Tender billions beckon in parties infrastructure plans

The high profile tenders that have dominated public sector contracts are set to continue as key political formations pledge to pump billions of shillings into transport and energy.

Both the ruling Jubilee and the National Super Alliance (Nasa) have pledged to continue investment in basic infrastructure despite a subtle difference in approach.

The big question is where the tender billions will come from. In its four years in power, Jubilee has managed to complete its first flagship project—the first phase of standard gauge railway using Chinese loans. It has also used mainly loans to build a second container terminal at the Mombasa Port and several other infrastructure projects. By the end of the first quarter this year, Kenya’s appetite for infrastructure loans had pushed public debt to Sh4 trillion.

READ: KISERO: Sovereign wealth fund must top agenda

“Our vision to transform Kenya into a middle-income economy has thus far been hampered by inadequate and inefficient transport and energy infrastructure,” Jubilee says in its manifesto.

The opposition too sees investment in transport as a primary undertaking. “It is an enabler of national life, makes it possible for people to interact and trade, and facilitates integration and inclusion.”

But with public infrastructure loans driving public debts to new highs, the Nasa team is betting on the public-private partnerships to finance a number of big projects. But for a start, it hopes to raise up to 30 per cent of tender price from cost savings.  

The team says contractors under its regime will have to keep their overheads down once the government “streamlines procurement, starts making prompt payments and adopts zero tolerance to corruption,” which push up projects cost by 30 per cent.

And in spite of the slow process of privatisation, Nasa says it will ring-fence proceeds of public asset sales for its infrastructure development activities.

READ: Nasa says to scrap Helb rule for jobs

ALSO READ: Jubilee, Nasa serve voters similar dishes

“It is bad economics to sell public assets to finance consumption. Assets, should finance other assets. To this end, Nasa will establish a National Infrastructure Fund.”

The process of selling public asset is usually a slow-rolling one as it has to be approved by numerous players.

An attempt by the National Treasury to sell State sugar firms, for instance, has yielded nothing in the last 10 years after the 11TH Parliament pushed it off its end-session resolutions two weeks ago, citing several court cases filed by governors and farmer groups.

Nasa says of its National Infrastructure Fund to be financed partly by proceeds from public asset sale: “The fund will be a development finance institution with a mandate to provide soft long term finance for revenue generating infrastructure notably water, sewerage and energy.”

With budget allocation only managing to finance 10 per cent of the cost of mega projects, Nasa’s approach may not be a foolproof alternative to the debt trap that has enmeshed Jubilee in its last four years of building public projects.

The Opposition however says it would build the capacity of local contractors “so as to compete for large infrastructure projects that are presently dominated by foreign contractors.”

It says: “There is no reason why in a few years, Kenyan contractors should not be able to compete domestically as well as regionally.”

Going by recent experience, however, building a pool of local talent may not necessarily translate to low cost of public projects.