Local financiers to get bigger pie of PPPs in new proposal

Commercial banks, insurance firms, and other financial services sector players are eyeing financing about a third of Kenya's development expenditure through public-private partnerships (PPPs).

This is as the government pursues increased private sector participation in infrastructure development to bridge the financing gap experienced as tax revenue continues to post sluggish growth and the wiggle room for more public debt shrinks.

A new report says local investors can finance the construction of infrastructure projects, including roads, dams, ports, and power transmission lines, accounting for about 30 per cent of the country's development expenditure in the coming years.

The government plans to spend about Sh700 billion on development projects over the coming financial year.

The report, which was done by a committee of experts on mobilising domestic capital for PPPs, has recommended the formation of the PPP Implementation Trust Fund (PPP-ITF) as a centralised vehicle for mobilising and deploying domestic capital for PPP projects.

The committee noted that currently, there is no dedicated statutory mechanism to secure and ring-fence payments due to private investors participating in PPP projects.

"This gap creates exposure to payment delays and fiscal uncertainty, potentially discouraging long-term private sector investment in PPP projects," says the committee in the report that was handed over to the National Treasury on Friday.

Dr Hosea Kili, who chaired the committee that started work in February this year, said the proposed trust fund has the potential to increase the number of PPP projects to account for up to a third of Kenya's development spending in the medium term.

Treasury Principal Secretary Chris Kiptoo said despite the need for Kenya to continue investing in infrastructure, the government does not have adequate revenues and has run out of room to borrow.