Politics and policy

Private firms to handle multi-billion-shilling public jobs

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Finance minister Njeru Githae (left) and Ministry of Roads PS Michael Kamau confer at a public private partnership workshop for senior transport and energy sector officials at the Crown Plaza Hotel February 12, 2013. Photo/SALATON NJAU

Finance minister Njeru Githae (left) and Ministry of Roads PS Michael Kamau confer at a public private partnership workshop for senior transport and energy sector officials at the Crown Plaza Hotel February 12, 2013. Photo/SALATON NJAU   Nation Media Group

By George Omondi

Posted  Tuesday, February 12   2013 at  21:25

In Summary

  • The partnerships are expected to help the Treasury reduce reliance on borrowings and free domestic resources for use in provision of social services.
  • Among the projects that have been cleared for PPP are Olkaria Geothermal development; the second container terminal to ease congestion at the Mombasa Port; the Nyali Bridge; Kisumu will have an upgraded seaport to handle bigger wagon ferries and ships transporting raw materials and industrial products between Kenya, Uganda and Tanzania; the Nairobi Commuter Rail Service project which involves building eight stations in the Nairobi area; a National Cancer Diagnostic Centre and a 6,000-capacity hostel to be constructed at Kenyatta University.

Investors will from next week be invited to participate in the first 30 projects that the government has approved for development through joint ventures between the public and private sectors.

The partnerships are expected to help the Treasury reduce reliance on borrowings and free domestic resources for use in provision of social services. Most of the projects are in the energy and transport sectors.

“The projects have already been approved by Cabinet and are ready for tendering from next week. Many more projects have been brought before us for approval,” the director of public private partnership at the Treasury, Stanley Kamau, said.

Among the projects that have been cleared for PPP are Olkaria Geothermal development, the Sh28 billion ($327 million) second container terminal to ease congestion at the Mombasa Port and the Nyali Bridge, which will open up the tourist-rich North Coast.

Kisumu will have an upgraded seaport to handle bigger wagon ferries and ships transporting raw materials and industrial products between Kenya, Uganda and Tanzania.

Also cleared for PPP is the $300m (Sh26 billion) Nairobi Commuter Rail Service project which involves building eight stations in the Nairobi area, a National Cancer Diagnostic Centre and a 6,000-capacity hostel to be constructed at Kenyatta University.

The World Bank has already disbursed a Sh3.5 billion ($40 million), mainly for consultancy and technical services required to prepare the projects for PPPs.

Under the PPA Act, however, the projects cleared by Cabinet still require parliamentary approval before Treasury commits itself by signing contracts with the private investors.

Faced with an external debt ceiling of Sh1.4 trillion, the government hopes PPPs will raise the trillions shillings more that it needs to roll out Vision 2030 flagship projects.

Finance minister Njeru Githae said the $3.2 billion (Sh275 billion) or 9 per cent of GDP allocated for infrastructure projects in the 2012/13 budgets meant at least Sh260 billon must come from outside the national budget every year for the next decade.

“Once we reduce the portion of our revenues that go to infrastructure projects, most of the pledges that presidential candidates are pledging to Kenyans will be fully financed from domestic resources,” said Mr Githae.

The pressure on state resources came to the fore in December when when the submissions by ministries for supplementary budget stretched hit Sh165 billion. Mr Githae was eventually able to finance only Sh60 billion.

The PPP model seeks to inject private sector discipline and efficiency in the provision of public services without the government losing strategic control.

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