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Projects in limbo as public private pacts lose shine

FINANCIAL STANDARD
By Lee Mwiti | April 11th 2017

Kenya has little to show for major infrastructural projects developed by the private sector under public private partnerships (PPPs). This is despite the Government’s praise for the pact as an alternative way to mobilise capital to fund infrastructure. Kenya legally embraced the deal four years ago.

The country’s annual infrastructure deficit stands at between Sh200 billion and Sh300 billion according to Treasury Cabinet Secretary Henry Rotich in a past interview. Mr Rotich while praising PPPs said Treasury allocated Sh405 billion, against Sh2.1 trillion budget for the Financial Year 2016/17 to infrastructure, underlying the huge funding gap.

“In Kenya, they have worked well. They are much better than privatisation. This is because the government only shifts the financial and operational risks associated with a project to the private sector, instead of yielding the entire project and its returns to the sector,” Mr Rotich said.

Experts however opine that there is little to show in terms of their impact in the local economy. They argue that employing private capital, which expects heavy returns, is more expensive in the long run when putting up public projects.

Dr Alex Awiti, a consultant with Eco-Build Africa, which develops and invests in urban development and housing projects, and a director at the East African Institute, Aga Khan University says misplaced priorities in engaging PPPs puts key sectors in dilemma - such as placing energy sector above agriculture.

“If investors could have been lured to come and invest in areas like water harvesting and dam construction, we would not be suffering food shortages during drought. Instead, incentives go mostly to energy,” Dr Awiti says.

The PPP Unit at Treasury headed by Stanley Kamau is supposed to vet investors and pinpoint viable projects that can be financed through such arrangement.

However, since the PPP Act was enacted, not a single project has come to fruition outside the energy sector. The first project that was proposed was the building of Kenyatta University hostels which has been unable to go past a PPP agreement stage. Investors say wrangles between the national government and counties have made it difficult for PPPs to work. Corruption, especially in counties, has not made things any easier.

Humphrey Watanga, a senior partner at Afcorp says wrangles between government and counties have been a disservice to investors.

“When you want to do a PPP with a country government, the national government is the only legal guarantor to the investment. When the State and the county wrangle, you miss out on the project,” he said.

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