The Treasury has committed to spending Sh12.9 billion in equity investment in the Africa Finance Corporation (AFC) as it eyes financing of Sh100 billion worth of projects from the multilateral development lender.
Already, Sh494.5 million was paid to the AFC last year and Sh1.29 billion has been allocated in the second budget revision released last month, Treasury told Parliament.
Treasury made the disclosures to the National Assembly’s finance committee earlier this month, following questions from the Law Society of Kenya (LSK) after the Ministry of Foreign Affairs misled Parliament that membership of the AFC would have no financial implications for Kenya.
Treasury wrote to the committee on March 3, 2025, noting that the Cabinet had ratified the agreement for Kenya to join the AFC in April 2017, but until MPs approve the decision, Kenya cannot become a full member.
The Treasury had, however, proceeded to pay the Sh494.5 million and allocate the Sh1.29 billion in the current financial year even before Parliament could approve the decision to join.
The AFC is a multilateral development lender that finances infrastructure on the continent through debt and equity investments and currently has 43 member states.
AFC, headquartered in Lagos, Nigeria, was set up in 2007 targeting big-money infrastructure developments on the continent across various sectors including energy, transport and logistics, telecommunications and manufacturing. Its shareholders includes African financial institutions, sovereign states and multilateral organisations.
Treasury says it has held a series of meetings with AFC officials, and in September 2023 expressed interest in investing in the lender.
“The Government of Kenya expressed interest and committed to investing $100 million (Sh12.9 billion) in AFC Callable Capital Shares, from which 25 percent will be paid and 75 percent will remain callable,” Treasury said in the letter.
Callable shares are preferred stock that the issuing company can choose to buy back at a fixed price in the future.
Treasury noted that since Kenya joined AFC in 2017, the corporation has invested Sh47.7 billion in the country’s transport, energy and natural resources sectors.
“Additionally, Kenya has planned various projects and programmes at a cost of $765 million (Sh98.7 billion), including sovereign loan of $200 million, trade finance for commercial banks for $550 million, wind power IPP (independent power purchase), Dongo Kundu special economic zone and the Kenya Pension Funds Investment Consortium (KEPFIC), among others,” Treasury says.
In its report dated March 13, the committee recommended that MPs approve the government’s application to become a full member of the AFC.
The Foreign Affairs ministry had misled MPs that joining the AFC would have no financial implication for taxpayers, a fact the LSK debunked by digging into AFC documents.
In a memorandum to Parliament on October 28, 2024, Prime Cabinet Secretary Musalia Mudavadi, who is also the CS for Foreign Affairs, stated that “accession will not attract any new financial requirements as the implementation of the agreement only necessitates membership to the corporation.”
AFC admits sovereign states as full members upon subscription to the corporation’s shares.
“Therefore, the committee agrees with the LSK that there will be financial implications to the agreement,” the committee report said.
In 2017, when Kenya applied for membership, the AFC shares were trading at $2.2 per share. The price has since risen to $2.31, which will apply to Kenya.
This means that the Sh1.29 billion allocated to buy shares in the supplementary budget presented by Treasury last month, will purchase about 44 million shares.
The government also plans to allocate an additional Sh1.44 billion ($11.16 million) in the 2025/26 budget.
According to the Foreign Affairs ministry, joining the corporation will help mitigate investment risks for infrastructure projects in the country due to its high credit rating.
“This means Kenya could see more foreign investors willing to participate in projects that would otherwise be considered risky, particularly in sectors like energy or transportation,” it said.
Some of the projects Kenya has in the pipeline that the AFC has been largely financing, include the extension of standard gauge railway line from Naivasha to Malaba, the construction of electricity transmission lines and petroleum exploration activities.
