Significant changes to the Public Private Partnership Act Cap.103 were brought by the Public Private Partnership (Amendment) Act No. 4 of 2023 to boost private sector investment in Tanzania and streamline project delivery processes. To ensure harmonisation, the Government subsequently published the Public Private Partnership (Amendment) Regulations, GN No. 838A of 2023.
These amendments refine the review and approval processes in the original Public Private Partnership Regulations, GN No. 37 of 2020, to better identify the most promising projects, best aligned with the Government’s agenda. The key changes are discussed in this article.
Comparisons of the PPP Regulations and the PPP Amendment Regulations
2 - Interpretation
PPP Regulations
Contained various definitions but lacked some essential ones. The following ‘old’ definitions have been replaced:
- Special purpose vehicle (SPV): “a project company established for the purpose of implementing a specific PPP project in accordance with the provisions of the Act.”
- Tender period: “the period between the date of the first publication of the invitation to tender or the date of the mailing of the invitation to tender and the closing date for the submission of tenders.”
- Local firm: “a firm which is incorporated and registered in the Mainland Tanzania.”
PPP Amendment Regulations
Clarifies and expands on various definitions covering key PPP components and stakeholders, including:
- Special purpose vehicle (SPV): “a private company established by a successful private party prior to the execution of an agreement for the purpose of implementing a PPP project.” (amended to align with the PPP Act)
- Tender period: “the period between the date of first publication of the invitation to tender or the date of mailing the invitation to tender and the date the contract of award is signed.” Contract of award is not defined in the legislation but, in most cases, it is likely to be the PPP agreement.
- Local firm: “a firm, company, sole proprietor or group of persons incorporated or registered in mainland Tanzania where the shareholding structure features is not less than fifty-one per cent (51%) of citizens or Tanzanians ownership.”
- Introduces five new definitions of Accounting officer; Commercial close; Fiscal commitment; Financial close; and Transaction advisor.
3 - Identification of solicited proposals, 3A - Information to be contained in prefeasibility study, 3B - Standard criteria
PPP Regulations
- Required the contracting authority to prepare concept notes and prefeasibility study at the beginning of the budget cycle.
- Contained general guidelines for the content of concept notes/prefeasibility studies.
PPP Amendment Regulations
- Removes the concept note altogether on the basis it served largely the same purpose as the prefeasibility study.
- Mandates detailed prefeasibility studies which must align with national development priorities, including climate assessments.
- Clearly describes the content of prefeasibility studies, as well as the process, timelines, and allocation of responsibilities for the submission, review, and approval of potential solicited projects.
8 - Commitment deposit
PPP Regulations
- Following approval of a prefeasibility study for an unsolicited project, private parties were required to make a commitment deposit of an amount of up to three per cent of the estimated cost of the project to be conducted.
PPP Amendment Regulations
- Deletes this Regulation, removing the upfront financial burden on private parties involved in unsolicited proposals.
9(1) - Review fee by private party
PPP Regulations
- Imposed a review fee of 0.1 per cent of the estimated capital cost of the project on private parties at the time of presenting the unsolicited proposal.
PPP Amendment Regulations
- Amends this subsection to introduce a cap on the review fee. The fee is still set at 0.1 per cent of the estimated project cost, however it will not exceed USD 50,000, thus encouraging private parties to propose larger projects without the burden of high review fees.
Read more comparisons in the original publication at Clyde & Co.
Streamlined Processes
Like in the PPP Amendment Act, the amendments eliminate the requirement for submitting concept notes prior to the prefeasibility study, expediting the initial approval process. The concept note, which was often a procedural formality, has been absorbed into the updated prefeasibility study.
Notification timeframes have also been accelerated. By reducing the timeframe from up to twenty-one (21) working days to a maximum of fourteen (14) working days for all parties involved, the entire bidding process has been streamlined. Further, mirroring the changes introduced by the PPP Amendment Act, the introduction of a formal process exempting certain projects from the competitive bidding process will improve efficiency and reduce uncertainty for projects that are seeking sole sourced procurement. By clearly defining the criteria for exemption, the process is also less open to abuse and urgent, essential projects can be prioritised transparently.
Together, these efficiency improvements will help PPP projects to be developed and deliver benefits to the country sooner, as well as increasing Tanzania’s appeal as a destination for investments in infrastructure.
Stringent Assessment of Projects at An Early Stage
While the concept note has been removed, the PPP Amendment Regulations expand on and clarify other requirements in the project evaluation process. The prefeasibility study now cannot be submitted unless it provides the information specified in the new Regulation 3A. These information requirements aim to cover the same ground as the concept note. However, where the concept note was more of a formality with little indication as to the level of detail required e.g. “affordability assessment”, the new conditions for the prefeasibility study are much more detailed and focused, with guidance as to how the topics should be assessed e.g. “for fiscal affordability, evaluating the extent and nature of likely government support requirements under the project, and the amount and duration as well as likely timing for such financial support”. The content requirements for the prefeasibility study still exist alongside this in Regulation 6, but have been updated to more closely match Regulation 3A. Contracting authorities will therefore need to ensure that the prefeasibility study complies with both regulations before it is submitted.
These changes will mean that prefeasibility studies are more detailed and standardised, making it easier for the PPP Centre to assess which projects are worthy of approval. The hope is that the greater level of detail and scrutiny involved in the prefeasibility study will help to weed out unsuitable projects at an earlier stage, avoiding wasted time and cost. However, the process needs to be managed properly so that potentially valid projects are not rejected due to contracting authorities failing to meet the stricter criteria as a result of the increased administrative burden.
Removal of Investment Barriers
Significant obstacles have been cleared to encourage unsolicited proposals. The removal of the commitment deposit requirement lifts a significant financial burden off private parties, particularly investors with limited funds ringfenced for preliminary matters prior to obtaining project financing.
Additionally, capping the review fee at USD 50,000 regardless of project size encourages the submission of larger, more transformational projects without the deterrent of excessive preliminary costs. Together, these changes lower the entry barriers to participation in PPP projects in Tanzania and dissuade investors from turning to other markets.
Efficient Allocation of Financial Support
The overhaul of the Fund has resulted in more structured and transparent guidelines for the allocation of financial support. This includes clear eligibility criteria and recovery mechanisms, ensuring that funds are used fairly to support viable and strategically important projects. Projects that have difficulty meeting the affordability criteria, but perform important social functions, can therefore be better supported and remain eligible for selection as a PPP project.
Greater Transparency and Accountability
Transparency and accountability of decision making is also brought to the fore by the PPP Amendment Regulations. Use of the Fund must be publicly disclosed and a contracting authority will now have to be confident that their selection of a PPP project is justifiable as it is required to publish the highlights and rationale of the agreement on its website and in a prominent newspaper. This will help to ensure that the PPP projects align with public interests and regulatory standards.
Modernisation in Line with Global Sustainability Trends
Finally, the integration of climate responsiveness into the regulatory framework aligns Tanzania’s PPP projects with global sustainability trends. This forward-thinking approach not only mitigates environmental risks, but also the potential for projects to attract investors that prioritise environmental impact. Although it is currently unclear how much weighting will be given to climate responsiveness as part of the overall assessment, investors should actively consider how their project can be made more climate responsive to increase the likelihood of a successful bid and deliver benefits to the planet at the same time.
Conclusion
The amendments to the PPP Regulations create a more streamlined, transparent, and competitive environment for PPPs in Tanzania. By reducing procedural delays, lowering cost barriers, incorporating environmental standards, and improving the governance of financial support, the amendments are set to boost infrastructure development and enhance public service delivery through PPPs. As with the PPP Amendment Act that came before it, the PPP Amendment Regulations are a welcome development that solidify Tanzania’s status as an attractive destination for foreign investors.
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Read the original publication at Clyde & Co.
