The Kenyan government has announced an ambitious plan to mobilize Sh50 billion through Public Private Partnerships (PPPs) in the fiscal year starting July 2024.
This initiative is part of a broader strategy to shift away from traditional debt-financed infrastructure projects. According to the draft Budget 2024 Policy Statement, the focus will be on key areas such as power generation and transmission, roads, water, and aviation.
In recent times, Kenya has increasingly relied on PPPs as a means of funding large-scale projects, moving away from the previous approach of relying on commercial loans.
This change in strategy is partly driven by the country’s constrained fiscal space and the need to manage its debt more effectively.
The National Treasury has highlighted that the PPP Directorate is managing a portfolio of 31 projects, with most at the procurement stage, aiming to raise significant funds in the 2024-25 financial year.
The drive towards PPPs is further underscored by the increasing debt obligations facing Kenya.
In the first quarter of the current financial year, debt servicing consumed two-thirds, Sh347 billion, of tax revenues.
This financial burden is largely attributed to maturing semi-concessional and commercial loans obtained for infrastructure projects like roads, bridges, power plants, and the modern railway line.
One notable example of a project funded through expensive foreign loans is the Standard Gauge Railway, financed predominantly through Chinese lending.
However, the hefty cost of servicing these debts has become a significant concern for the government.
The recent amendments to the Public Private Partnerships Act of 2013, enacted in 2021, illustrate the government’s commitment to enhancing PPP frameworks.
These changes, aimed at reducing bureaucratic hurdles and attracting investors, allow public entities engaged in PPP deals to single-source work, thereby expediting project execution.
Additionally, the government’s focus on PPPs is not just about funding infrastructure but also about ensuring the sustainability of these projects.
They aim to develop major infrastructure projects, including expanding the road network, modernizing the Jomo Kenyatta International Airport (JKIA), and ensuring the availability of water for agricultural, industrial, and domestic use.
This approach underscores the critical role PPPs play in facilitating large-scale infrastructure development in Kenya.
