MIC Grant Supporting Governance and Private Sector Development


Overview

  • Reference: P-NA-KA0-001
  • Approval date: 08/07/2015
  • Start date: 20/01/2016
  • Appraisal Date: 28/10/2014
  • Status: OngoingOnGo
  • Implementing Agency: MINISTRY OF FINANCE
  • Location: REPUBLIC OF NAMIBIA

Description

I.Project Description

1.1 Description of preparatory activities for which resources are requested

2.1.1.The proposed operation will finance technical assistance and capacity building activities in core skills required for effective implementation of the PPP policy and legal framework, development of pipeline projects for PPP and capacity building for public investment management. Skills shortage is one of the biggest challenges facing the Government of Namibia. The success of the PPP programme, therefore, depends on the extent to which the requisite skills can be sourced. While aiming to help in the development of the policy, legal, regulatory and institutional arrangements for PPPs, the operation will place emphasis on skills development and knowledge transfer to ensure sustainability. The project will be structured around three components, and activities delivered in a sequenced approached.

Component 1: Operationalising the policy, legal, regulatory and institutional arrangements for PPPs

2.1.2.This component will focus on supporting the Government of Namibia in addressing policy coherence by ensuring alignment between the PPP Policy and the draft PPP Bill as well as with any sector-specific policies on PPP, and defining and elaborating the operational procedures for identifying, appraising and procuring PPP projects (including the provision of guidance on the roles and responsibilities of various institutions within the overall PPP architecture). Specific tasks under this component are

(i) streamlining of the PPP policies and draft PPP Bill;

(ii) Development of PPP guidance manual;

(iii) Operationalization of a fully functional PPP Unit, with requisite skills; and

(iv) Coordinating the development of a PPP project pipeline (including selection of projects for pilot implementation). Implementation of these tasks will not only ensure that a credible PPP framework is in place, but also facilitate its operationalization. A Resident Advisor on PPPs will be hired to, among others, assist with the establishment of PPP Unit, develop the PPP pipeline, design a PPP capacity building programme and serve as a mentor and sounding board to the Head of the PPP Unit. Tasks of the Resident Advisor will also include a review of the staffing and skills requirements for the PPP Unit; building an effective relationship between the PPP Unit, line Ministries, and Local authorities etc.; defining eligibility and selection criteria and preparation procedures for PPPs; defining contractual and financial structuring principles; and developing procurement rules and processes. For purposes of ensuring sustainability, knowledge transfer will form an important part of the Advisor's tasks. The PPP architecture will be designed in such a way as to guarantee its sustainability well beyond the project. A Consulting firm will also be hired to help develop a PPP Guidance Manual.

Component 2: PPP Capacity building

2.1.3.This component aims at building and strengthening the capacity of government officials in charge of PPPs, including the PPP Unit and sector ministries. PPP, as a concept, is still fairly new across government. For this reason, a comprehensive capacity building programme should be developed fairly quickly. This would encompass formal PPP training, study tours, seminars and workshops involving key stakeholders, as well as on-the-job training and mentoring, targeting senior public officials and the core PPP team. Training will be conducted mainly by local and regional tranining institutions. Such a programme should be extended to the Ministry of Finance, National Planning Commission (NPC), and other line ministries and agencies that are involved in infrastructure development. It will also include SOEs which implement major projects (such as Namport and Nampower). In addition to training, other capacity development and facilitation services will be arranged to foster greater coordination and coherence in PPP project pipeline development and implementation. A consulting firm will also be hired to provide transaction advisory services to prepare selected pilot projects to feasibility stage.

Component 3: Public investment management capacity enhancement

2.1.4 The objective of this component is to strengthen the capacity of key departments within the Ministry of Finance responsible for managing the public investment programme, budgeting and finance, and the National Planning Commission. It will target key players involved in project preparation, implementation and contract management. Key activities under this component include:

(i) project management capacity building; and

(ii) strengthening of the cash and debt management function. Specific activities will include training in cash and debt management; cash flow forecasting; project appraisal and management; and development of a budget preparation manual. Enhanced capacity in public investment management will complement the other interventions focusing on the development of the institutional and operational framework for PPPs. By strengthening the capacity of the Ministry of Finance and the National Planning Commission to better manage public investments, including on aspects of debt management, this component will build on the positive results of components 1 and 2, expected to lead to a reduction in government's direct budget funding of infrastructure projects. Finally, a prerequisite for attracting private investments for long term PPP infrastructure investments is a stable macroeconomic environment. The improved capacity to manage public investments will positively impact fiscal and broader macroeconomic stability. Component 3 and the other two components focusing on PPP, therefore, mutually reinforce each other.

1.2 Description of the expected outputs and their linkages to the targeted project

2.2.1.The proposed project is expected to result in two main outcomes:

(i) Implementation of at least two PPP pilot projects from a comprehensive project pipeline; and

(ii) enhanced budget credibility and tighter control of budget execution. At the end of the project, it is expected that the operationalization of a Public Private Partnership framework in Namibia will result in the following outputs:

(i) coherent and streamlined PPP Bill submitted to Parliament;

(ii) the establishment of a fully functional PPP Unit with adequate staffing, and operational manuals in place;

(iii) the existence of a strong link between PPPs and the annual budget process;

(iv) identification and preparation of a number of PPP projects;

(v) launching of bids by the PPP Unit through competitive bidding processes;

(vi) training of staff on PPP development, project cycle management, financial management, tender documentation, bid evaluation, contract negotiations; and (vii) organization of seminars and workshop to develop an understanding of PPPs.

2.2.2 The direct beneficiaries of the project will be government officials involved in PPP activities. This will be mainly through training, mentoring and study tours. The allocation of at least 30% of training and study tour slots to females ensures that women benefit from the project. The private sector will also benefit from an improved PPP legal, regulatory and institutional framework. In the long term, the positive impact of the project on the quality of infrastructure services (emanating from increased private investments in infrastructure development) will also help reduce the cost of doing business, hence benefiting SMEs, including those headed bywomen. . The entire population of Namibia will benefit indirectly as a result of improved infrastructure service delivery and enhanced public financial management. The economic competitiveness of Namibia (due to better infrastructure) and fiscal space created (by freeing up resources to finance other aspects of development) will benefit the entire population.


Objectives

Project Objectives

1.2.1. The purpose of the project is to provide capacity building, technical assistance and advisory services to assist the Government of Namibia in the development and operationalization of a PPP framework. As explained above, the Government has an infrastructure funding gap of N$ 150 billion for the period 2014/15 - 2019/20. Meeting this shortfall is crucial for Government's efforts to attain medium to long term growth targets and economic transformation. Due to resource constraints and competing priorities, the public sector is unable to meet the funding shortfall alone. In this regard, the use of PPPs is a credible option. The government approved a PPP Policy in 2012 and is in the process of finalizing a draft bill, which seeks to give legal effect to the guiding principles and supporting institutional structures. The draft Bill is likely to be enacted by the parliament in 2015. The Ministry of Finance has obtained administrative approval for the establishment of the PPP unit, which will start with a small team of three professionals - the Head of the unit at Director Level, supported by two deputy directors

1.2.2. Bank's support aims to attract private investment in infrastructure and other strategic areas of the economy. Support to the Government of Namibia in its efforts to develop the framework for PPPs will yield immense benefits, including the following: (a) PPPs will create value for money and sustainability in infrastructure service delivery by enabling the government to harness private sector efficiency and effectiveness in project management, enhancing innovation, ensuring faster delivery and facilitating optimal risk sharing in infrastructure service delivery. PPPs therefore bring more than just financing. (b) The improved policy, legal, regulatory and institutional arrangements likely to result from the Bank's intervention will help attract private investments and contribute to the government's inclusive growth and economic transformation agenda. (c) The project will also have both direct and indirect impact on public investment management. Its focus on the development of PPPs will help create fiscal space, hence freeing up resources for investment in other critical areas of development, such as education and skills development. The capacity building for project and debt management, budget preparation and cash flow forecasting will help in boosting the country's public investment management capacity which, together with the enhanced PPP capacity, will constitute a major boost to Government's capacity for economic management. PPP and PIM reinforce each other. Through the proposed project, the Bank can share the wealth of expertise it has accumulated through similar PPP interventions in other Regional member Countries.

1.2.3 The proposed project also responds to a GoN request for Bank's prompt support to enhance budget, cash and public debt management capacity. The Government has communicated to the Bank that it requires urgent technical assistance to improve the capacity and institutional framework for budget, cash and debt management which is critical to developing external and domestic financing capabilities as well as mobilizing private financing and improving efficiency of public investment in infrastructure development. The key government entities involved in operationalizing the PPP policy are the Ministry of Finance, the National Planning Commission and sector Ministries. Enhancing the capacity of these entities is, therefore, critical to operationalizing of the PPP policy and operational framework.


Rationale

1.4 Justification for the use of resources: 1.4.1 The proposed operation is aligned with Namibia's Fourth National Development Plan 2012/13-2016/17 (NDP 4), which among others, aims at supporting a private sector led growth to promote value addition and diversify sources of economic growth. Among the key enablers it has identified are public infrastructure and business enabling environment. It is also aligned with the Bank's 2014-2018 Country Strategy Paper, which has two pillars, namely

(i) Infrastructure with focus on transport, energy and water; and

(ii) Private sector development through skills development and improving the regulatory environment. The project is listed among the indicative projects identified under Pillar 2 of the CSP. The project is also consistent with the Bank's Ten Year Strategy 2013-2022, which, among others, has identified both private sector development and infrastructure development as operational priorities; the Governance Strategic Framework and Action Plan 2014-2018 (GAP II); and the Private Sector Development Strategy (2012-2017). The project is also consistent with the operational priorities of the MIC Technical Assistance Fund 2011 Revised Guidelines.

1.4.2 The proposed project will support the Government in operationalizing the new PPP policy and PPP law, expected to be enacted in 2015. This will promote transparency, efficiency and effectiveness of public spending, and help the government of Namibia in meeting its policy objectives as laid out in the NDP4: high and sustained economic growth, job creation, and increase income equality. Following a process of broad consultation with key stakeholders in both the public and private sectors, the government approved a national policy in 2012 to support the development of PPPs. The Policy lays out a succinct PPP lifecycle to be followed in the development of PPP projects and assigns responsibility to various institutions at each stage. An effective PPP framework should create a transparent appraisal system with a suitably located 'gateway' which will prioritise high-potential PPPs. A clear distinction of roles and responsibilities amongst the key institutions capacity enhancement will facilitate this. According to the policy, the key players involved in the PPP lifecycle are (a) Line Ministries and Line Agencies; (b) Ministry of Finance (MOF) which will house the PPP Committee and the PPP Unit; (c) Transaction Advisors; and (d) National Planning Commission (NPC). While the primary anchor for the preparation of the PPP project is the Line Agency, it is envisioned that the PPP Unit will provide it with technical assistance throughout the PPP lifecycle.

1.4.3 Achieving the strategic objectives of the PPP Policy requires building institutions and capacity to take the PPP agenda forward. Government will require support in a number of areas, hence the focus of the proposed operation: (a) to finalise the ongoing work on the PPP Bill, with a view to having it enacted by Parliament sometime in 2015. In this regard, the assistance of a seasoned PPP expert to finalise the drafting will be critical; (b) to address the gap and inconsistency between the PPP policy and draft PPP bill in relation to the roles and responsibilities of the PPP Unit and PPP Committee; roles and responsibilities of transaction advisors; and guidance on the final authority for transaction approvals; (c) to establish a functional PPP Unit, consisting of professionals with the right set of skills in the fields of finance, commercial law, project appraisal, contract management and public policy. The new PPP Unit will have to set up essential systems and tools to effectively serve Offices, Ministries and Agencies (OMAs) within government, as well as a platform for effective communication with the private sector; and (d) a set of detailed PPP regulations and guidelines will be required, as well as the establishment of a system for monitoring and evaluation.

1.4.4 The proposed operation seeks to exploit potential synergies with ongoing and planned operations in Namibia. It will complement the ongoing ZAR 2.9 Billion New Port of Walvis Bay Container Terminal project which was approved in July 2013. The Bank has provided transaction advisory services for the structuring of guarantees required for the Kudu Gas to Power Project. The proposed operation complements the Kudu Project by helping facilitate private sector participation in this major infrastructure project, which requires alternative financing modalities. It will also complement interventions by other partners such as the EU and China involved in infrastructure development. Lessons learned from PPP interventions in other countries have been incorporated in the design of the proposed operation. These include (a) access to critical PPP skills and continuous capacity building are crucial for the success of any PPP programme; (b) internal capacity must be developed to manage PPP transactions; and (c) PPP Unit with executive power tends to be more effective; (d) successful PPPs require clear political leadership and administrative capacity.

1.4.5 As at 31 October 2013, Bank Group commitments to Namibia totaled UA 310 million, net of cancellations. The Bank has financed 24 public sector loans and grants and one private sector loan. The transport sector has been the largest recipient of Bank financing with a share of 85 percent, followed by finance (7 percent) and the social sector (6 percent). The current portfolio has commitments totaling UA 227.44 million, of which UA 5.45 million was disbursed, representing a disbursement rate of 2.4 percent. The low rate of disbursement reflects the approval of a major transport project in July 2013. The performance of Bank portfolio was considered satisfactory in 2013 with a rating of 2.0 out of 3.0, down from 2.78 in the 2009 Country Portfolio Performance Review (CPPR). The decline was due to start-up delays encountered by two MIC grants. The Bank did not finance any project in Namibia through its sovereign window between 2004 and 2013.


Benefits

Bank's support aims to attract private investment in infrastructure and other strategic areas of the economy. Support to the Government of Namibia in its efforts to develop the framework for PPPs will yield immense benefits, including the following: (a) PPPs will create value for money and sustainability in infrastructure service delivery by enabling the government to harness private sector efficiency and effectiveness in project management, enhancing innovation, ensuring faster delivery and facilitating optimal risk sharing in infrastructure service delivery. PPPs therefore bring more than just financing. (b) The improved policy, legal, regulatory and institutional arrangements likely to result from the Bank's intervention will help attract private investments and contribute to the government's inclusive growth and economic transformation agenda. (c) The project will also have both direct and indirect impact on public investment management. Its focus on the development of PPPs will help create fiscal space, hence freeing up resources for investment in other critical areas of development, such as education and skills development. The capacity building for project and debt management, budget preparation and cash flow forecasting will help in boosting the country's public investment management capacity which, together with the enhanced PPP capacity, will constitute a major boost to Government's capacity for economic management. PPP and PIM reinforce each other. Through the proposed project, the Bank can share the wealth of expertise it has accumulated through similar PPP interventions in other Regional member Countries.


Key contacts

KOMA Baboucarr - OSGE2


Costs

Finance source Amount
MICFUAC 787,681
TotalUAC 787,681