The use of Official Development Assistance (ODA) in the Development of Public Private Partnership(PPP) Projects

The Case of ZambiaA presentation made at a workshop on “African trade unions as actors in development”Dakar, Senegal, 23 November 2015.

By Grayson KoyiInstitute of Economic and Social Research, University of Zambia.

2 Structure of Presentation Introduction Country Development Context Institutional and legal Framework for PPPs in Zambia ODA Flows to Zambia Case study: preliminary findings

Case description

Case justification

Employment creation

Employment relations

Respect of international labour standards

Respect of national labour laws

Preliminary conclusion and recommendations

3 Introduction The development of public-private partnerships is increasingly been seen as

a way of ensuring that private sector can contribute both directly and indirect to poverty reduction, job creation and national

development (OECD, 2015). focus of ODA is being shifted from the public to the private sector through finance

blending mechanisms.

Public Private Partnerships (PPPs) may be considered as a new concept in Zambia, But, the country has progressed quite early

launching a PPP Policy in 2008 enacting an Act of Parliament in 2009.

Several PPP projects have already been implemented in various sectors mainly in agriculture, health, transport and energy.

The particular interest of this study, however, was: PPPs that are beneficiaries of ODA .

 

4 Introduction The case study discussed offers evidence from a developing

country context of experiences with ODA financed PPPs. It focusses on African Banking Corporation Zambia

(BancABC) A banking firm in the financial services sector in Zambia that received

a US$3.5 million equity investment from Norfund in 2011.

Key guiding questions: To what extent has Norfund’s loan facility to the bank contributed to

employment creation and respect of labour rights and compliance with national labour laws and International labour standards by the beneficiary firm?

What have been the overall development results and impacts on communities of this ODA-PPP project?

To what extent have trade unions being involved in decision-making on PPPs in development and how can that role be enhanced?

5 Country context: Positive Macroeconomic Trends

6 Country Context: High Rural Poverty

7 Institutional and legal framework The 2009 PPP Act determines and establishes a number of institutions to be involved in

various processes of PPPs.

PPP Unit at the Ministry of Finance and National Planning is in charge of the implementation of PPPs,

The PPP Council formulate policies relating to PPPs and is an approval body for PPP projects.

A Technical Committee exists, plays an advisory role to the Council on technical matters.

Composition of technical committee includes government departments and representatives from professional bodies

There is no representation of labour on the technical committee, however.

A legal framework exists

The PPP Act No. 14 of 2009 regulates not only matters on the institutional structure related to PPPs, but deals with issues governing project identification and feasibility studies as well as the competitive selection process

Scope of legal framework limited, however.

Appears non-responsive to ODA financed PPP

Institutional capacity to ensure its enforcement remain weak

8 ODA flows to Zambia declining but remains significant

9 ODA received as percentage of government expenses has declined steeply

10 Case study preliminary findings Case description

African Banking Corporation Zambia (BancABC) is a retail bank operating in the financial services sector with more than 50,000 clients and about 200 employees.

It is a foreign owned bank operating in Zambia and across a number of countries in Africa

It’s headquarters are in Botswana

The bank is a beneficiary of an investment loan from Norway's Norfund.

The five-year loan agreement to the tune of NOK 29.9 million (i.e. USD 5.3 million) was signed on 1st December, 2011.

The loan facility was approved after a full on-site credit review performed by Norfund in May 2011.

The full scope of the review still being examined to determine whether it included labour dimensions

11 Case study preliminary findings

Case study justification The project has been running for over four years.

This enables ample time to relate to possible impacts and interact with various dimensions of the current debate.

The project qualifies as a PPP using ODA funds. It is a recipient of a Norfund loan.

The amount of the investment loan is sizeable, US$5.3 million

The bank also has a nation spread this enable an appreciation of its national development impacts

12 Case study preliminary findings Employment creation

The Bank reports a workforce of about 200 nation-wide

An assessment of how employment dynamics have changed due to Norfund loan investment yet to be determined

Challenges being experienced with access to this dataset

Secrecy issues

13 Case study preliminary findings

Employment relations

Until September 2015, the basis of employment relations was the Human Capital Manual.

However, with the recent change in the shareholding structure, the new owners have assumed an open door policy towards collectivised employee relations

The new management has since September 2015 signed a recognition agreement with the Zambia Union of Financial and Allied Workers Union (ZUFIAW ).

Union has already prepared their claims and demands for improved terms and conditions

Proposals for improving the Human Capital Manual have also been made

With the absence of a collective bargaining mechanism, salaries remain an individual secret for workers.

What was apparent was that terms and conditions of service were individualised to the point where employees performing similar functions and with similar qualifications did not necessarily earn similar wages nor served on similar conditions of service.

This leaves workers vulnerable to exploitation .

14 Case study preliminary findings

Respect for International labour standards

Until September 2015, workers in the bank did not enjoy some fundamental principles and rights at work as enshrined in International Labour Standards,

particularly ILO Convention No. 87 (freedom of association and protection of the right to organise Convention, 1948) and

Convention No.98 (right to organise and collective bargaining convention, 1949).

Table 2 on the next slide illustrates the extent to which the company has been in compliance with the eight fundamental ILO Conventions that Zambia has since ratified and are in force .

15 Case study preliminary findings  Conventions Date

RatifiedStatus Bank Compliance

1 C029 - Forced Labour Convention, 1930 (No. 29)

02 Dec 1964

In force Yes

2 C087 - Freedom of Association and Protection of the Right to Organise Convention, 1948 (No. 87)

02 Sep 1996

In force Yes, Recognition agreement granted to the union in September 2015

3 C098 - Right to Organise and Collective Bargaining Convention, 1949 (No. 98)

02 Sep 1996

In force No, currently no collective bargaining taking place. Preparation to commerce first ever negotiation underway.

4 C100 - Equal Remuneration Convention, 1951 (No. 100)

20 Jun 1972

In force Yes, though issues of transparency around salaries and other decision making processes remain 

5 C105 - Abolition of Forced Labour Convention, 1957 (No. 105)

22 Feb 1965

In force Yes

6 C111 - Discrimination (Employment and Occupation) Convention, 1958 (No. 111)

23 Oct 1979

In force Yes

7 C138 - Minimum Age Convention, 1973 (No. 138)Minimum age specified: 15 years

09 Feb 1976

In force Yes

8 C182 - Worst Forms of Child Labour Convention, 1999 (No. 182)

10 Dec 2001

In force Yes

16 Preliminary Conclusions After a preliminary analysis, the study found no evidence of improved

employment outcomes due to Norfund’s investment loan to African Banking Corporation Zambia (BancABC Zambia). Further analysis of existing datasets may be necessary to establish clear evidence of employment and national tax revenue impact, however.

Available data and analysis on employment relations pointed to recent improvements but also uncovered failure to respect the international labour standard on collective bargaining since collective bargaining negotiation was yet to be operationalized.

Available data and analysis also established that the trade unions have not been involved in decision-making on PPPs in development.

Against these findings, the paper reaches a preliminary conclusion that development impacts of this project are unclear and that the trade union capacity to understand and participate in decision-making process on PPPs needs to be enhanced.

17 Preliminary Recommendations To Government

Strengthen the PPP legal framework to make it response to the ODA financed PPPs

To DFIs/development partners,

Align development finance to developing countries’ investment priorities.

Make development outcomes the overriding criteria for project selection and evaluation

Target domestically-owned companies as a preferred option for ODA financed private investment whenever possible

Set clear transparency and accountability targets for ensuring monitoring and accountability to local stakeholders

To trade unions

Undertake a pro-active agenda towards the use of ODA in PPPs

Demand for space and involvement in the PPP institutional framework in Zambia

Raise awareness around the rights of workers, including the right to collective bargaining for BankABC employees

Establish union structures across all BancABC outlets