Affordable housing: Public Private Partnerships driving progress
The unmet demand for affordable housing in Sub-Saharan Africa presents an opportunity for the public and private sectors to collaborate through Public-Private Partnerships (PPPs), leveraging their individual strengths to drive rapid progress in increasing the supply of affordable housing in the region.
JLL Sub-Saharan Africa’s (SSA) Strategic Consulting team have been investigating the ongoing status of affordable housing in parts of the SSA region. While the intent is to cover the entire region, the countries upon which the analyses are primarily focused, are; South Africa, Kenya, Nigeria, Ghana, and Tanzania.
Previous articles (Article 1, Article 2 and Article 3) highlighted the unmet demand for affordable housing in the region and the opportunity it presents for both the public and private sectors to collaborate, thereby leveraging individual strengths to drive rapid progress in increasing the supply of affordable housing in the region. One such collaborative approach is that of Public-Private Partnerships (PPPs) which will be the focus of this article (Article 4).
PPPs are essentially, strategic joint-venture arrangements between public institutions and the private sector, in which both parties collaborate in the delivery of various assets or public services based on a formal agreement by both parties. These arrangements generally seek to bolster efficiency and quality while lowering the cost of public projects by sharing expertise and resources in the most optimal manner, minimising risk and maximising returns for both parties.
According to the World Bank, PPPs can take on a variety of permutations, depending on the level of risk and involvement assumed by the private party. On the one hand, low private risk and involvement would entail public retention and operation of assets, whereas high private risk and involvement is characterised by the private sector retaining ownership and operating assets, often with a pre-defined exit strategy for the private party.
PPPs in the SSA region
PPPs have been embraced by various countries across the SSA region with many of the key regions having established formal PPP policies and units which have largely supported the development of infrastructure. According to data from the PPP Knowledge Lab, the total project value of infrastructure projects since 1990, within South Africa, Kenya, Nigeria, Ghana, and Tanzania amounts to USD 84.8 billion. Although PPPs across SSA have been widely implemented in the development of infrastructure projects, their implementation within the affordable housing sector has been gaining traction. Housing authorities across key SSA markets have attempted to implement PPPs in increasing the supply of affordable housing in the region with varying levels of success.
Within key markets in the SSA region, PPP projects in the housing sector have often taken the form of government providing mainly land and related services and amenities upon which the private party develops the housing project as required by the local housing authority. The private party often raises finance for the project, however, the government may be required to provide a portion of the funding and incentives, in certain instances. Some models encountered within the SSA market do entail the private sector undertaking additional functions such as a feasibility study, project design, as well as operation and maintenance of the project once built.
Challenges with the PPP Model
One of the major challenges encountered in the attempt to utilise PPPs in addressing access to affordable housing across various SSA markets is the lack of national policy which would serve as a guideline for PPP implementation in the housing sector, specifically. Other challenges include the following:
- The need for the government to provide land for development
- Insufficient infrastructure and services to support new housing developments
- Lack of adequate state funding or access for funding
- Corruption and lack of political will
- Excessive delays in decision-making
- Slow project progress or non-delivery
- Inadequate partner selection processes which prevent competition
- Inadequate financial assessment of private partners due to corruption
- Inability of government institutions to fulfil contractual terms resulting in loss of project ownership or equity
- Poor quality of some housing projects
Optimising PPPs in the SSA Region
Based on the above, it is clear that despite the relative success of PPPs in the delivery of infrastructure projects across the region, the adaptation of PPPs as a strategy for increasing the supply of affordable housing across key SSA markets has been an uphill battle in which some of the challenges that have plagued traditional procurement methods have resurfaced. In some cases, it is reasonable to attribute many of these challenges to insufficient preparation prior to implementation. This may be due to the urgency with which many of these governments have sought to employ PPPs in addressing the increasing backlogs in affordable housing delivery.
The Urban Land Institute (ULI) has emphasised proper preparation as one of the ten principles for successful PPPs. Preparation is a key stage in the implementation of PPPs and by carefully undertaking this part of the process, many of the challenges that have arisen in the implementation of PPPs across SSA can be eliminated due to the early detection of potential pitfalls and constraints which would inform the decision to proceed with any given project. Furthermore, this would also help governments with the selection of suitable partners as well as a suitable PPP structure, technical elements which are key to the successful implementation of PPPs. Given the shortage of skilled personnel who are experts in PPP arrangements, the need for public institutions to engage with the relevant experts prior to implementing PPP arrangements is also critical to ensuring effectiveness.
Resistance to PPPs by various stakeholders is another threat which often results in the cancellation of PPPs regardless of the level of progress achieved. By ensuring advance engagement of all the relevant key stakeholders who have the ability to affect project progress and establishing internal governance structures through which important decisions can be made throughout the duration of the project, some of the detrimental delays and cancellations can be avoided. This should also be planned within the preparation phase.
PPPs, when implemented effectively, are designed to ensure that all parties leverage upon their strengths, share risks and resources in order to achieve an outcome that neither party could achieve on their own. This is the major draw towards implementing PPPs in solving particularly complex problems such as affordable housing delivery across the SSA region. They have the potential of ensuring efficient use of public resources and resolving some of potential bottlenecks that arise in the development process such obtaining development approvals and compliance. Furthermore, through collaboration both the public and private sectors can accelerate skills transfer and build better long-term relationships with public authorities, potentially speeding up urban development, as a whole.
Our next article on affordable housing (Article 5) will provide an overview of opportunities within the affordable housing sector in the SSA region.