RE-POSITIONING THE PPP DEPARTMENT IN ATTRACTING MORE INVESTMENTS IN ZANZIBAR

PRESIDENT’S OFFICE – LABOR, ECONOMIC AFFAIRS AND INVE

ZANZIBAR PUBLIC PRIVATE PARTNERSHIP DEPARTMENT

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ZANZIBAR PUBLIC PRIVATE PARTNERSHIP

INTRODUCTION:
The Revolutionary Government of Zanzibar (RGoZ) recognizes the need to finance and
develop infrastructure as the demand for public services grows and the strains on government
budgets increase. With continuing global economic growth and expansion, the role of
government in the provision of public services and infrastructure has equally increased, and
more governments are looking to the private sectors to participate in providing these services
in partnership with the public sector. The RGoZ has determined the facilitation and
encouragement of Public-Private Partnerships (PPPs) as a way to enhance the provision of
public services will be a key strategy in ensuring timely and quality provision of the services
in demand. The establishment of the use of PPPs as an important way to mobilize additional
resources for development of public infrastructure and commits to ensuring that the proper
legal, regulatory and institutional frameworks are in place to promote and implement PPP
projects.
The foundation for Zanzibar’s PPP framework rests on the PPP Policy of 2014. The Policy
articulates the fundamental goals of PPPs in Zanzibar. Based upon the PPP Policy, Zanzibar’s
PPP Act was drafted and enacted in 2015. As the companion piece to the PPP Act 2015, the
Revolutionary Government of Zanzibar (RGoZ) passed the PPP Regulations 2017, which
explain how the provisions of the PPP Act should be implemented.

The establishment of this PPP Department under the PPP Act No. 8 of 2015 is one of the
efforts of the Revolutionary Government of Zanzibar to attract and recognise the contribution
of the private sector in improving public development which has a great contribution to the
country's economy.
The full engagement of the private sector, coupled by the adoption of PPP in Zanzibar, could
enable the government to better fulfil its responsibilities in the efficient delivery of
infrastructural facilities and services.
The PPP Department is responsible for coordinating all projects of Partnerships between the
Public Sector and the Private Sector for the Public authorities of the Government in the
relevant sector.

Vision
A poverty-free Zanzibar with all the necessary infrastructure and public services perpetually
in place, the achievement of which is partially due to well-collaborated public and private
sector initiatives.
Mission
To implement a robust and transparent framework for public and private sector collaboration
in Zanzibar through a competitive and professional PPP process.
Goal
To provide essential and productive infrastructure and public services in line with Zanzibar’s
natural and ethical environments, geared towards national economic and environmental
sustainability.

OBJECTIVES OF THE DEPARTMENT

The PPP Department has set the following goals:-
i) Strengthening Cooperation between the Public Sector and the Private Sector by setting
guidelines for cooperation,
ii) To raise the status of the Department to be autonomous institution so that it can manage its
activities in efficient way,
iii) To strengthen the capacity of the Staffs of the Department by setting a program of short
and long-term studies through the relevant sectors of the projects in accordance with the
direction of the Government.
iv) To remove the dependence of the budget from the Central Government by using the
opportunities of internal revenue sources aligned within the Law and Regulations through the
Project Development Fund (PDF),
v) Educating various institutions on the importance and benefits that will be obtained
regarding cooperation,
vi) To strengthen cooperation with the Private Sector in bringing the foreign Direct
Investment money to develop the country's economy,
vii) Strengthen collaboration with the Private Sector to create formal employment
opportunities,
viii) Strengthening collaborations with the Private Sector with the aim of improving services
to citizens,
ix) Strengthen collaborations with the private sector to improve and expand infrastructure
facilities,
x) Strengthen collaborations with the Private Sector in order to capture local content by
reaping expertise, technical knowhow and new technology from the Private Sector,
xi) Establishing a PPP program in college curricula with the aim of producing domestic
experts.
xii) To preserve and protect the environment,
xiii) To protect the heritage of Zanzibar.
 OPPORTUNITY STATEMENT:
Re-positioning the PPP Unit in attracting more Investments in Zanzibar
1. The RGoZ drive for the Private Sector participation.
The Revolutionary Government of Zanzibar (RGoZ) recognizes the need to attract investments and
financing necessary for addressing development challenges facing the country, and for optimizing
the available investment opportunities in the country. At the same time, in order to meet the
development objectives specified in Zanzibar Development Plan (ZADEP) 2021 - 2026, the country
requires significant investment from a broad range of sources including national, regional and
international investors in order to meet the development goals articulated in the Vision 2050 of
which need to be financed by the government, private investors and other public funders.

These needs are increasing at speed due to the changing global development context, increasing
population, and declining traditional sources of revenues (aids, grants, etc). All these factors are
leading to the increase in demand for public services, and the increase in the gap between the
government budget and the resources available. These gaps and the drive of the government
towards socio-economic transformation has increased the space for private sector participation in
providing social services through Public-Private Partnership and other modalities which can attract
more private sectors to finance development.

Currently there are barriers to securing this financing that include: a limited pipeline of bankable
projects; capacity gaps in project preparation and investment promotion in the country;
fragmentation in portfolio development approaches between regional governments, national
government and the private sector; and limited investor engagement.

For the past years, the RGoZ has adopted the National PPP Policy of 2014 which led to the
establishment of the PPP department under the President’s Office Labour, Economic Affairs and
Investments. The PPP department is mandated to facilitate PPP arrangements as a way of mobilizing
additional resources from private sector for funding development initiatives. In addition, the
department also support the President’s Office - Labour, Economic Affairs and Investments in
ensuring an enabling environment through friendly legal, regulatory and institutional frameworks
are in place to promote and implement PPP projects.

The PPP Department in the President’s Office is expected to deliver the followings.

(i) Projects reviews and consultations.

(ii) Support fiscal risk management and monitoring.
(iii) Providing recommendations (through technical analysis) on unsolicited proposals for
consideration.
(iv) Approval of feasibility studies for Non-Major Projects.
(v) Reviewing Agreements and contracts prior to signing, and approval of re-negotiations.
(vi) Providing ongoing support to Public Authorities in: -
a. Retention of technical and transaction advisors.
b. Undertaking of feasibility studies.
c. Project tendering and bid selection.
d. Contract signing.
e. Monitoring and evaluating Public - Private Partnership projects being undertaken;
and
(vii) Resolving disputes.
 (viii) To provide civil education and capacity building which will promote awareness and
understanding of Public Private Partnership, including their purpose and processes, to
relevant stakeholders.

2. Restructuring the PPP Department

Despite these good efforts and ambitions of the RGoZ, there are needs to broaden the functions,
position and mandates of the PPP department in such a way it supports the government in attracting
private investments into public services not only through PPPs but also through other emerging
innovative financing and investment opportunities such as blended financing, crowd funding, etc.

By restructuring and broadening the PPP department, the RGoZ will have an investment facility with
a vision to transform the country into a top destination for investors by supporting the generation
and progression of projects that support people and sustainable development. The Facility will have
two main pillars of work: enabling the development of specific projects and delivering capacity
building to staff on project teams (government and private sector).

a. Vision and mission

The overall vision of the investment Facility is to increase the quality and volume of bankable
development projects emanating from Zanzibar’s different sectors. This includes projects promoted
by both the government (at local, regional and national levels) and the private sector. Key to
attaining this vision is facility’s successful execution of the following mission elements:

• Developing and operating a platform that moves projects from ideation to investment by
improving quality, analysis, prioritisation and framing. Cumulatively, the facility will seek to
build an ongoing pipeline of sustainable and people centred investment opportunities in
partnership with national and LGAs.
• Establishing connections to wide variety of investors to drive local and international
investment.
• Building capacity of local and national institutions and key personnel within those
institutions to identify, scope and build out good supporting materials for projects.
• Developing primarily sustainable infrastructure investment opportunities as a core offering
and coordinating with other platforms support related growth in other areas of the economy
such as the MSME sector.

Values alignment
The work of TIF will remain aligned with the values of the government of Zanzibar, UNDP and other
partners. Core to this is a commitment to people centricity, that is placing the considerations,
requirements and welfare of the people as the primary consideration. Secondly, the Facility will
work to support investments that are aligned to the country’s development objectives as articulated
in ZADEP, the SDGs and ZDV 2050 and in subsequent policy frameworks. Inclusive in these objectives
is a commitment to pursuing sustainable development objectives and working through deep
partnership with government at all levels.

b. Expected outcomes
We are currently in the Decade of Action as the UN system and other development partners
galvanise around global action towards meeting the Global Goals by 2030. The Facility is an initiative
that aims to contribute to the attainment of the SDGs in the following ways:

• Catalysing up to USD XXX billion in investment capital into people centred projects in the
country by 2030
• Augmenting the technical capability of regional government systems in the country to
identify and evaluate project concepts for sustainable urban development projects in a
holistic and integrated matter
• Enabling MSMEs operating in the key value chains in the country to participate in a number
of major projects as service providers and contractual partners. Through this meaningful
participation, these businesses will grow and create jobs contributing to the national targets
under the eight Sustainable Development Goal focussed on Decent Work (SDG 8).
3. Why this Facility:
As mentioned earlier, the Investment Facility has been conceptualised to address the barriers to
securing financing for sustainable development projects and to attract more private sector
participation in addressing development challenges. In restructuring the PPP department to respond
to the new needs on the ground explained above, the proposal is for the new facility to have two
pillars of work with each pillar being analogous to the main barriers identified.

Pillar one: Support development of specific projects

There are three key activities that are critical to projects reaching financial close, and it is these
activities that will guide and inform the project support delivered under the facility’s first pillar of
work. These activities are:

i. Developing priority projects with targets of 2-3 high priority project prioritised per year.
These can be drawn from regional government strategic plan, ZADEP 2021 - 2026, ZDV 2050,
CCM Manifesto and private sector partners. Based on conversion established during phase
one, we anticipate that arriving at 2-3 projects will necessitate initial review of 20 concepts
and ideas.
ii. Moving projects from ideation to feasibility and investment by ensuring that robust
feasibility studies and business plan have been conducted including a comprehensive
assessment of available financing options comprising PPP, innovative financing approaches,
and utilising appropriate blended finance instruments.
iii. Working with project leaders to develop priorities and pipeline to ensure that high impact
projects are selected in line with a long-term masterplan.

The objective of this pillar is to provide direct project preparation and investor matchmaking support
provided to 10 or over 10 years, leading to cumulative direct investment in the billions of shillings.
Further, we hope to demonstrate the market potential of a new services practice area providing
advisory services within the RGoZ in very early project preparation and crowding in other players to
scale the offering. We anticipate that part of successfully delivering on this pillar will be building a
roster of reliable experts who are engaged at various scoping, pre-feasibility and feasibility stages.

Pillar two: Deliver capacity building

i. Building the capacity of government staffs at MDA and LGAs level to develop portfolios &
pitch projects by emphasizing skills transfer and learning by doing exercise.
ii. Capacity building of staff at sectoral level at data gathering stage this is done through
providing on demand coaching as required, delivering capacity building workshops and
sharing relevant examples.
iii. Developing and distributing investor criteria of appropriate investment partners, and sharing
financial model templates, standardised documents that can be leveraged as examples, or as
a basis for building out customized materials.
iv. Calibrating risk/return expectations by sector through developing and show casing case
studies and comparable investments. These materials will be widely published and will be
used a learning aid in the capacity building programming.

The most significant impact of this pillar is the development of a comprehensive suite of tools on
project preparation, investor readiness and sector guides on different infrastructure sectors for use
by project promoters across the globe. This includes self-guided learning materials (how to guides,
instructional videos), templates for standard documents and contracts that can be easily customized,
group based and one on one practitioner coaching on Project Financing.

Through the two pillars of work, the investment facility will enable projects to go through a five-step
process beginning with ideation and concept creation. This is where a specific idea is first articulated,
with a vision for what is possible laid but no clear road map to achieving this. Experience shows that,
many potentials develop do not leave this stage.

The next stage following concept articulation, is the pre-feasibility stage, here the beginnings of a
road map emerge with more detailed plans being developed, and initial regulatory approvals are
obtained. The risks to the projects are still high at this stage, and the pathway to returns are unclear.
For this reason, there are few players providing support and engaging with project promoters at this
stage.

This then moves to the feasibility stage at which point comprehensive studies may be completed,
these studies help to identify and address key risks with the project. If a project progresses beyond
feasibility, its appeal to investors is increased as the likelihood of success is enhanced by de-risking
activities taken at the feasibility stage.

The investment facility is therefore focussing its activities at taking ideas through the concept to pre-
feasibility and feasibility stages where the need is highest, the potential for impact greatest, and the
landscape of existing players smallest. The figure below depicts the project development cycle and
highlights the stages at which the facility seeks to act.

4. Proposed Governance Structure and Team:

To achieve its outcomes, the facility will require a strong and effective team led by the head of the
PPP department and has to be exempted from other Ministerial duties rather fully committed to
implement the facility’s activities. While this governance and team structure is expected to evolve
throughout the incubation process as the initiative grows, a strong framework and team is proposed
to be available from the onset. The team can be drawn from the department of PPP in the
President’s Office - Labour, Economic Affairs and Investments or from other existing structures
where the required skills and expertise are available.
 a. Initial governance structure and staffing for New Facility

The establishment of the facility will be staggered across two phases over 24 months (see annex for
more details on the implementation plan). During phase one and in the first parts of phase two, the
governance of the initiative is vested in the President’s Office - Ministry of Labour, Economic Affairs,
and Investments who play the role of host and UNDP will be the proponent partner for the Facility.

The President’s Office - Labour, Economic Affairs and Investments, Ministry of Finance & Planning
and the Local Government Authorities will also be invited to join the facility’s governing board from
inception. This ensures that there is strong alignment between the facility’s work and government
development priorities. As additional funding partners are engaged, the governing board of the
facility will be expanded to include funders and representatives from the private sector.

Initial staffing for New Facility will comprise of:

● A team of PPP department staffs to oversee initiative work, co-lead the strategy, and drive
government and stakeholder engagement within Zanzibar.
● UNDP will deploy experts on specific areas of technical analysis as a way of facilitating
incubation, co-lead the facility’s strategy, and deliver on pillars of work.
● Technical advisors in related disciplines such as economics, engineering services, financial
assessment and others as required.

b. Long term governance models for New Facility

Through market assessment and based on models of prior work, we identified three main alternative
governance models and hosting arrangements possible for the facility once it is fully incubated. It is
anticipated that this fully incubated hosting arrangement and associated governance structure will
be set up in phase two of establishing the facility. The three alternative governance models
identified are:

● Option A: New Facility is a new department within an existing government agency.

● Option B: New Facility is a new arms-length government supported agency.

● Option C: Incubate New Facility as a new standalone legal entity.

c. Team and staffing

The optimal team to operate the Investment Facility will include a secretariat team from the
President’s Office - Labour, Economic Affairs, and Investments supported by UNDP staff.

New Facility secretariat team

The proposed New Facility secretariat team is organised into the following teams:

i. Senior development finance & impact specialists to support project promoters in portfolio
planning, project definition and advancement.
ii. Seasoned skills transfer and investment practitioners to lead capacity building missions and
continuously refine and built the suite of New Facility toolkits and templates.
 iii. Team of project managers driving co-ordination across regions and all facilities activities,
seeing collaboration opportunities nationally.
iv. Dedicated external engagement professionals managing relationships with government and
investors this includes a government affairs and key personnel driving relationships with
domestic financing institutions.
v. Internal strategy, operations and management team leading and co-ordinating work across
the facility including ongoing legal and governance.
In addition, the secretariat maintains a database of technical advisors across sectors in
infrastructure, manufacturing and services, MSME development, these technical advisors are
brought on as required.

UNDP staff attributions under proposed structure

Given UNDP’s role in leading the ideation, design and establishment of this Facility, it is anticipated
that there will continue to be a dedicated team of professionals within the organisation working on
building this initiative.

5. Implementation plan:
It is foreseen that it will take a period of 24 months to fully incubate the facility as a sustainable
entity driving the formulation of bankable people centred development projects in Zanzibar. This
period allows adequate time to gather relevant market insights, design the facility, pilot models and
iterate through learning, get stakeholder buy-in, demonstrate traction and effectiveness, and build
the team, governance and financing structures that enable sustainability.

This incubation will be delivered in two phases:

● Phase 1: Discover, design, pilot and operational expansion.

● Phase 2: Scale up an independent operation.

The design of the Facility will be informed by market testing and stakeholder engagements in
Zanzibar and internationally. The proposal is to leverage the current government structures to
establish the facility in a phased way whereby in the first phase the facility will undertake the
following activities;

 Survey what lessons can we draw from similar past PPP projects.
 Reviewing national projects identified and at various stages of preparation.
 Unpack various sectoral investment strategies, how are they linked to the nation’s
Integrated Development Plan & national strategy?
 Identify the highest potential early-stage projects and developments to focus efforts on?
 Identify optimal combination of services for enabling project preparation at scale focusing
on bankability and impact factors: including an enabling regulatory environment, financial
analysis, feasibility assessments.
 Identify the most appropriate new emerging finance structures such as blended finance
structures in each investment case.

The second phase of the facility, which will be in the second year and beyond, will start
implementing long term plans to make the Investment Facility sustainable as a stand-alone
Investment Facility with team and staff. In the second phase, the facility will have a clear offer and
validated services and tools that can be deployed at scale.

 Identifying the most appropriate finance structures in each case

 Identifying optimal combination of services for government enables project preparation at
scale.
 Classifying the highest potential early-stage projects and development to focus efforts on.