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VAS

Fix hurdles in Vision 2030 partnerships

COMMENTARY
By Ibrahim Kitoo | January 16th 2017

Recent years have seen an increase in cooperation between the public and private sectors for the development and operation of the transport and energy infrastructures in Kenya.

This is a direct result of efforts to increase the quality and efficiency of public services, enormous financing requirements for projects, large funding shortfall in the public sector, the need to cover investment needs and desire to access and leverage on private sector efficiencies.

These factors alongside growing market stability and a viable regulatory framework in support of Public Private Partnerships (PPPs) create a favourable environment for private investment through PPPs.

PPP is a partnership between the Government by itself or through a public entity and the private sector for the purpose of delivering a project or a service traditionally provided by the public sector.

The arrangement is that the Government remains actively involved throughout the project’s life cycle while the private sector is responsible for the more commercial functions such as project design, construction, finance and operations. Risk transfer from the public to the private sector is a critical element of all PPPs.

The private party receives a benefit for performing a public function either in compensation from a public fund or fees or charges to consumers or both.

In Kenya, the PPP framework is provided under the Public Private Partnerships Act, No.27 of 2013 (PPPA). PPPA is designed to provide for the participation of the private sector in the financing, construction, development, operation, or maintenance of infrastructure or development projects of the Government through concession or other contractual arrangements.

In addition to this, it also provides for the establishment of the institutions to regulate, monitor and supervise the implementation of project agreements on infrastructure or development projects.

PPPA requires a transaction advisor to guide the Government from the PPP procurement process to its financial close. This is so because many agreements ought to be reached and a proper feasibility study carried out to give comfort to both investor and the Vision 2030 aims to transform Kenya into an industrialised middle-income economy.

This requires heavy investments in infrastructure. Introduction of PPPs remains a major milestone. They may just be the needed shot in the arm for the Government to deliver on this vision. The national list of priority projects currently includes over 70 infrastructure projects earmarked for PPPs.

While PPPs can present a number of strategic advantages and benefits to both the public and private sector, it must be remembered that PPP projects are complex to design, implement and manage. PPPs are not a panacea to development; they are by no means the only option and should be considered only if it can be clearly demonstrated that they will achieve additional value compared with other approaches, if there is an effective implementation structure and if the objectives of all the parties can be effectively achieved within the partnership.

For Kenya to benefit from PPP arrangements, an efficient procurement process which is clear, transparent, robust, fair, cost-effective and competitive must be put in place, so that the highest value for the public entity is attained.

A lot of synergy and mutual cooperation is required between the public entity Nodes, the National Treasury PPP Unit, PPP Committee, the Cabinet and the Petitions Committee. The PPP legal framework as much poses a challenge due to the multiplicity of other legislations indirectly and incoherently bearing on the success or otherwise of PPP arrangements. This state of affairs calls for a deeper understanding of the provisions of these statutes by the PPP implementers and other players.

Above all, there is a need to review, rationalise and harmonise these legislations as is possible in favour of a consolidated and comprehensive statute.

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