Africa’s most utilized form of alternative dispute resolution mechanism. 69% of the surveyed economies prescribe it . However, some African countries require arbitration to be undertaken domestically.
In some cases, countries may also require institutional approvals to initiate arbitration.
- In Algeria , a 2015 Government Decree governing the delegation of public services establishes that recourse to international arbitration bodies must be subject to prior institutional approvals (e.g., a prior agreement reached in a government meeting).
Most African countries are signatories to the:
- International Centre for Settlement of Investment Disputes (ICSID) Convention, which enables international arbitration under the auspices of the World Bank or other contracting states to ICSID.
- New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which allows for the enforcement of arbitration agreements and foreign arbitral awards.
Mediation is regulated in approximately 30% of the countries on the continent. Of the countries regulating mediation, 53% are civil law based, 40% common law based, and 7% have a mixed legal system.
The use of dispute adjudication boards, instead, is usually not addressed in local laws . However, according to the Dispute Board Federation, dispute adjudication boards have been used to resolve PPP related disputes in South Africa, Uganda, Malawi, Morocco, Tunisia, and Ghana.
5.8 Judicial Systems and Appeals Against Contract Award Decisions
As a judicial means of dispute resolution, courts are used in approximately 40% of the jurisdictions surveyed. Most jurisdictions surveyed select local courts as the forum for resolving disputes. This selection may be made for a variety of reasons, including the court’s familiarity with the PPP legislation and because the PPP contract might already be governed by local laws and legislation.
Most countries on the continent also allow private sector partners to appeal a contract award decision.
- In Ghana , the PPP Act of 2020 establishes a complaints panel that any individual can use for any breach of the bidding process. Decisions made by the Ghanaian complaints panel can be appealed to the High Court.
- In Guinea , under a 2021 government decree implementing the PPP law of 2017, disputes related to contract awards are referred to the Public Procurement Regulatory Authority. Guinea also introduces a ‘minimum standstill period’ between the contract award and the actual signing of the contract to provide unsuccessful bidders with the time needed to decide whether to challenge the contract award.