Risk Management in Transport PPP Projects
In the Islamic Countries
133
for the definition of the financial terms and possible liabilities. This proposal, together with
the draft contract documentation is submitted together with all the documents
resulting from the outcome of the bid process to APIEX for its project review. On the
basis of this review APIEX formulates a decision or authorization proposal for the
implementation of the project as a PPP to be considered by the competent authority
identified in accordance to the legislation relating to investments implementation in
Mozambique. According to this law PPP initiatives in the transport sector are likely to fall
under responsibility of the Council of Ministries. Based on the positive decision by the
Council of Ministries the line Ministry has the authority to sign the PPP concession
agreement and the contractor has the right to implement the PPP contract.
The PPP legislation is relatively detailed in terms of the expected content of the feasibility
studies required to launch the procurement procedures for the selection of the potential PPP
contractors. The viability appraisal of a PPP candidate initiative looks quite comprehensive,
which shall encompass its technical, environmental, socio-economic as well as financial
feasibility. Particularly concerning the economic and financial analyses, these preliminary
studies shall include a socio-economic analysis, an affordability analysis, a risk/benefit sharing
analysis and sensitivity analyses. The following elements are furthermore specifically
mentioned in the legislation concerning the content of the economic-financial analyses:
assumptions on the tangible and intangible assets, equity and loans, buying and selling prices,
expected revenues, value of any tax incentives, interest rates, inflation, insurance, amortization
rates and foreseeable risks, cash flow and operating results (before and after loan repayments),
indicators for management and solvency of the enterprise, profitability ratios of capital and
other assets, critical point of sales, rate of internal return, tax rate, recovery period of
investments, total net present value and its allocation for investors, partners and shareholders,
demonstration of equitable sharing of financial benefits between the contracting parties.
According to existing literature, socio-economic analysis, affordability assessment including the
identification of the required long term explicit/implicit, direct/contingent liabilities by the
public are elaborated in practice at the stage of identification and preparation of a PPP candidate
project in Mozambique. At this stage financial viability or bankability assessment is also
performed in Mozambique. Market assessment per se does not seem to be explicitly mentioned
in the legislation, but it is performed as part of the feasibility analyses as an input to the
economic and financial appraisals. A risk appraisal, including risk identification, allocation and
assessment seems also to be performed which is also foreseen by the legislation. On the other
hand it seems that standard methodologies are not in use for the ex-ante appraisal of the PPP
projects (WB, 2018). Models are actually mentioned in the PPP implementing regulation that
should be available for use to line Ministry, Ministry of Economy and Finance, as well as
Regulatory Authorities for the feasibility analyses and monitoring reporting activities that are
foreseen by law at the different stages of project development and contract implementation.
However some sources report on problems in the adoption and use of the existing Public
Investment Project Appraisal Manual for Cost-Benefit Analysis, which seems also lacking a
sector-specific methodology. Institutional and professional capacity by the public sector is a