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. Oftentimes, local development plans lack the necessary funding to improve services and make infrastructure accessible to their communities. Public-Private Partnerships (PPPs) are an effective tool to realise these plans. 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, helps local governments tap into alternative financing mechanisms like PPPs.

Jenifer Bukokhe Wakhungu, Regional Programme Advisor at the UN Capital Development Fund (UNCDF)

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

While many municipalities struggle with a lack of fiscal transfers from national governments and limited local tax revenues, PPPs present an opportunity to finance infrastructure and essential services  that governments alone cannot afford. However, these partnerships also come with challenges: requiring enabling policies, technical expertise, and effective risk management.

Why Are Public-Private Partnerships Important for Local Development?

Jenifer Bukokhe explains that local governments often find themselves constrained by fiscal transfers that come with strict conditions, leaving little room for capital investment projects. Local tax revenues, even when efficiently collected, are a very small component of the total budget and cannot cover the costs of large-scale infrastructure projects.

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

Loroo Livestock Market in Loroo County and Kuru Market in Yumbe District are inspiring examples of  projects realised through PPP financing in Uganda.

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

Why Aren’t PPPs More Common?

Despite their potential, PPPs are not widely implemented in many developing countries. Jenifer 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 advices to help local governments prepare, structure, and finance PPP projects. UNCDF also offers financial instruments, such as loan guarantees, to reduce the risk of investments and encourage private sector participation.

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 prepareda 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 local tax revenue, for example 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. Jennfier encourages local governments to explore UNCDF’s open calls for proposals. UNCDF provides funds for infrastructure projects with strong development impact. The Hague Academy for Local Governance offers training on Fiscal Decentralisation and Local Finance.

PPPs present a valuable tool for municipalities to get access to the funding needed to improve public services. 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 our upcoming course on Fiscal Decentralisation and Local Finance in November.

“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.” concludes Jenifer Bukokhe.

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.