Abstract
Public–private partnerships (PPPs), it is argued, generate greater value for money than traditional procurement methods. Governments overwhelmed by budget deficits and public debts see them as a way to overcome the challenges of providing critical public infrastructure. However, many PPP projects are not on cost and on time, igniting criticisms and debate as to their merits. The Ghanaian Government has developed a PPP policy framework with the view of engaging the private sector to build needed infrastructure. Incorporating insights from path dependency, we are interested in finding out if, compared to traditional procurement, the policy represents a new path for national development.
Introduction
According to their proponents, public–private partnerships (PPPs) – defined in general as long-term (25–30 years) contracts between a private party and a government agency for providing a public asset or service – generate greater value for money than traditional-procurement 1 methods through private sub-contracting and risk-sharing, while still allowing for public control of projects (Akintoye et al., 2016; Bovaird, 2004; Zaato and Hudon, 2015). They are thus seen as a way to overcome the challenges of generating critical public infrastructure for governments overwhelmed by budget deficits, huge public debts, and citizen demand for improved service delivery (Akintoye et al., 2016; Dada and Oyediran, 2016; Vining and Boardman, 2006; Zaato and Hudon 2015).
Many PPP projects do not seem to have delivered the results they promised, with cost overruns and delays. Opponents argue that total costs often turn out to be much greater than estimated; that the risks are, in fact, seldom borne by the private partner; and that the democratic process often appears to be circumvented in the name of proposed efficiency gains (Levy, 2011; Murray, 2006; Ojha, 2010; Zaato and Hudon, 2015). They see PPP as part of the neoliberal agenda pursued by the political right to restrain public sector growth. It is thus, they say, not the answer to the public infrastructural deficit that its proponents would like us to believe.
In spite of the inconclusiveness of the PPP debate, it has become a significant preferred approach for building public infrastructure and public procurement mechanisms in both developed and developing countries (Akintoye et al., 2016; Dada and Oyediran, 2016; Levy, 2010; Trebilcock and Rosenstock, 2015; Zaato and Hudon, 2015). Governments therefore continue to use it as a tool to address public infrastructural deficits (Dethier, 2015; Gutman et al., 2015; Trebilcock and Rosenstock, 2015; Verhoest et al., 2015). One area where the demand for PPP has become critical is in the provision and management of public infrastructure, such as roads, bridges, ports, water delivery, and power generation (Hurk and Verhoest, 2014; Koppen and Enserink, 2009; Trebilcock and Rosenstock, 2015).
With assistance from its developmental partners, the Government of Ghana has committed itself to using this approach to address its huge infrastructure deficit, as part of the Africa Infrastructure Country Diagnostic, a project designed to expand the world’s knowledge about physical infrastructure in Africa (Foster and Briceño-Garmendia, 2010). Consequently, it has made PPP a major policy as a way to raise capital and expertise to build critical public infrastructure and improve service delivery. This is not surprising, in view of the widely-held notion that infrastructure can lead to economic growth and human development (Calderón and Serven, 2008; Dethier and Moore, 2012).
Following this, in June 2011 the government released a policy paper, titled the ‘National Policy on Public–Private Partnerships’, to reinforce its commitment to PPP. This is the first time a Ghanaian government has developed a national policy to regulate the interface between the public and private sectors in the PPP form. The policy is supposed to initiate a new, improved approach to financing and generating critical public infrastructure through a collaborative effort with the private sector (both local and international). The questions of interest to this paper, then, are: with this new policy, is Ghana breaking away from its traditional state-led path of development to a new one based on partnerships with the private sector? Is the policy in its current condition the ultimate public agenda for a new path of development? In other words, will the policy be the watershed, or create the critical juncture, for the country’s development, especially with infrastructural development?
These questions are relevant because even though Ghana adopted neoliberal reforms in the early 1980s, with a call for the greater involvement of the private sector in the national economy, this call was mere rhetoric and partisanship, with no major policy development to back it up. For instance, under the National Democratic Congress (NDC) regime (1992–2001), the private sector was not seen as a major player in national development, or even as the engine of growth it advocated. Similarly, the New Patriotic Party (NPP) government (2001–2009), which projected itself as private sector friendly and a champion of neoliberalism, failed to develop such a policy, despite making huge noise about the role of the private sector in the economy.
We are interested in using path dependency theory to find out if the new policy is a real departure from state-led development and whether it really forges a new path on which the public and private sectors will travel together. The aim is to understand: the circumstances that led to its development; the public’s capacity and readiness to adopt, implement and, potentially, benefit from the use of PPP; and its ability to bring about the needed infrastructure and value for money in Ghana – or, on the other hand, whether it is simply yet more empty political rhetoric. Our objective is to compare it with previous development paths to determine its potential and what else may be needed to use it to achieve both existing and potential policy goals in the infrastructure sector. We are therefore interested in the design of the policy, to see whether it has closed the loopholes associated with PPP, as well as in its power to deal with Ghana’s infrastructural deficit. We will also examine the institutional and structural challenges involved in what may be described as the complex and difficult marriage of the public and private sectors.
We used documentary analysis, which is defined as “a systematic procedure for reviewing or evaluating documents – both print and electronic…material” (Bowen, 2009: 27) in this paper. We therefore reviewed a number of documents, especially those dealing with infrastructure development from the independence era to the present, as well as the proposed policy, the draft PPP bill, statements by government officials, that is politicians and bureaucrats, on the policy, and other literature on PPP policy-making in both developed and developing countries. The objective was twofold, to: understand the institutional framework in its present form to see if it is well developed or not; and, determine if it represents a break from previous national development trajectories and in what ways.
The Ghanaian case is significant for a number of reasons. First, Ghana has always been seen as a pacesetter on the African continent. It acted neoliberally when it was the first to embark upon a World Bank/International Monetary Fund (IMF)-backed structural adjustment program, and thereafter was the star pupil of these institutions, emulated by other African countries (Minogue, 2001). It was also selected because of the high-profile nature of the undertaking, the close media scrutiny, and the richness of the data available.
This study contributes to the knowledge about and understanding of PPP policy-making by stressing on the numerous legal, institutional, capacity, political, and governance challenges that governments in developing countries face when dealing with PPPs. It demonstrates that policy-makers and practitioners might have good intentions of creating an enabling environment for PPPs, but that actually formulating policies and implementing them to achieve these goals remains a mirage in most cases due to slow bureaucratic and snail pace parliamentary procedures and ineptitude.
The paper is divided into sections. Following this introduction, we deal with the theoretical perspective of path dependency. The purpose is to review it, understanding the theory, and examine how it may explain the Ghanaian case. The next section examines the development trajectories of Ghana from the immediate post-independence era to the current democratic dispensation. This is followed by an examination of the new policy. After that we use the theory to analyze whether the policy is a path breaking or pioneering one that will enable the government to deal with the country’s huge infrastructure deficit. The final section concludes the paper with some suggestions for future research.
Path dependency: a theoretical conceptualization
Scholars have used and continue to use path dependency, or historical institutionalism, as a theoretical framework in the study of economics, mathematics, technological change, social institutions, public policy, and administration (David, 1985; Harrison et al., 2008; Page, 2006; Pierson, 2004). For example, Arthur (1994) and David (1985) called on it to explain how certain types of technology (the QWERTY computer keyboard) that were once considered inferior not only survived but, even, thrived in a highly competitive technological industry. Similarly, North (1990) employed the concept to study and examine how social institutions once created become difficult to change. The meaning, he concluded, is that various individuals and organizations adopt and adapt their behaviors according to the dictates of them, thereby making them self-sustaining (Harrison et al., 2008; North, 1990). Other scholars have arrived at a similar conclusion about the role of path dependency in political institutions, democratic consolidation, and public administration (Pierson, 2000; Stuteville and Jumara, 2010). When we talk about path dependence in this paper, we mean both the concept and its application to the study of public policy and administration (Kay, 2005; Thelen, 2004).
Scholars who use the term path dependency understand it as enabling them to see the order or sequences of events as they unfold and before they culminate (Mahoney, 2000; Pierson, 2000). Path dependency therefore presumes both sensitivity to the early stages of an event and knowledge about how historical processes influence its future and final outcome (Mahoney, 2000). It claims that “particular courses of action, once introduced, can be virtually impossible to reverse” (Pierson, 2000: 251). “Course of action” includes a policy that requires the introduction of both the idea and instrument, or what Hall (1993) calls “third order” change. The economic and political ideas used to justify these reforms for decades eventually make change difficult. In general, when scholars use path dependency to understand policy, all they are really saying is that history matters, and that the future is significantly shaped by past events or policies (Gartland, 2005).
In spite of its continuous employment, the concept has not lent itself to a single definition. Thus, the concept of path dependence is difficult to explain in the context of the social sciences (Pierson, 2000). The sense in which it is used tends to fluctuate between a narrow and a broader scope. With regard to the broader version, “path dependence refers to the causal relevance of preceding stages in a temporary sequence” (Pierson, 2000: 252). In other words, past events affect current and, even, future ones. Sewell had this in mind when he defined path dependence as “what happened at an earlier point in time will affect the possible outcome of a sequence of events occurring at a later point in time” (Sewell, 1996: 262).
A narrower interpretation, on the other hand, has been offered by some scholars (Harrison et al., 2008; Levi, 1997). Levi summed it up by saying that “once a country or region has started down a track, the costs of reversal are very high. There will be other choice points, but the entrenchment of certain institutional arrangements obstructs an easy reversal of the initial choice” (Levi, 1997: 28). This narrow definition, while stressing the significance of the costs of reversing a beaten path, ignores the force of emergency and regime change that may result in utter path reversals.
In this paper, when we speak of path dependency, it is to this narrow definition that we refer. It implies that, faced with a choice, policy-makers will maintain the path they are currently on rather than change or develop a completely new one. The rationale concerns the high financial, social, political, and cultural costs associated with reinventing the wheel and venturing into uncharted territories. With this choice, policy-makers will stay on the trodden path, and think, “the devil one knows is better than an unknown angel.” This definition can be summarized as “preceding steps in a particular direction induce further movement in the same direction” (Pierson, 2000: 252).
Writing from the perspective of issues of institutions and democratic consolidation, Alexander subscribes to the idea of maintaining the status quo because change is too expensive. He states that “a range of technological, economic, social, and political arrangements, once in place, appear to generate patterns of costs and benefits such that rational actors prefer to maintain the status quo even if an alternative might provide higher aggregate returns in the long run” (Alexander, 2001: 254). Furthermore, he notes that “the longer actors operate within such a status quo, the more any shift to an alternative is unattractive” (Alexander, 2001: 254). The difficulty of changing course and leaving the status quo leads to a situation where initial courses become “locked in” (Alexander, 2001; Pierson, 2000). The locked-in position therefore becomes the preferable and default option when looking for policy options and alternatives. There may be tweaks, but the broader foundation and infrastructure of the locked in option becomes the default position.
Alexander’s (2001) two versions of path dependency are relevant here to explain the costs associated with maintaining or changing the status quo. He argues that there are two main rational versions of path dependency. The first asserts that confronted with the choice of maintaining or changing the status quo, policy actors behave in a homogeneous manner (Alexander, 2001). It is assumed that “everyone makes roughly the same cost/benefit analysis favouring the status quo” (Alexander, 2001: 254). All actors are rational, will list their options, weigh the costs associated with each option and, ultimately, behave in a homogeneous and rational way, maintaining the status quo.
The second version can be called the heterogeneous one; it states that “costs and benefits are unequally distributed but the actors who prefer change are relatively weak while actors who favour the status quo – vested interests – are powerful enough to determine political outcome” (Alexander, 2001: 254). This analysis also exposes the power (in)balance inherent in path dependency analysis. Powerful and dominant groups tend to have more to lose, while agents of change usually have a difficult time explaining hypothetical, futuristic, and expected benefits. Vested interest is therefore prepared to use its powerful leverage to support and argue for the status quo by emphasizing the high costs a change could inflict on them.
A clearer explanation may use the economic principle of increasing returns, which states that “the probability of further steps along the same path increases with each move down that path” (Pierson, 2000: 252). Put another way, “the cost of exit – of switching to some previously plausible alternative – rise” (Pierson, 2000: 252). It is this high cost of changing course that makes the principle of increasing returns “self-reinforcing” (Pierson, 2000: 252). The self-reinforcing feature of path dependence makes major change from the status quo hard even with a change of government. It also means that all things being equal, policy-makers will maintain the course unless and until a powerful external force compels them to do otherwise.
Propositions of path dependency
Three main elements can be discerned in the discussion of path dependency in the literature. These are the critical juncture, the self-reinforcing mechanism, and the concept of learning effects (Arthur, 1994; Mahoney, 2000; Thelen, 2004). The most important element of path dependency is the critical juncture. A critical juncture is a point in the policy process “where multiple equilibria are possible, that is at which some other path could have been taken, and must lead to a path that is discontinuous from that which preceded it” (Harrison et al., 2008: 5). Critical junctures are, therefore, crucial to understanding not only path dependence itself, but also the history and path dependency of policy-making (Pierson, 2000). They are the intersection between path departure – that is from the old ways of doing things – to the beginning and creation of a new path.
The second feature of path dependency is what scholars refer to as the self-reinforcing mechanism (Arthur, 1994; Mahoney, 2000). Self-reinforcement means that institutions tend to repeat themselves and get into patterns of self-reproduction (Arthur, 1994; Thelen, 2000). Thelen surmised that a self-reinforcing mechanism has positive or negative feedbacks or increasing returns: that is to say that “initial moves in one direction encourage further movement along the same path” (Thelen, 2000: 101).
The third feature of the theory is “learning effects” (Mahoney, 2000; Ohemeng and Anebo 2012). Learning effects means that with time, actors and policymakers operating within an institution “that defines a particular path become more adept and knowledgeable and use this to enhance the efficiency of the institutions or the path embarked upon” (Deeg, 2001: 9). The bottom line, so to speak, of learning effects is that as institutional actors become accustomed to a beaten path, they become more comfortable in and knowledgeable about their behaviors, and tend to stay that way (Deeg, 2011; Mahoney, 2000).
A brief overview of the PPP idea
Before we discuss the policy, we will briefly review the literature on PPPs. They have been described variously as a “game of names”; a “grammar of multiple meanings”; and, sarcastically, as “problem, problem, problem” (Linder, 1999). The divergence of these views is attributable to the fact that even though the locus and ethos of PPPs might be the same, they mean different things to different people at different times and in different political systems. The confusion over the terminology is worse when it is used to describe the involvement of the private sector in infrastructure development (Delmon, 2010).
Public–private partnerships have generally been considered a form of cooperation or co-production between private and public sectors (Hodge and Greve, 2008; Klijn and Teisman, 2003, 2005). Other scholars have called them a form of privatization, or contracting-out, in which certain functions of the public sector are sold to the private sector (Coghill and Woodward, 2005; de Bettignies and Ross, 2006; Murray, 2006). We see PPPs as a partnership between public and private organizations that may include sharing power, common objectives, tasks based on expertise, work, risks, burdens, and costs, where such a partnership usually lasts anywhere from 25 to 30 years. Our definition is consistent with what Kernaghan (1993) has described as true partnership.
Why has partnership become so pervasive in infrastructural development? Several factors make the value-for-money claims of PPPs resonate well with policy-makers and practitioners facing shrinking public revenues, aging public infrastructure, mounting debts, and citizen demands for improved service delivery (Delmon, 2011; Hodge, 2004; Trebilcock and Rosenstock, 2015; World Bank, 2015; Yescombe, 2011). In countries that are rebuilding after decades of war, as well as those striving to consolidate democratic gains, the rationale for adopting PPPs can better be explained by their promise of flexibility, improved incentives, better planning, technological transfer, and the sharing of knowledge and information between the state and the private sector (Awortwi, 2004; Ayee and Cook, 2003; Spackman, 2002; Trebilcock and Rosenstock, 2015).
Furthermore, it is claimed that PPPs can minimize on-budget expenditure by governments on public services and infrastructure (Vining and Boardman, 2006, 2007; Vining et al., 2005). As Thomsen (2005) argues, through PPPs the private sector is being invited to assume a bigger burden in the economies of developing countries because of the lack of public funds to implement public policies and finance public infrastructure. From this perspective, PPPs are not only desirable, but a practical necessity for developing countries attempting to transform themselves with funding and expertise from private firms (Dethier, 2015; Gutman et al., 2015).
There is also a perception that the PPP has the ability to provide public services and infrastructure at a lower cost than traditional public procurement (Delmon, 2011; Foster and Briceño-Garmendia, 2010; World Bank, 2015; Yescombe, 2011); as Boardman et al. (2005: 163) argue, “there are many reasons to expect that infrastructure PPPs could lower construction and operating cost.” It has also been claimed that PPPs can transfer to or share with the private sector the financial, operational, technical, and administrative risks associated with providing public infrastructure or services (Corner, 2005; Pollitt, 2005). Accordingly, for developing countries that find it difficult to attract foreign direct investments, or that face serious challenges – due, perhaps, to their poor credit ratings – in borrowing from the financial markets, PPPs are another and better option (Dethier, 2015; Gutman et al., 2015; Trebilcock and Rosenstock, 2015).
Yet despite the promise of the social, political, and economic benefits of PPPs, the literature on both developed and developing countries is replete with tales of failed PPPs, naturally arousing concerns among policy-makers (Hilton and Stoney, 2007; Murray, 2006; Vining et al., 2005). Examples are numerous of failed PPPs in developed, as well as developing, countries. In most such cases the PPPs, like the Robert Guertin Centre, the Brampton Hospital (both in Canada), the waste disposal PPPs contracts (Ghana), and the Telecom PPP contract (Lebanon) returned no value for money, involved huge cost overruns, and compromised the democratic process (Awortwi, 2004; Boardman et al., 2005; Hilton and Stoney, 2007; Jamali, 2004; Mitchell-Weaver and Manning, 1991). Opponents thus argue that risks are often not shared, cost overruns occur all the time, and the democratic processes of increased transparency and accountability are mostly circumvented (Hodge, 2004; Vining et al., 2005). There are also important democratic governance challenges such as the lack of accountability and transparency (Ghere, 2001; Hilton and Stoney, 2007; Zaato and Hudon, 2015). Public sector unions are against PPPs because they think they erode employment protection, leaving workers vulnerable to the whims and caprices of greedy private sector bosses (Trade Union Advisory Committee, 2014).
The state and developmental trajectories, 1957–2010
In the immediate post-independence era in Ghana there was no viable local or, even, foreign private business community capable of either partnering with the state or independently funding public infrastructure (Hutchful, 2002; Killick, 1978). That left the state the only actor in national economic development. The Convention Peoples Party (CPP) in government at independence in 1957 became ideologically “more and more committed to heavy state involvement to promote an early transition to socialism” (Herbst, 1993: 19) in economic development (Danso, 2008; Dzorgbo, 2001).
The National Liberation Council (NRC) set up after the overthrow of the CPP in 1966 made a real attempt at adopting private sector ideas for national development (Danso, 2008; State Enterprise Commission, 1995). They placed less emphasis on state-owned enterprises (SOEs) (Danso, 2008: 342). At this time, the national development emphasis seems to have shifted toward private ownership and market based principles. These policies had become unsustainable by the time the Progress Party came to power in 1969, and declared that “state participation [in the economy] would be undertaken when private capital was unavailable” (Danso, 2008: 342). Developing the private sector thus proved to be an illusion. The regime reserved a place for the state in some policy areas, and embraced expansionary policies, with significant increases in capital spending (Frimpong-Ansah, 1991).
The military then overthrew the government in a coup d’état, and set up the National Redemption Council (NRC) under Colonel I.K. Acheampong. Its aim was to return to Nkrumah’s policies (Hutchful, 1979). Pursuing a state-led agenda, it captured the commanding heights of the economy (Gyimah-Boadi, 1991) by creating more SOEs and strengthening existing ones. In 1979, the Supreme Military Council was in turn overthrown by the military, whose officers set up the Armed Forces Revolutionary Council (AFRC, June to September 1979). The AFRC had no ideology except to rid Ghana of corruption and return it to constitutional government. It considered the private sector to be part of the corruption that had engulfed the country; it therefore confiscated the assets of a number of privately owned companies it believed had committed economic crimes against the state (Danso, 2008). Unfortunately, their actions engendered a serious animosity, mistrust, and anger between the business community and the government, which only subsided when it transferred power to a democratically elected government, the People’s National Party (PNP) in September 1979.
The PNP had an uneventful reign, and was replaced by the Provisional National Defence Council (PNDC) through a coup d’état on December 31, 1981. The PNDC followed a more radical socio-political and economic agenda that was very suspicious of the market and private finance and, more significantly, of the IMF/World Bank. Unfortunately, implementing the agenda proved impossible because of the dire economic straits in which Ghana then found itself (Kraus, 1991). 2
By 1982 the PNDC had realized that outside help was needed to salvage the deteriorating economy. That meant turning to the IMF and the World Bank, a notion anathema to the more strident ideologues in the government (Hutchful, 2002; Killick, 2010). When the government did turn for help to the very institutions it had denounced as neo-colonialist, it inevitably resulted in the adoption of neoliberal policies. The PNDC’s 1983 Budget and Financial Statement was the clearest indication of a tectonic ideological shift in Ghana’s economic and political history. The budget “suggested a fundamental break with not only the PNDC’s previous policies but also from the thrust of economic practice since independence” (Herbst, 1993: 29). Packaged as the Structural Adjustment Program, it “marked a move away from the strongly interventionist role characteristic of most governments of the preceding 35 years” (State Enterprise Commission, 1995: 4) in Ghana. These policies, together with others aimed at reforming the economy, were seen as the most “comprehensive economic reform program on the [African] continent” (Herbst, 1993: 30) – and, by default, in most developing countries. The 1983 Budget was thus a watershed in Ghana’s political and economic history (Harrison et al., 2008; Pierson, 2000). It meant a sharp turn in Ghana’s developmental path since independence, from state-led to market based policies.
From 1982 to 2001, when the PNDC and, later, the NDC (1993–2001) left office, the government was more focused on economic stabilization and growth measures using both the state (public ownership) and, at some level, the private sector through liberalization and privatization (Chazan, 1991; Herbst, 1993). It “also eliminated foreign exchange controls and adopted a market-determined exchange rate system, which provided incentives for the private sector to attract foreign capital and to pay for imports” (Arthur, 2006: 32). Nevertheless, no tangible policy concretized the interface between the private and public sectors in the form of PPP, partly thanks to the government’s continuous suspicion of the private sector, especially the local entrepreneurial class (Hutchful, 2002; Killick, 2010).
It was in these circumstances that the NPP (2000–2009) came to office. An offshoot of the PP, the NPP was seen as more pro-business and, therefore, private sector friendly. To demonstrate its pro-business stand, the president declared their period of governance as the “golden age of business” (Arthur, 2006). It consequently established the Ministry of Private Sector Development (MPSD), and placed it under a cabinet minister (Arthur, 2006). Trumpeting his achievement after he left office, the former president boasted that the NPP, for the first time in the history of Ghana, had created a MPSD in a true commitment to public–private-sector-partnership, and as a better alternative to accelerate national (Arthur, 2006).
The ministry was expected to champion the golden age of business by creating a hospitable environment for private businesses. The government further prioritized macroeconomic stability, privatization, and liberalization of critical sectors of the economy (Ackah et al., 2010; Ayettey and Owoo, 2015). It argued that a “liberalized trade, investment, and industrial policy will attract manufacturers, entrepreneurs, and traders and encourage them to establish value-added job-creation facilities in Ghana” (Arthur, 2006: 8).
As part of its pro-business idea it expanded the mandate of the Ministry of Trade, and established the President’s Special Initiatives (PSIs) as a way of attracting private businesses, especially to the agro-processing and garment sectors (Ackah et al., 2010; Asem et al., 2013). The PSIs centered on five pillars, including the mobilization of private initiative, expansion of the industrial and export base, and a fruitful partnership between government and the private sector (Ayettey and Owoo, 2015: 11). It also enhanced the Free Zones Board concept initiated by the NDC, as well as established an Export Development and Investment Fund (EDIF) in 2001. The EDIF’s mission was (and remains) providing funds on concessionary terms for the development and promotion of the country’s exports (Asem et al., 2013: 26).
Unfortunately, while the NPP focused on helping to build the private sector with various initiatives, it neglected to develop a systematic policy for engaging in PPP, despite the creation of a PPP desk office at the Ministry of Finance. In addition, the MPSD failed to achieve its mandate, for a number of reasons. The private sector thus remained weak (Opoku, 2010). Furthermore, most of the PSI initiatives were stillborn when the government was defeated in the general election of 2008, while others had collapsed right after they were started. The government was also accused of using the ministry and the PSI as conduits for corruption and cronyism (Agyapong, 2002; Asante, 2012). It was therefore not surprising that the new NDC government (2009–2017) abolished the MPSD immediately upon assuming office in 2009.
What is clear from this brief examination of Ghana’s development is that private sector development in the country has not included a conscious effort to develop a PPP in the traditional sense and as has existed in some countries. In fact, what we have had is a lot of rhetorical announcements amid noisy political fanfare, with no substantive policy or legislative backing that might clearly spell out the role and significance of the private sector in national development and service delivery.
Has the time come to share the burden?
Why has the Ghanaian government turned to PPP to develop public infrastructure? A recent study of the country’s infrastructural needs by Foster and Pushak (2011) concluded that annual economic growth could reach more than 2.7% increase if the infrastructure endowment is raised to the level of middle income countries. Their finding was similar to those of a number of studies on the development of public infrastructure throughout Africa (World Bank, 2015). To do so, however, the government needs to invest massively in the sector. Foster and Pushak (2011) noted that “addressing Ghana’s infrastructure challenges will require sustained expenditure of almost $2.3 billion per year over the next decade, split fairly evenly between investment and operations, on the one hand, and maintenance, on the other” (2). These funding levels equal about 20% of the gross domestic product (GDP), with more than half of that going to the power sector alone (Foster and Pushak, 2011). They further stressed that the country already spends about $1.2 billion per year on infrastructure, equivalent to about 7.5% of GDP, and will need about $0.4 billion per year to maintain current levels. For a developing country with a variety of competing needs, such funding and investment levels are very high, and constitute real challenges (World Bank, 2015). How can the government meet them?
The answer, the NDC government says, is in engaging the private sector in a meaningful partnership. The new PPP policy is thus aimed specifically at fostering a meaningful partnership with the private sector, while also addressing the infrastructural funding gap by sharing the funding costs with it. With volatile foreign exchange prices for the country’s raw material exports, dwindling foreign aid, an over taxed populace and global economic uncertainties, the country has singled out PPPs as a viable alternative to fund and manage critical public sector infrastructure.
The PPP policy at a glance
As noted, in June 2011 the NDC government, led by the Ministry of Finance and Economic Development (MoFED), developed a national policy on PPP in the country. The 25-page document articulates the imperative for such partnerships to succeed in the face of some difficulties the government anticipates, and details a “combination of policy and legal reforms, financing mechanisms, incentives and institutional support to bolster private sector participation of public infrastructure and services” provision in the country (Ministry of Finance and Economic Development, 2011: 1). Some of the policy’s objectives are to: leverage public assets and funds with private sector resources from local and international markets to increase needed investment in the infrastructure sector; create an enabling environment for the private sector and government to demonstrate value for money in public infrastructure provision and management; protect the interest of all stakeholders in the PPP process and create an effective and efficient risk sharing regime in the sector; create effective institutional and structural arrangements for the identification, structuring and competitive tendering of PPP projects in the country; and encourage local Ghanaian businesses to actively participate in the delivery and management of public infrastructure (Ministry of Finance and Economic Development, 2011: 3).
To achieve these objectives and demonstrate its commitment to the PPP concept, the government commits itself to certain key duties and responsibilities. These commitments are aimed at ensuring the effectiveness of projects preparation and their financial viability. The first is establishing a Project Development Facility (PDF). The PDF, so developed, “shall finance upstream investment appraisal, value for money assessments and other feasibility and safeguard studies” (Ministry of Finance and Economic Development, 2011: 6). It will also support financing transactional advisors responsible for “undertaking project and transaction structuring and implementation up to the signing of the contractual arrangements with the private investors(s)” (Ministry of Finance and Economic Development, 2011: 6). Second is the development of a Viability Gap Scheme (VGS). The VGS is supposed to primarily support infrastructure projects that are economically justifiable, but not economically viable (Ministry of Finance and Economic Development, 2011). The third is the establishment of an Infrastructure Finance Facility (IFF) as a fund or a company owned by the state but operated in arm’s-length fashion, with the mandate to raise the “requisite long-term financing with government support for on-lending to commercial rates to the private sector partner for PPP projects” (Ministry of Finance and Economic Development, 2011).
Under the policy, the government also intends to establish key institutions, including policy units under the MoFED for implementation. These include a Project and Financial Analysis Unit (PFAU), a PPP Advisory Unit (PPPAU), and a Debt Management, Budget, and Legal Division (DMLD). These units are aimed at providing PPP project advice and support, individual project sponsorship, design, preparation, execution, policy dissemination, monitoring, and enforcement (Ministry of Finance and Economic Development, 2011: 7).
Another key component of the policy is a National Public Private Partnership Draft Bill 3 to be promulgated, to “put in place the legal framework pursuant to the National Policy on PPPs” (Ministry of Finance and Economic Development, 2013: 2). The draft bill has nine core components that cover critical aspects of PPP policy, such as: guiding principles; an institutional framework for PPPs; a project identification, feasibility and approval preparation mechanism; PPP solicitation processes; and evaluation and selection processes (Ministry of Finance and Economic Development, 2013). Furthermore, the bill addresses issues regarding contract signing and implementation, dispute resolution mechanisms, mechanisms for appropriate forms of government support and, finally, an interpretation section of the draft bill (Ministry of Finance and Economic Development, 2013).
These developments – that is, the PPP policy and draft bill – are major departures from Ghana’s old developmental trajectory because, as explained above, few prior national policies have been followed by a fully developed policy and a legal framework supporting them. They show the clear intention of the NDC government to alter the path of national development as it seeks the means to address the infrastructural deficit of the country. Exactly how effectively this policy will address the country’s critical infrastructure needs and, more important, how it differs and departs from the past governments’ policies remain to be seen.
The new PPP policy: insights from path dependency theory
In this section, we will attempt to apply the path dependency theory to understand and determine if the new policy is leading or will lead to path forging for national development, or whether it will just be business as usual. As already noted, key features of path dependency are critical junctures, a self-reinforcing mechanism, and learning effects.
Critical junctures are very important in understanding path dependency and the history of the policy process (Harrison et al., 2008; Pierson, 2000). For our purpose, the development of the PPP national policy and the drafting of the PPP draft bill are critical junctures; it is the first time since independence that a government has developed a comprehensive national policy, in addition to a draft bill on PPP, as the way forward for national development. As has already been explained, even though the NDC (1993–2001) and NPP (2001–2009) governments made announcements, with great political pomp and circumstance, about the significance of the private sector, neither of them put together a policy like the current one to bridge the gap between the sectors. The involvement and performance of the private sector was nonexistent or, at best, weak (Arthur, 2006; Opoku, 2010). The new policy can therefore aptly be described as a watershed in changing the path of development, and a serious demonstration of a deep-seated commitment of the NDC government to PPPs. This commitment can be seen from the backing of the policy with a law, an action, which was heretofore absent from national policies in Ghana.
It is fair to state that the policy and the bill thus do signify path breaking, and have created a new path based on the definitions and characteristics learned from previous policy or path dependent development. For instance, the bill’s objective is to formally engage the private sector in national infrastructure development and management. It recognizes the private sector as an equal partner with greater resources (funding, expertise, etc.) that the NDC government can tap to deliver on its promises for better public infrastructure for the welfare of Ghanaians and to achieve its “Better Ghana Agenda.” It is therefore fair to say that the government has succeeded in transforming the informality of previous public–private initiatives into a crystallized, formal, and coherent policy.
The policy and the draft bill have therefore supplied the various legal mechanisms needed to ensure that future governments not only stick to this path, but learn from it and improve upon it for future development. This process of establishing a policy, implementing it, and using feedback to improve it and make it more efficient follows the self-reinforcing mechanism idea of path dependency theory (Arthur, 1994; Thelen, 2000). From this perspective, the new policy has set the stage for a more formal approach to public sector infrastructure development and management in place of the ad hoc shenanigans of previous regimes. This self-reinforcing mechanism therefore represents a major advancement in the continuous use of PPPs in Ghana. Future governments may tweak the policy to make it better and more efficient in response to environmental uncertainty; but the core argument, that a broader and formal national policy on PPPs is needed, is self-reinforcing, and is an idea whose time has come.
Finally, the foregoing analysis demonstrates that the NDC government had learned from their mistakes by not being content with making public pronouncements, and backing them up with a policy and a draft legal bill. The draft bill in particular is important because it will make it difficult for future governments to reverse this development, while at the same time ensuring that people responsible for the policy’s implementation follow it to the letter. They both (the policy and the draft bill) include accountability mechanisms, as well as institutional frameworks and structures to improve upon the policy as and when necessary. We thus see an element of learning effects here as well, manifested in the idea of rational policy-makers anticipating potential or real negative effects in the future, and adopting present and short-term measures to mitigate them.
The national PPP policy in Ghana: a political rhetoric?
The critical question is: with this new policy, is Ghana breaking from its old developmental path? The evidence marshalled above demonstrates that this new policy is not a path departure in Ghana’s developmental history, but rather a path detour. A path departure entails a complete change of direction, while a path detour involves tweaking or reformulating a policy to bring it into line with a preferred principle; in this case, the PPP principle. A number of factors account for this state of affairs.
The first major challenge of this policy is that although it was formulated in 2011, it has still to be institutionalized and implemented. None of the proposed institutions or structures identified in the policy document (PDF, VGS, IFF, PFAU, and PPPAU) has been established. These facts call into question the commitment of the government to the policy and to reaping its benefits. The whole PPP idea seems to be stalled, and until something dramatic is done it may remain on paper.
An institutional weakness of the policy is the failure of the government to pass the draft bill into law. In May 2013, the Ministry of Finance developed a draft National Public Private Partnership Bill. The plan was to present the draft bill, together with the PPP policy, to the Attorney General’s Department before submitting them to Parliament for ratification and passage (Ministry of Finance and Economic Development, 2013). Such a law will prove a deep commitment to the PPP concept, and also assure private sector entities and other stakeholders that the government is very serious about the PPP process. It will also map avenues by which to seek redress and settle disputes. If passed, this law will create a strong framework for the government to monitor and regulate the activities of the private sector in PPPs to ensure the optimization of resources and achieve core institutional objectives (Pongsiri, 2002). Unfortunately, it has been three years since the draft bill was written, and it has yet to be presented to Parliament, debated, and passed. To this extent, the new policy is hollow, and obviously without legal force. The inability to promulgate the law perhaps indicates a serious lack of commitment of both the NDC government, and may make stakeholders suspicious.
By their nature, PPPs do not entail less or, even, a hands-off government. On the contrary, they need a more informed, experienced, and smart government, capable of matching the knowledge and experience of private firms and consortia in PPP transactions (Zaato and Hudon, 2015). This means that the lack of, or inadequacy of institutional capacity poses a very serious challenge to the realization of PPP objectives, especially in developing countries (Akintoye et al., 2016; Dada and Oyediran, 2016; Jamali, 2004; Mitchell-Weaver and Manning, 1991; Trebilcock and Rosenstock, 2015). As Thomsen (2005: 3) argues, “many developing countries lack the administrative and regulatory capacities to provide an adequate environment for PPPs.”
In Ghana, the situation is worse because of the lack of specialized knowledge and research on PPPs, such as by think tanks, specialized bodies, and institutions that both research them and oppose or advocate them, as happens in most developed countries in the Organisation for Economic Co-operation and Development (English, 2005; English and Guthrie, 2003). For instance, the Dutch government set up a specialized body called the Dutch Knowledge Centre on PPPs, under the Dutch Ministry of Finance, specifically to provide knowledge, advice, and technical expertise (Klijn and Teisman, 2003). The absence of such expertise among policy-makers in Ghana is a major problem. The benefits of such institutional knowledge and memory are that they are there to supplement the knowledge of the policy-makers with research on best practices, which ultimately makes for better decision-making. Establishing such a center under the new policy will be a significant path departure from earlier developmental policies in Ghana. Its absence, however, demonstrates what we may describe as the “business-as-usual” attitude of the Ghanaian government in national policy development.
The need to improve transparency and accountability in PPP transactions is the second critical success factor for their adoption and implementation (Trade Union Advisory Committee, 2014; Zaato and Hudon, 2015). Unfortunately, the policy development process was closed to outside interests. It was monopolized by a few government officials at the Ministry of Finance and the developmental partners, with little or no public participation or consultation by critical stakeholders. Important private sector bodies, such as the Association of Ghana Industries, the Private Enterprise Foundation, and the Trades Union Congress, were not consulted. The policy process thus defeats the very purpose of the public consultation, participation, and citizen engagement that are critical to PPP. For a policy that is aimed at building trust with the public and critical stakeholders to provide critical public infrastructure, the lack of accountability, consultation, and participation are disturbing defects.
Closely related to these shortcomings is the lack of a Public Sector Comparator (PSC) framework in Ghana’s PPP policy. In Canada and other developed countries where the PPP concept has taken deep root, the PSC serves as a useful criterion for predicting whether value for money can be achieved (Acar and Robertson, 2004; Canadian Council for Public–Private Partnerships, 2003). Through the PSC proposed private bids are compared with their value if they were provided by the public sector, and a PPP project is only implemented if the private bid promises greater value for money than the public sector’s traditional procurement option. The PSC can also assist in allocating risks in PPP contracts (Corner, 2005). They are therefore critical components of the PPP policy process, and its absence is another big challenge to the current policy.
The deep-seated institutional and structural weaknesses just identified demonstrate that the new policy may not mean a path departure and the emergence of a new path for national development. Overcoming these hurdles will go a long way to creating an enabling, conducive, and hospitable environment for the adoption and implementation of PPPs in Ghana.
Conclusion
The objective of this paper was to critically examine the government’s attempt to develop and use PPP to address the infrastructural needs of Ghana. Like other African countries, Ghana remains poor as a result of the failure to address public infrastructure needs: which many believe if well addressed may lift them to the high middle countries status for which they all yearn.
To this end the government, with the help of its developmental partners, has developed a national PPP policy that it believes will enable it to address the country’s infrastructural problems. The policy’s development stems from the notion that government alone cannot shoulder the enormous burden of dealing with the current infrastructural deficit, and that the benefits of PPP outweigh their limitations.
Using path dependency theory, we sought to examine whether the policy in its present state breaks a new path. Consequently, we asked two questions. First, is Ghana breaking away from its traditional state-led path of development to a new one based on partnerships with the private sector? Although the actions of the NDC are not different from those of previous ones, we must say that the policy itself is laudable. It is our view that the NDC, a party that sees itself as social democrats and believe that the state should play a significant role in development to develop such a policy, no doubt is a break away from the traditional state-led approach as it provides a balance for state–private sector relationship in infrastructure development. Moreover, and with the coming to power of the NPP (2017–) with their pro-business ideological orientation, it is expected that the policy will be implemented to its logical conclusion, even if it means tweaking it to meet the exigencies of the day.
The second question we looked at was: Is the policy in its current condition was the ultimate public agenda for a new path of development? In other words, will the policy be the watershed, or create the critical juncture, for the country’s development, especially with infrastructural development? From the standpoint of the policy document and the commitment of a party (NDC) that can be considered a bit more pro-state, there is no doubt that, if it is implemented, this will be a watershed moment in national development.
These questions were important because we believe that it is crucial that a new path for national development be forged in view of the cost associated with undertaking development projects. Since gaining independence Ghana has followed a development path championed by the state, with limited private sector involvement, even under governments that claimed to be private sector friendly, as well as during the adoption of neoliberal reforms, which were to pave the way for the private sector to function as the engine of growth in the economy. This state-led development has not boded well for the country.
In spite of this, the analysis demonstrates that the new policy has governance, capacity, and regulatory challenges that need to be addressed before it can result in a new path for development. In its present form the various pronouncements from the previous NDC government makes the policy similar to earlier ones, like the now [in]famous “golden age of business” mantra of the previous NPP administration. Just like the PSI, therefore, not having the draft bill passed or a law to give strong legal backing to the new policy demonstrates the unwillingness or the inability of policy-makers in Ghana to see policies aimed at partnering with the private sector from conception to fruition.
With the 2016 general elections in Ghana, and the electoral calculus that has been shown to work against PPP policies and specific projects (Hilton and Stoney, 2007; Zaato and Hudon, 2015), we hope that the policy will not be condemned to the shelves to gather dust with the excuse that it was the policy of the previous government, as it had been the norm and that the present government will adopt the policy and pass the draft bill into law.
We are of the opinion that if the present government addresses some of the identified challenges, establishes the various institutions proposed under the policy, and passes the draft bill, with some modifications, it may lead to the long-sought-after, well-functioning, partnership and relationship with the private sector, and may, in view of some of the innovative new ideas it is proposing, eventually lead to a path departure in national development. The effect of the overall policy may thus bring significant benefits to a country aiming to be a high middle income one in the near future.
This paper also provides important knowledge in the area of contracting and negotiation especially with regards to PPP policy-making. As we indicated above, the lack of engagement and consultation with identifiable groups like the Association of Ghana Industries, Private Enterprise Foundation, Trades Union Congress and others in the negotiation stage will present major roadblocks down the line at the implementation stage of the policy. This is because these groups are and will be very vital to the success of the policy and their neglect in the negotiation process means that they cannot own it, and might see it as foreign and an imposition on them at the implementation stage. The lesson is that in contracting and negotiation of such a major policy, all major stakeholders need to be engaged and involved from the beginning to the end. That way, they can own it and contribute to making it a success because it directly impacts them and their activities.
Finally, for governments in developing countries seeking creative ways to develop their countries, Ghana’s case provides some useful insights. For instance, formulating a national policy, backing it with a bill, and establishing strong institutions to make the policy work are worth emulating. Furthermore, the long delay in debating and passing the proposed bill, demonstrates the difficulties that governments, especially those in developing countries, face when negotiating with various branches of government for a major policy that has far wider political, economic and financial implications for national development. These are all lessons others can learn from the Ghanaian case. A caveat though is that while they can learn from Ghana’s approach, it must be said that one-size-does-not-fit-all and blindly copying what Ghana is doing may be a disaster because of the prevalence of different environments in these countries.
Footnotes
Author Note
Author Frank Louis Kwaku Ohemeng is also affiliated to University of Ghana, Ghana.
Declaration of Conflicting Interests
The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
Funding
The author(s) received no financial support for the research, authorship, and/or publication of this article.