Treasury banks on private sector funds to finance projects

The government is banking on private capital to plug a huge financing gap for infrastructure projects as social programmes and constitutional implementation takes up bulk of its revenues.

Through public private partnership (PPP) deals, the National Treasury has sought to raise up to Sh2.5 trillion in the next 10 years (Sh255 billion annually) to build public assets that are crucial for attainment of medium income status in the next 16 years.

“It is now recognised that national development funding gap can only be plugged by bringing together capital and know-how from public and private sectors,” Treasury Cabinet Secretary Henry Rotich said in a public announcement on Tuesday.
The decision to build major public infrastructure through PPPs is set to clear the cloud of doubt that has surrounded the flagship projects, especially after the two-tier government introduced by the Constitution raised State’s recurrent expenditure.

Earlier, Transport and Infrastructure ministry officials cast doubt over State’s ability to get the flagship projects off the ground after Treasury allocated only Sh53.9 billion to cover the entire lot (and a pending bill of Sh20 billion) in 2013/14 financial year.

READ: Kibaki projects hit by shortage of funds

Under the PPP programme, counties at the Coast take the bulk (34 per cent) of the 47 public assets that range from port and road expansion, energy development, irrigation and housing construction to major ICT facilities.

Among the priority projects listed for development through PPPs, the Treasury has given the Kenya Ports Authority (KPA) the green light to enter into deals with private investors to develop Lamu port.

The authority will also engage private capital in converting berths 11-14 of Mombasa port from cargo to container terminals, completing phase two and three of the facility’s second terminal as well as in upgrading Lake Victoria ports.

The Kenya Urban Roads Authority has been given a free hand to engage private capital in constructing a parallel bridge to the existing 400-metre Nyali Bridge as Kenya Highways Authority (KeNHA) links up with private partners in expanding the Mombasa-Nairobi highway.

The KeNHA will also rely on the public-private partnership to build Nairobi’s Southern bypass and to construct a dual Nairobi-Nakuru carriageway.

The PPP will enable Nairobi and Mombasa counties in developing their solid waste management systems while Interior ministry hopes to use the model in constructing 16,000 housing units for prison officers and 50,000 houses for police force.

Through PPP, the long-awaited special economic zone will be constructed at the Dongo Kundu area of Mombasa; the National Oil Corporation of Kenya will build an offshore oil jetty and Kenya Railway Corporation will get the Nairobi commuter train on tracks.

Kenyatta and Moi universities have been cleared to build student hostels through PPPs, the same financing model through which Kenya Airports Authority will build its second terminal and a transit hotel at the Jomo Kenyatta International Airport in Nairobi.

“This list has been subjected to series of suitability checks and has been granted formal clearance to proceed for development as PPPs,” Mr Rotich said.

READ: KU seeks partners in Sh1bn student hostel deal

In energy sector, the Geothermal Development Company intends use the PPP model to develop 800-megawatt plant in Bogoria and a 400-megawatt plant in Menengai.

Similarly, the Kenya Electricity Generating Company will be counting on the model to develop 800-megawatt liquefied natural gas plant at Dongo Kundu, 560-megawatt geothermal station at Olkaria and a 980-megawatt coal plant.

The PPP projects extend to agriculture where regional development authorities intend to build dams and irrigation schemes, ICT where a four-tier National Data Centre tops the list and in health where oxygen plant leads.