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Participation of private sector crucial

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THE private sector should increase its involvement and investment in the development of infrastructure, a new report has said, warning that government projects had been plagued by lack of accountability.

Old Mutual Investment Group said in a recent research on infrastructure development that traditionally, publicly funded infrastructure projects had been affected by lack of accountability in governance systems.

This inefficiency had led to poor service delivery.

The problem is seen in many economies across Africa, including Zimbabwe.

Old Mutual said there had been great examples where more private equity had been poured into capital projects after the private sector moved in.
In contrast, publicly funded projects had failed to attract critical funding because of accountability and governance concerns.

“Involvement of the private sector in infrastructure projects has the potential to improve efficiencies and result in access to private capital for maintenance and expansion,” Old Mutual said in the report released recently.
“There has been an increase in privatisation of government enterprises to raise funds for the government and to improve on service delivery from these enterprises. There has been notable improvement in the service delivery from these entities following privatisation. This is mainly because private funds should be accounted for and a return is required from any investment.”
The report added; “There is a consensus view that well managed public systems are an exception rather than a rule. This is why it is felt that the private sector should be involved in infrastructure development. The thinking behind this notion is that the inefficiencies from publicly owned and operated infrastructure are costly to the public and the private sector as well. There is lower accountability on public sector funding than that required from private sector funding. The public sector seeks to serve public interest and pricing is generally sub-economic which could be why there are inefficiencies,” the report said.
In Zimbabwe, most critical infrastructure is controlled by government and local authorities.

These include the National Railways of Zimbabwe, Air Zimbabwe, telecommunications companies, NetOne and TelOne, ZESA Holdings, which runs the power infrastructure.
Across the country, most water reticulation plants are managed by local authorities.

The thrust on these institutions has been to charge affordable prices to help millions of people facing problems.
Recently, government directed the City of Harare to cancel of outstanding bills incurred by residents before the dollarisation of the economy in 2009.
But while the intentions have been good, these institutions have been severely run down, sometimes as a result of the unviable pricing system, but also due to rampant mismanagement of public enterprises.
During the time of Zimbabwe’s economic crisis between 2000 and 2008, many State firms were forced to charge for their services in local currencies.
At that time, all private enterprises had switched to multi currencies to save their firms.

Air Zimbabwe, for instance, was forced to charge the Zimbabwean dollar equivalence of US$5 for a one way trip to the Far East.
The result was a debilitating crisis for the national airline.

Many have blamed this crisis on the problems that Air Zimbabwe later faced until it temporarily closed in 2011.
Recently, private companies have joined Zimbabwe in rehabilitating roads, railways and other infrastructure.
South African firm, Group Five, is involved in the rehabilitation and maintenance of several highways at a cost of over US$1 billion in the next decade.
The results have already been seen in Zimbabwe, where several highways have been improved.

The Build Operate and Transfer model has been among the most favoured models of private sector infrastructure development.

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