I’m a PPP freak.

You know…

I heard in the news that Ghana will keep 70% of the toll revenue.

Excellent.

Seventy per cent is a very impressive number.

Particularly before anyone asks:

Seventy per cent of what?

Ghana’s Parliament recently approved a 20-year PPP to introduce electronic tolling across 66 locations.

The Government receives 70% of gross toll revenue.

The concessionaire receives 30%.

Great for a press release, some pictures and ceremonial pats in the back.

Percentages are seductive.

They look precise.

They fit nicely into headlines.

Especially, online press.

Now, imagine I offer you 70% of… let’s say… a restaurant.

Would you accept?

Before you say a word, let me add a few details.

The restaurant loses money.

The kitchen needs replacing.

Nobody knows how many customers will come.

You pay for maintenance.

And the bank gets paid before you do… as usual.

Still excited about your 70%?

Unless you love self-flagellation… I guess you are not that much anymore…

And that’s the issue with the revenue-sharing agreements.

Before celebrating the split, I would want to know:

Who pays for the system?

Who carries demand risk?

What happens if drivers avoid the tolls?

Who absorbs collection leakage and enforcement failures?

Which costs are paid before revenue is distributed?

Who funds major maintenance and future upgrades?

And what happens when the private party’s 30% is no longer enough to keep the arrangement bankable?

You’d say that all this is logical… but if so… it’s because you haven’t met the “best advisors” a government I advise found on toll matters…

Hopefully for the government, Ghana’s agreement apparently uses gross revenue, which is considerably better than a vague promise of 70% of “profits.”

But even 70% of gross revenue does not answer the most important question:

Does the underlying model actually work?

A generous percentage of an unrealistic forecast is not value.

It is a very attractive number inside a spreadsheet.

This happens everywhere.

A government negotiates a larger revenue share.

An investor negotiates a higher ownership percentage.

A contractor accepts a bigger bonus pool.

A shareholder wins a larger share of “savings.”

Everyone focuses on the numerator.

Nobody checks whether the denominator exists.

Before You Send the board paper, press release or draft agreement, follow the money all the way to the bottom.

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