Treasury secretary Henry Rotich in the Budget Statement on June 14 invited trustees of pension schemes to partner with the government in financing projects under the PPP framework.
PPPs have struggled to take off since the law was passed in 2013, largely due to bureaucracies.
Treasury’s plan to tap cash from retirement schemes into vehicles for funding infrastructure projects under the Public-Private Partnership has got backing from the Sh1 trillion pension industry.
Treasury secretary Henry Rotich in the Budget Statement on June 14 invited trustees of pension schemes to partner with the government in financing projects under the PPP framework.
PPPs have struggled to take off since the law was passed in 2013, largely due to bureaucracies.
“These (pension) funds have the potential to play a critical role, particularly, in providing local currency financing for PPP projects, thereby significantly de-risking projects from foreign-currency funding exposure,” Mr Rotich said.
Sundeep Raichura, the chief executive of Zamara, a pension fund administrator which manages about Sh23 billion in assets for 185 pension schemes, said long-term investment in infrastructure will enable pension schemes to diversify from traditional asset classes such as government securities and equities.
Pension schemes in Australia have successfully funded building of airports, he said, while in Chile workers’ savings have been sunk in road projects under plans which generate regular income through toll fees paid by motorists. “It is a complex investment, it’s time-consuming and the level of due diligence that one need to undertake is big,” he said in Nairobi on Tuesday.
“But the proposed amendment to the regulations is a step in the right direction”.
James Woodward, head of Infrastructure Hub in Africa at KPMG, said capacity constraints with complex procurement for the PPPs may potentially cause up-front time delays.
“If this constraint is not appropriately dealt with in the initial stages of planning a PPP programme, it can lead to stretched timelines and deal fatigue from all stakeholders including the public,” Mr Woodward said via email.
“Dealing with this capacity constraint requires a tight balancing act between encouraging local participation and maintaining deal flow.”
World Bank’s senior financial sector specialist Caroline Cerruti in May backed move to rope in pension schemes into infrastructure projects.
“Given constraints of commercial banks to lend long-term to PPP projects, it makes sense for the government to search for long-term local currency financing for various infrastructure projects and this is an opportunity for pension schemes,”Ms Cerruti said.
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