53170 Success Stories infrastructure advisory This series provides an overview of successful public-private partnerships in various infrastructure sectors, where IFC was the lead advisor. Infrastructure Advisory Services 2121 Pennsylvania Avenue NW Washington DC 20433 ifc.org/infrastructureadvisory Health Sector Lesotho: National Referral Hospital Lesotho is replacing its main public hospital with a new 425- bed facility that is supported by a network of refurbished urban clinics. All the facilities will be designed, built, financed, and operated under a public private partnership (PPP) arrangement that will also include clinical services. The new hospital will deliver greatly improved, high­quality, publicly funded health care services and will serve as the main clinical training facility for all health professionals. The PPP project structure is a first for the health sector in Africa. The Tsepong consortium, headed by Netcare, won the bid for the project. Tsepong will design, construct, partially finance, and operate the new hospital and three urban clinics under an 18-year PPP agreement. The consortium has significant local ownership. The project will cost approximately US$100 million and will be financed through a combination of commercial financing by the Development Bank of South- ern Africa, a government contribution, and private equity. The project was supported by technical assistance funds from the governments of the Netherlands and Sweden and has been awarded a grant of US$6.25 million from the Global Partnership for Output Based Aid that will be used for the initial delivery of services at the new facilities Background operator and where it does not meet the required standards, Lesotho is a small, mountainous country of 2 million people in predetermined penalties will come into effect. southern Africa. Its revenues come primarily from water exports to Furthermore, the private operator is required to obtain and South Africa, agriculture, and garment manufacture. The nation's maintain accreditation from the Council for Health Services main hospital, Queen Elizabeth II, is an aging facility that is Accreditation of Southern Africa. Failure to obtain and maintain functioning at a minimal level and urgently needs to be replaced. this accreditation can result in termination of the agreement. The country faces serious challenges in the health sector, and the existing hospital was consuming increasing government resources The project also includes the Joint Services Committee, while services continued to decline. established by the government and the private operator, to review performance and to develop mechanisms, procedures, and In addition, Lesotho faces a shortage of trained health care protocols that will improve services at the hospital and clinics. professionals and the new hospital will help the country retain and attract doctors and nurses by providing improved working BIddIng conditions and professional development programs. Bidders were asked to submit their bids within minimum volume, IFc's role service, and budget parameters to provide the government with a IFC advised the government on the feasibility, structuring, clear idea of what was possible within the range of affordability. tendering, and implementation of the PPP. It worked closely Bids included a markup of the draft PPP agreement and bidders with the government to bolster its understanding of PPPs, build were scored on their technical proposals and then on their its implementation capacity, and help it build and maintain financial bids. Fourteen companies participated in the investors' political support. The IFC team undertook extensive due diligence conference and two companies submitted bids. A preferred bidder and project feasibility work, and marketed the project locally, was selected for negotiations, which concluded with the signing of regionally, and internationally. the final PPP agreement and then moved to financial close. IFC also commissioned a baseline study that documented the existing poor services and facilities, providing important data posT-Tender resulTs that allowed the government to make some simple, but effective, changes at the current hospital that could improve services in the · Construction started in March 2009, clinic services interim before the new hospital is completed. The study also gave are scheduled to begin in late 2009, and the new potential bidders realistic operating data they could use when hospital is to open in mid-2011. preparing their bids. · Tsepong will provide 65 percent of the financing The team developed the bidding documents and PPP agreement through the Development Bank of Southern Africa and helped the government with the tender process. IFC will and equity investors continue to advise the government for an additional 12 months during the early stage of implementation. · IFC's baseline study of the current hospital identi- fied that Lesotho has one of the world's highest TransacTIon sTrucTure cervical cancer rates. No prevention or treatment The government wanted a new hospital that it could afford programs were being provided and referrals to given its limited budget, but also needed to be sure that the South Africa were too late to be effective. As a same problems the existing hospital faces--insufficient staff, result, the government and the Lesotho-Boston maintenance, and supplies--would not be perpetuated. It also University Health Alliance designed a pilot pro- wanted the new hospital to have a lasting effect on local economic gram. This program, supported in part by the Merck development. Vaccines Gardasil Access Program, began operation As part of their bids, consortia were required to include specific in February 2009 and will provide services to 25 targets for local participation in the project's equity, management, percent of the women in Lesotho in the first year subcontracting, and community development. These targets, of operation. If the program is expanded across the along with stated increases over the life of the contract, country, it is expected to reduce the rate of cervical were incorporated in the final PPP agreement as contractual cancer by more than 90 percent within 10 years. obligations. Performance monitoring is comprehensive and employs a system 03/2009 designed by IFC that goes beyond what most health PPPs use. Performance will be monitored quarterly by an independent monitor jointly appointed by the government and the private