State mulls Sh1.6tr for PPP projects in 2024/25

The government plans to finance 37 infrastructure projects worth $12.1 million (Sh1.6 trillion), through Public Private Partnership (PPP) arrangements in the next financial year beginning June 30, 2024. From this substantial investment, the government is set to mobilise some Sh70 billion towards the project.

This decision, contained in the Budget Summary for the Fiscal Year 2024/25 and submitted to the National Assembly on April 30, is a testament to the government’s innovative approach to overcoming budgetary constraints and achieving its development goals.

The PPP model is a collaborative approach that allows the government to partner with private entities to finance, develop, and manage infrastructure projects.  This model is particularly appealing to governments like Kenya’s, which are grappling with tight budgets but have ambitious development agendas.

By leveraging the resources, expertise, and efficiency of the private sector, the government can undertake large-scale projects without overstretching its budget. According to the National Treasury, the projects span various sectors, including transport, energy, housing, health, tourism, urban services, water and sanitation, environment, and irrigation.

The transport sector will receive the largest share of the investment, with eight projects valued at $4,988 million (Sh670.6 billion). This is followed by the energy sector, with six projects worth $1,280 million (Sh172.2 billion), and the health sector, with five projects costing $1,355 million (Sh182.2 billion).

However, implementing PPP projects is not without challenges. The National Treasury listed the challenges as a weak public investment policy framework, significant delays in obtaining necessary approvals, and potential fiscal risks.

National Treasury is crafting a harmonised public investment policy to address these issues. This initiative, coordinated by the Public Investment and Portfolio Management Directorate and the PPP Directorate, aims to bridge the existing gaps and streamline the implementation of PPP projects.

Frequent sensitisation

The PPP Directorate has also initiated frequent sensitisation and awareness creation among counties, ministries, departments, and agencies (CMDAs) to ensure that these entities identify projects that can be implemented within the PPP framework to supplement government budgetary allocations.

To manage fiscal risks, the government is taking into account contingent liabilities, including those from PPP projects, and making contingency provisions to cushion the economy from unforeseen shocks. This is a prudent move that underscores the government’s commitment to fiscal responsibility and economic stability. Furthermore, the government is strengthening PPP institutions, improving governance, and promoting a framework that balances risks with affordability and value for money.

This strategic approach aims to ensure rapid service delivery, reduce execution timelines, and promote local content for greater national value capture in PPPs.

Kenya Kwanza Government initially considered ending Public Private Partnerships (PPPs) due to fiscal risks and the need for more scrutiny on government procurements.

However, recognising the private sector’s vital role in achieving Kenya’s development goals, the government changed its stance. The recently published Public Private Partnerships Bill, 2021, overhauls the legal framework governing PPPs, simplifies the approval process, and introduces direct procurement.