Ghana has had a National Policy on Public Private Partnerships (PPPs) in place since 2011, and a draft PPP Bill is currently making its way through Parliament, and is expected to be passed during Q1 or Q2 2016. The Ghanaian government has also laid out an ambitious pipeline of priority infrastructure projects to be taken forward under this new regime.
Problems can arise where PPP legislation purports to have an effect on existing projects which have already been let before the new laws come into force. For example, the Infrastructure Concessions Regulatory Commission (ICRC) Act of Nigeria mandated that government approval for infrastructure projects should not be given unless they have been advertised in a particular way. The Act did not address what should happen to projects where the private sector party had already been selected before the Act came into force but before the final government approvals were received. This required an ad hoc solution to be put in place by the ICRC.
According to the current draft of the Ghanaian PPP Bill, all PPP agreements entered into between 3 June 2011 and the date the new Act comes into force are be subject to a retrospective approval process. Firstly, there is an assessment as to whether the PPP agreement was entered into in accordance with the National Policy on PPPs. If it was not, then it will only remain in force if it is subsequently “regularized” by a PPP Approval Committee which is formally established by the Act. A number of existing projects have been established following unsolicited private sector proposals, so one can expect that these will fall in the latter category.
It is not clear what the process of “regularization” will involve. It might involve the PPP Approval Committee requiring certain amendments to the existing PPP agreement, or it may even involve the committee declining outright to grant an approval. What status would be given to those contracts which are then declined, or where the amendments proposed cannot commercially be accommodated? Even if the parties agree terms that would cater for this eventuality, it seems likely that any compensation terms would be just as unenforceable as the remainder of the PPP agreement.
A similar issue arose at the start of the PPP/PFI programme in the UK about 20 years ago, where there were concerns over the authority of certain public bodies to enter into long-term PPP agreements, and lenders could not be certain that these public bodies would be permitted to honour their obligations. The UK government eventually solved this by implementing a short piece of legislation, that provided that even if the PPP agreements themselves were found to be generally ineffective for lack of authority, the specific provisions that sought to regulate the commercial consequences of this invalidity would nevertheless be upheld by virtue of the Act.
There is a potential analogy here for Ghana. There are a number of signed concession projects in Ghana where the financing is still being arranged. If prospective lenders are to advance funds on these , they will need absolute clarity as to whether these agreements will ultimately be upheld by the PPP Approval Committee. As the Bill has not yet been passed, there may be time to fix this issue and to allow these projects to proceed smoothly. Representations have been made on this basis, so prospective investors and lenders should watch this space.