The potential role of public-private partnerships in the South African economy : an innovative conceptual public-private partnerships model for small and medium enterprise development

Abstract

The introduction of PPPs in infrastructure provision has changed the way in which governments around the world now view infrastructure provision. However, the introduction of PPPs to deliver the needed infrastructure has benefited only a few companies. Most of these companies are the big construction firms that possess technological know-how and those that have the financial ability to execute large infrastructure projects. Although SMEs are important for employment creation, inequality and poverty reduction, the participation of SMEs in these PPP projects is very low. This is because PPP models in developing countries are based on those used in developed economies, and such models ignore the socio-economic problems facing developing countries. Therefore, this study argues that PPP projects in developing countries present an opportunity for growing the SME sectors in developing countries. It challenges the viewpoint of seeing infrastructure backlogs only as providing opportunities to big private sector companies and argues that infrastructure backlogs can be used by governments to reduce the triple challenges of unemployment, poverty and inequality by linking SMEs to PPP projects. The traditional PPP model that is being applied by many developing countries does not fully encourage the participation of SMEs in PPP projects, as most of the projects executed through this model are bundled into big projects that SMEs cannot execute due to a lack of technological know-how and weak balance sheets. The study therefore suggests different ways in which the participation of SMEs in PPP projects could be improved based on the results of the survey conducted for this study. The study then proposes an “innovative conceptual PPP model for sustainable SME development” that takes into account the needs for developing countries to create jobs, reduce poverty and inequality. It also takes into account all challenges for SMEs identified through the review of literature and the study survey.