Kenya's new law on public private partnerships heralds a new dawn in the delivery of infrastructure projects whose initiation, development and implementation were hitherto characterised by false starts and red tape. These were the reasons for low uptake and reduced investor interest in projects under this arrangement.
The Public Private Partnerships Act, 2021 has replaced the PPP Unit with a new entity within the National Treasury, the PPP Directorate, headed by a director-general. The PPP Directorate as envisaged has a far broader mandate than before when it was a unit.
It will originate, guide and coordinate the selection, ranking and prioritisation of PPP projects. It has also been given a proactive licence to originate and lead in project structuring and PPP programmes in Kenya.
The approval levels and timelines will offer greater clarity for investors and should create a more efficient process for PPP development.
Furthermore, by reducing the direct role of the government in PPPs by removing the Cabinet's approval function, projects are for lack of a better word de-politicised and are less susceptible to being derailed to meet competing political objectives.
The PPP Act, 2021 also adds a number of permissible contract structures, including some that are not traditionally considered PPPs such as public-private joint ventures and strategic partnerships.
The net effect of these changes is to broaden the scope of what is classed as a PPP, funnelling more contracting arrangements between the public and the private sector.
The new law proposes a significant expansion of the procurement options available to a contracting authority. Clear timelines have been stipulated for certain processes, including the period within which bids must be evaluated and for appeals by bidders.
For instance, it introduces direct procurement but reserves this method for exceptional circumstances. These include where the works or services are only available from a limited number of private parties and where direct procurement shall significantly lower the cost of delivering the project.
The privately initiated investment proposals (PIIPs) process was one of the more problematic aspects under the now repealed PPP Act, 2013.
The new law now corrects a number of these faults by setting out clear circumstances in which a PIIP can be considered, including where the project meets a demonstrated societal need in terms of national infrastructure priorities and can be delivered at a fair market price.
It also sets certain minimum requirements for a proposal, to ensure that the contracting authority is able to properly evaluate proposals. For instance, detailed studies must be provided for financial viability as well as operating plans, risk allocation and environmental and social studies.
Extensive due diligence must then be carried out by the PPP Directorate and the relevant contracting authority at the cost of the private proponent prior to accepting the proposal, creating an additional layer of verification which has been absent in the now repealed PPP Act, 2013.
Benefitting Kenya through Local Content Requirements
Another worthy addition under the new PPP Act, 2021 is that local content requirements have also been introduced, as well as requirements that Kenyan goods and services meeting a minimum standard are given priority and that skilled and qualified Kenyan citizens are employed where possible.
The imposition of local content requirements is an important policy objective, provided that safeguards are in place not to make PPPs more expensive - a cost which will eventually be passed back to the government of Kenya.
The local content guidelines have not been issued yet, but the PPP Directorate is obliged to provide these. The success of local content requirements may well hinge on these guidelines and standards.
Barring any challenges and factors, the PPP Act, 2021 is expcted to provide greater confidence to investors and create a friendly environment for delivery of strategic infrastracture in Kenya more through PPP arrangements.