Law paves way for increased funding of key projects
Finance Minister Njeru Githae. Mr Githae said the new law is paving way for more joint ventures in key projects. Photo/File
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Finance minister Njeru Githae said the Public Private Partnership (PPP) Act came into effect last month.
The new law paves way for more joint ventures in key projects.
A new law on private sector input in public projects has raised hopes of increased funding for energy and road construction.
Finance minister Njeru Githae said the Public Private Partnership (PPP) Act came into effect last month, paving way for more joint ventures in key projects.
“In exercise of the powers conferred by Section 1 of the Public Private Partnership Act, 2013, the minister for Finance appoints the February 8, 2013 as the date on which the Act shall come into operation,” the minister said in a legal notice.
Analysts said the new law is expected to help plug gaps in financing of big projects which are critical in transforming the country into a middle-income status by 2030.
The energy sector already hosts several partnerships between Independent Power Producers (IPPs) and agencies such as Kenya Power and the Kenya Electricity Generating Company (KenGen).
“With the new laws things can only get better,” Energy permanent secretary Patrick Nyoike said.
Despite the energy sector being critical in boosting the country’s economic growth, high capital outlays and inability to mobilise adequate financial resources have slowed down its development.
“We have addressed several challenges such as the letter of support that previously held back investors for long,” Mr Nyoike said.
Estimates by the Treasury showed that the government needs to spend about Sh5.16 trillion ($60 billion) over the next eight years, more than two times the Sh2.15 trillion ($25 billion) committed.
In the fiscal year 2012/13, the allocation for infrastructure was Sh267 billion or nine per cent of the GDP against the 15 per cent Treasury desires.
The PPP laws gazetted by Mr Githae are expected to boost confidence and certainty among investors through more transparent and specific contract procedures.
They also offer investors risk mitigation measures such as letters of support and guarantees and compensation for termination of contract in the event of political events or drastic review of laws.
The Act further provides for the establishment of a Viability Gap Fund to support economically viable projects that may not attract investments from outside government.
The expected inflow of new investment could help ease some pressure on the government as it grapples with massive budgetary shortfalls arising from a slowdown in economic activity and high interest rates.
Economic growth in the half first of the current fiscal year was 4.7 per cent against a forecast 5.5 per cent.
During the period July-December 2012, revenue collection was Sh360.3 billion against a target of Sh404.3 billion. This was compounded by donors failing to meet the disbursements they had committed to help support the budget.
