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Public-private partnerships the way to go

REAL ESTATE
By Harold Ayodo | November 5th 2015
Deputy President William Ruto unveils a plaque to officially launch Phase 1 of Konza Technopolis City at Malili in Makueni County last year. He was accompanied by ICT Cabinet Secretary Fred Matiang’i (now the acting Lands CS) and suspended Lands CS Charity Ngilu. Konza is being built through public-private partnerships. [PHOTO: Standard]

Public private partnerships (PPPs) are major forces behind multi-billion-shilling infrastructural projects in the country. PPPs are arrangements between a contracting authority and a private party.

A contracting authority means a State department, agency, corporation or county government, which intends to have a function undertaken by it performed by a private party.

PPPs are currently important as the Government struggles to implement Vision 2030 - a development blueprint that commenced in 2008. The aim of Vision 2030 is to transform Kenya into an industrialised middle-income country, providing high quality of life by 2030.

It also aspires for a country with high-quality services and facilities with investment in infrastructure given top priority.

 FUNDS

The Government recognised that the required funds to support the development agenda and meet the infrastructure deficit require involvement of the private sector, hence public private partnerships (PPPs).

Treasury Cabinet Secretary Henry Rotich recently noted the need into tap the private sector to bridge the infrastructure financing deficit. He was quoted in the media saying the country’s annual infrastructure budgetary deficit currently stands at around $2 billion (Sh202 billion).

The CS said that the Government was considering a range of options to finance major infrastructure projects, including PPPs.

According to Rotich, there is a huge infrastructure deficit that should be filled as the demand for good roads is high due to the economic growth countrywide and regionally.

 PRIVATE SECTOR

The partnership arrangements offer an opportunity to attract private sector participation in financing, building and operating infrastructure services and facilities.

The previous Government had in the pipeline a series of PPP projects that entailed construction of the Nyali Bridge and second container terminal in Mombasa.

Other projects that have seen the light of day or are in the feasibility or conception stage are the Lamu Port-South Sudan-Ethiopia Transport corridor (Lapsset) and Konza Techno City.

The Nairobi Commuter Rail, Kisumu Sea Port, Jomo Kenyatta International Airport expansion, houses for security forces, Karen Medical Centre and Mombasa Conventional Centre are also among the mega projects running into billions of shillings.

Pundits in real estate concur that the main rationale behind the PPPs is to ensure additional projects funding from the private sector and help the Government cut down borrowing.

The partnerships may deliver the Government from the chains of the infamous cow boy contractors who perfected the art of completion delays, cost overruns, poor maintenance, poor design, poor project selection and grand corruption.

Legally, contracting authorities are required to enter into project agreements with quailed private parties towards financing, construction, operation, equipping or maintenance of the infrastructure or development.

The contracting authority may designate its assets for use by the private party during the duration of a project on agreed terms and conditions.

However, before entering into an agreement, the contracting authority must undertake a study and assessment on technical, commercial, financial, legal and institutional capacity.

The duration of the project should be determined, therefore, the contracting authority must consider provisions of relevant written laws before signing on the dotted line.

 STANDARDS

Other considerations include the lifespan of technology to be used in the project, investment standards required to be maintained by each party, economic and financial viability and depreciation of the assets of the project.

In some cases, the required period by parties to meet and maintain the partnership, service delivery standards, and investment levels and recoup investments is also considered.

According to the Public Private Partnerships Act (2013), only an accounting officer of a contracting authority can enter into a project agreement on behalf of the authority.

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