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African Voices Must Speak Up for Infrastructure Financing, Support

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Monday, December 12th, 2016
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Lesotho is facing challenges in financing its Queen Mamohato Hospital, which costs U.S. $67 million a year to run, representing half of the country’s meagre health budget.

Oil palm plantations, like this one in Kango being developed by Singaporean firm Olam, are part of a government drive to make Gabon an emerging economy by 2025. Photograph: Xavier Bourgois/AFP/Getty Images

The project, which the World Bank’s International Finance Corporation helped design, is a result of a public-private partnership (PPP) agreement between the Lesotho government and a South African private healthcare provider.

Under the terms of the partnership the Lesotho government purchases healthcare services while the latter co-financed, built and operates the public healthcare facility and delivers clinical and non-clinical services for a period of 18 years. The health care provider is responsible for treating a stipulated number of patients per year according to an agreed formula, after which the Lesotho government will be charged additional costs for excess treatments. In order to make the project a reality, the government made up-front payments to the value of $58 million.

Unfortunately the project is not going according to plan. Contrary to advice that the operational costs of the hospital would not exceed previous budgets, the number of patients receiving treatment at the facility has continuously surpassed the agreed-upon numbers. Partly due to this, the Lesotho government’s payments to the health care provider have skyrocketed.

Relations between the two partners have deteriorated as a result, and Lesotho officials have accused the healthcare provider of overcharging for its services. Since the hospital opened its doors in 2012, the excess charges have run into millions of U.S. dollars and by 2014 the project fees were three times higher for the Queen Mamohato Memorial Hospital than its predecessor, drawing on funds that are desperately needed for rural clinics.

However, rising implementation costs of the project are only one of many challenges facing the Lesotho government. Without proper contract management skills, technical specialists and monitoring capacity, the government finds it difficult to re-negotiate its agreement with the healthcare provider or ensure that it fulfils the terms of the PPP agreement.

The Lesotho example highlights some of the difficulties that developing countries in Africa face in accessing financing for major social infrastructure projects, which are in turn critical for the social and economic development of its poorest citizens.

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