An Expert’s Guide to Public-Private Partnerships for Local Development

As budgets for foreign aid are reducing globally, local governments  are in need of innovative financing instruments and mechanism such as loans, guarantees, municipal bonds and equity. More than ever, local governments have a unique responsibility and opportunity to make vital infrastructure accessible and services inclusive for their communities. Oftentimes, development plans have been designed but lack the necessary funding and financing. Public-Private Partnerships can be an effective tool for these plans to be realised.

Ugandan women selling their goods in Kuru Market in Kuru Town Council.

“Public-Private Partnerships (PPPs) offer a way forward, bridging the gap between public service needs and private sector investment.”

Public-private partnerships (PPPs) have gained increasing attention as an innovative financing tool for financing local development. While many municipalities struggle with limited fiscal transfers and constrained local tax revenues, PPPs present an opportunity to finance infrastructure and essential services (development interventions)  that governments alone cannot afford. However, these partnerships also come with challenges: requiring enabling policies, technical expertise, and effective risk management.

To explore these dynamics, we spoke with Jenifer Bukokhe Wakhungu, Regional Programme Advisor at the UN Capital Development Fund (UNCDF) and expert on The Hague Academy’s Fiscal Decentralisation and Local Finance course. With extensive experience across Africa, she has supported decentralisation processes and intergovernmental fiscal reforms, helping local governments tap into alternative financing mechanisms like PPPs.

Why Are Public-Private Partnerships Important for Local Development?

PPPs facilitate collaboration between governments and private entities to identify, develop, finance and operate public infrastructure and services. Bukokhe explains that local governments often find themselves constrained by fiscal transfers that come with strict conditions, leaving little room for capital investment projects. Meanwhile, local tax revenues, even when efficiently collected are a very small component and often fall short of covering the costs of large-scale infrastructure.

“PPPs can unlock financing for critical projects—like water supply, energy, and market infrastructure—where traditional public funding is insufficient,” Jenifer notes. “Rather than relying solely on national government transfers or local tax revenue, municipalities can leverage private sector resources to expand service delivery.”

One example she shares is the construction of local markets in Uganda and Tanzania. Local governments provided the land and basic infrastructure, while private investors financed additional facilities, such as cold storage units for dairy and meat vendors. This model not only improved market conditions but also generated stable revenue streams for municipalities.

Find out more about local markets in Uganda that were constructed though PPP financing here: Loroo Livestock Market in Loroo County and Kuru Market in Yumbe District.

Why Aren’t PPPs More Common?

Despite their potential, PPPs are not widely implemented in many developing countries. The expert highlights several key barriers:

• Regulatory and policy constraints: Many countries lack the legal frameworks necessary to govern PPPs effectively.
• Political considerations: Leaders may hesitate to commit to long-term projects that extend beyond their tenure.
• Technical capacity gaps: Structuring a PPP requires expertise in risk assessment, financial structuring, and contract negotiation—skills often lacking at the local level.

To address these challenges, organisations like UNCDF provide technical advisory services to help local governments prepare, structure, and finance PPP projects. UNCDF also offers financial instruments, such as loan guarantees, to de-risk investments and encourage private sector participation.

Do you recognise these challenges in your own context? Join the Fiscal Decentralisation and Local Finance course to discuss potential solutions with Jenifer Bukokhe Wakhungu and fellow practitioners.

How Can Local Governments Get Started?

For local officials considering PPPs, Jenifer Bukokhe advises a systematic approach:

1. Understand the legal framework: Research existing PPP regulations and policy incentives in your country. For instance, Uganda started by identifying the gaps in the existing legal and regulatory framework and prepared a specific PPP Policy and guidelines. Uganda also established a PPP Unit within the Ministry of Finance and Economic Development by an Act of Parliament.
2. Identify potential revenue generating projects: Focus on initiatives with both social and economic impact, such as energy, water, or waste management, or initiatives that would increase the local tax revenue, e.g. transport hubs that incur user fees.
3. Engage stakeholders early: Building partnerships with private investors, civil society, and regulatory bodies is key.
4. Seek technical support: Organisations like UNCDF offer guidance on structuring viable PPPs.

She also encourages local governments to explore UNCDF’s open calls for proposals, which provide financing for infrastructure projects with strong development impact.

PPPs present a valuable tool for municipalities seeking to bridge funding gaps and improve public service delivery. While challenges exist, strategic planning, policy reforms, and capacity-building initiatives can enable local governments to engage in successful partnerships. Learn more about how innovative financing tools can support local development projects in your context in our upcoming course on Fiscal Descentralisation and Local Finance.

“At a time when traditional sources of funding are shrinking, local governments must innovate. PPPs are not a replacement for public finance, but they are an essential part of a diversified strategy for sustainable development.”