Economy & Politics

Private firms to handle multi-billion-shilling public jobs

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

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.

READ: Kenya targets green energy, invests in geothermal production

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.

READ: New commuter rail service to ease traffic jam

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.

Its introduction is set to usher in a raft of reforms at the bonds section of Nairobi Security Exchange as the government moves to boost its capacity to provide long term financing to private investors.

READ: (Commentary) Partnerships with private sector key to country’s growth

The Treasury estimates that once the model takes shape, more money would accrue to government in the revenue deals, eliminating the current pressure on national revenue.

“We are not trying to reinvent wheels because India is able to build 50 kilometres of road each year without asking the national treasury for any funds,” said Mr Githae. The list from the Treasury comes just one month after President Kibaki approved the PPP Act in December 2012.

The legislation allows investors to sign contracts for building and operating key infrastructure projects for an agreed number of years before handing them back to the government.

The Act establishes a Project Facilitation Fund to finance project preparation, offer subsidies and compensate investors for losses from projects deemed to be of great public good.

“As we move forward with implementation of development projects PPPs are going to be an institutionalised way of doing business in government,” the Treasury’s finance secretary Mutua Kilaka said.