Kenya says private-public partnerships are ‘key to infrastructure development’

Out-Law News | 23 Jan 2015 | 12:48 pm | 1 min. read

Kenya plans to finance 57 “key infrastructure projects” under private-public partnership (PPP) schemes, the government has announced.

National Treasury cabinet secretary Henry Rotich said in an interview that Kenya “is keen to tap the private sector to bridge the infrastructure financing deficit”.

According to Standard Digital, Rotich said: “We have a huge infrastructure deficit and it is important that we fill it. The demand for the infrastructure and especially better roads is very high mainly because of economic growth both in the country and our neighbours.”

According to Rotich, Kenya’s annual infrastructure budgetary deficit currently stands at around $2 billion.

Rotich said the government was considering a range of options to finance major infrastructure projects including PPP, “domestic and international borrowing and an increase in budgetary allocations”.

Proposed projects include the construction of 10,000 kilometres of roads through annuity financing, a model which Rotich said allowed contractors to receive government-guaranteed loans from banks for design, construction and subsequent maintenance.

Rotich said he was confident that development partners would continue to support national infrastructure projects because the government had “never failed to service its loans”.

Infrastructure investment expert Akshai Fofaria of Pinsent Masons, the law firm behind Out-Law.com, said: “Substantial investment in infrastructure is critical to achieving the ‘Kenya Vision 2030’ to become a globally competitive country. Tapping into PPP financing is particularly advantageous for Kenya, in light of increased confidence from foreign private investors and its position as one of the largest economic powerhouses in sub-Saharan Africa.”

Fofaria said: “Kenya’s core industries in tourism, agriculture and manufacturing all require significant infrastructure investment to develop further. The establishment of a PPP committee and adoption of new PPP legislation further demonstrate the government’s intentions to tackle the infrastructure funding gap and welcome more private foreign investment into the country.”

Kenya’s government has previously unveiled proposals to work with private investors to increase overall domestic electricity generating capacity by 5,000 MW by 2016. It is envisaged that this capacity will be made up of natural gas-fired plants [1,050 MW], geothermal [1,646 MW], wind [630 MW] and coal [1,920 MW].

Last year, Kenya’s energy and petroleum ministry issued a call for tenders from private investors to build a coal-fired plant in the country’s eastern Kitui county. The proposed 900 to 1,000-megawatt Kitui plant, which the ministry expects to be built by December 2016, would be required to use coal from Kenya’s Mui basin – which the ministry said has estimated deposits valued at more than $40 billion.

In addition, 10 companies were prequalified for a tender for a second coal-fired plant at Lamu, which will initially use imported coal.

Power generated from both coal-fired plants will be sold to the Kenya Power & Lighting Company Limited under long-term power purchase agreements.

The World Bank has said Kenya has the “opportunity to achieve higher, more sustainable growth if it increases investments in infrastructure”.

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