President William Ruto has signed the National Infrastructure Fund Bill into law, marking a new chapter in Kenya's financing of mega infrastructure.
The President described the establishment of the fund as the most consequential initiative in the development history of the nation.
He said the fund will help narrow the infrastructure financing needs of the country that the World Bank estimates to be about $4 billion (Sh16 billion) each year.
He noted that the Fund will strengthen Kenya's journey towards first-world economic status by raising up to Sh5 trillion to finance key projects.
“The National Infrastructure Fund gives us the opportunity to build the future rather than wait for it,” he said.
He explained that the fund will power transformation in agriculture through extensive irrigation and water storage, expanding modern infrastructure such as roads, railways, ports, airports and logistics corridors that connect farms, factories and markets, and scaling up reliable energy to power industry, innovation and value-added production.
The President was speaking at State House Nairobi on Monday when he assented to the National Infrastructure Fund Bill in the presence of captains of industry from Kenya, Africa and around the world.
Present were National Treasury Cabinet Secretary John Mbadi, International Finance Corporation Regional Vice-President Mary Porter, Africa Finance Corporation President & CEO Samaila Zubairu, Britam Holdings CEO Tom Gitogo, Kenya Commercial Bank Group CEO Paul Russo, County Pension Fund CEO Hosea Kili CEO and NCBA MD John Gachora among others.
Further, President Ruto noted that the fund will help the country structure its priorities and package them into instruments attractive to investors.
The President said the fund will build on the government’s progress over the past three years, including revitalising agriculture, expanding healthcare, stabilising education and implementing affordable housing while creating jobs, increasing savings, deepening financial inclusion and opening new opportunities for the youth.
“But the next stage of our journey demands more. More scale. More investment. And, above all, a new way to finance our development,” he said.
Noting that the Kenyan National Infrastructure Fund is not an experiment, the President said it is a model that has succeeded in other jurisdictions.
He cited the Nigeria Infrastructure Fund established in 2011, the Ghana Infrastructure Investment Fund (2014), India’s National Investment and Infrastructure Fund (2015), the Canada Infrastructure Bank (2017), the United Kingdom’s National Wealth Fund and South Africa’s Infrastructure Fund.
“We have drawn lessons from all these experiences,” he said.
The President explained that the National Infrastructure Fund is a commitment made to the Kenyan people in the Kenya Kwanza manifesto, adding: "Today, we fulfill that promise."
He pointed out the risks of heavy reliance on sovereign debt to fund national development, saying without innovative funding Kenya has found it difficult to invest in mega infrastructure and at the same time stabilise the economy.
On Tuesday, the President announced that he will be at the Nairobi Securities Exchange to ring the bell to begin trading of Kenya Pipeline Company shares after a successful IPO that raised Sh106 billion ($820 million) that will form the seed capital for the National Infrastructure Fund.
“Our goal is to leverage this capital at least 12 times, mobilising close to Sh1.2 trillion ($9.3 billion) for infrastructure investment. Over time, this model will enable Kenya to mobilise close to Sh5 trillion over the next decade,” he said.
At the same time, President Ruto announced that the expansion of Jomo Kenyatta International Airport will be the first major project to be financed through the new model.
He said the transaction will be structured with Sh20 billion government equity from the National Infrastructure Fund and domestic institutional investors.
He told private sector representatives at the function: "The opportunities you have been looking for in commercially viable public infrastructure projects are right here."
The President called on stakeholders to find ways of eliminating restrictions placed on pension funds so that they can invest in other asset classes that deliver returns and grow the country’s economy.
On governance, the President said Parliament recently enacted the Government-Owned Enterprises Act, a legislation that provides a modern legal framework for commercialising government enterprises and ensuring that they are run according to the highest standards of corporate governance.
He said State corporations such as the Kenya Airports Authority, Kenya Ports Authority, Kenya Railways, Kenya Electricity Transmission Company, Geothermal Development Company and the National Cereals and Produce Board will now operate under this framework.
“Over time, these entities will access capital markets and the proceeds will allow us to build even more infrastructure for the future,” he said.
President Ruto said that government-owned commercially viable agencies and enterprises will be run by the same principles as the private sector.
“They will not be run by people with political connections, politicians who have not succeeded in their quest for office or people who have not been subjected to competitive recruitment,” he said.
Mr Mbadi said the National Infrastructure Fund will fast-track the development of major projects without raising the debt burden.
He said the proposals from the Infrastructure Fund Bill were informed by lessons learnt and practices from other countries that have experienced significant infrastructure development by transitioning from traditional debt-heavy spending to blended investment-led financing models.
He explained that the government studied successful models from many jurisdictions, including India, Singapore, Saudi Arabia, South Africa, Nigeria, Germany and Canada.
“It is worth noting that the signing of the National Infrastructure Fund Act into law is the wider delivery of the Kenya Kwanza Manifesto as approved by Kenyans in the last election, a promise that was in black and white in the manifesto,” he said.
Mr Gitogo said the establishment of the Infrastructure Fund focuses on investing in factors of production that increase productivity and competitiveness.
Mr Russo said the banking sector is ready to participate in building the country’s infrastructure.
Ms Porter said the organisation is ready to support Kenya’s transformation and national priorities that benefit communities.
“We look forward to deepening our engagement as Kenya mobilises capital to build infrastructure that will power the nation’s growth for generations to come,” she said.
Mr Zubairu noted that Africa will rise when African capital builds Africa's infrastructure and powers African industries.
“The Kenyan infrastructure fund embodies this philosophy: It mobilises domestic capital, channels that capital into strategic infrastructure and creates conditions for industry and value here in Kenya," he said.