EDITORIAL: Financing public projects through PPP is viable

Reports that the National Treasury is at last considering public private partnership (PPP) as an alternative model for financing flagship projects are encouraging.

One of the key reasons Kenya enacted a PPP legal framework was to tame public debt by enlisting private sector support in financing public projects.

But almost seven years after the PPP Act received presidential assent in January 2013, the model has largely been ignored even as public debt bulges to alarming levels.

Under the PPP model, the State is supposed to facilitate the private entities as they invest in public assets.

The lofty idea is to have fiscal incentives and legal protection offered to private firms as they build, operate and later, transfer public assets back to the government.

In practice however, the Treasury has overlooked the PPP framework and opted to borrow from domestic and foreign markets, pushing public debt to levels beyond Sh6 trillion mark as at the start of this year.

What’s more, the 47 counties have been piling pressure on the National Treasury to approve foreign financing of a number of projects that if allowed could seriously complicate the national public debt position.

That’s why we think the latest proposal by the National Treasury to have some of the flagship projects financed through PPP should be given serious thought.

It may sound overly ambitious that the Treasury plans a mass rollout of an untried concept, starting with a massive 80 projects valued Sh1.1 trillion in the year to June 2020.

But PPP remains an alternative, and its use in new bridges, roads and power plants as outlined in the Budget Policy Paper tabled in Parliament last week, must be carefully shepherded to success.

As long as our tax collection is hardly enough to cover our recurrent expenditures and the public debt time bomb keeps ticking dangerously, the PPP must be seen as an alternative financing model for public goods.

But first, let’s start by educating citizens on PPP and its pitfalls. The very idea that private sector – including foreigners - can be allowed to build and initially own key public assets, may not be readily palatable to all citizens.