Kenya sweetens deal for investors

Nairobi Expressway

The Nairobi Expressway which is under construction.

Photo credit: File | Nation Media Group

Kenya has expanded procurement options and set clearer approval processes and timelines to lure private investors into multi-billion shilling projects in the latest bid to attract investment.

The Public-Private Partnership (PPP) Act signed by President Uhuru Kenyatta on Tuesday sweetened conditions of project concessions amid pressure to fix bottlenecks that made it costly to do business.

“The new law streamlines the PPP process making it easier for investors to apply for projects and is expected to result in a significant increase in projects funded and developed through the PPP model thereby relieving pressure on the exchequer” Treasury PS Julius Muia told the Sunday Nation.

Kenya has opened up public concessions of roads, energy and housing projects, railways, and ports to private investors in hope of meeting its development needs.

Statistics by the National Treasury show that 45 projects are under implementation or in active operation under the PPP model. These include six road projects totalling 639km under the Roads Annuity and Tolling Programmes, and 39 electricity generation projects, both renewable and thermal energy, totalling 3,034 megawatts (MW) of installed capacity).

Nairobi Expressway

For example, the 27km Nairobi Expressway will be owned by the investors for 27 years upon completion.

Construction of the planned Sh160 billion toll highway from Nairobi to Mau Summit will also be funded through the PPP model that will see a French consortium design and fund the project and operate it for 30 years before handing it to the State.

The PPP arrangement allows private investors to own infrastructural projects for a given period to recoup their funds before ceding the ownership to the State.

A review of the new PPP law shows that Kenya made a raft of investor-friendly provisions, including increasing the period of concession for projects to up to 30 years from 25 — aligning the concession timeframe to the global standard.

A review of key Build-Operate-Transfer (BoT) projects globally shows that concessions are typically for a period of 25 to 30 years – which is considered sufficient enough for investors to fully recoup their investments.

Extended concession period

Besides the extended concession period, the new PPP Act now provides for a significant expansion of the procurement options available for contracting agencies, including direct negotiation for Privately-Initiated Investment Proposals (PIIPs). This is a shift from the old arrangement whereby public agencies were limited to competitive bidding processes — locking out billions of shillings in potential investments.

The new PPC Act also addresses previous bottlenecks to good governance by creating a new entity known as the PPP Directorate within the National Treasury and, unlike its predecessor the PPU Unit, has functions that are largely separate from those of the old PPP committee which primarily approves projects.

The newly created PPP Directorate has a much broader mandate than that of the PPP Unit. The new directorate will initiate, guide, and coordinate the selection, ranking, and prioritisation of PPP projects within the public framework.

Analysts said it also now has powers to originate and lead in project structuring and PPP programmes in Kenya.

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