State banks on private sector to fund infrastructure

February 13, 2012
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Finance PS Joseph Kinyua/ FILE
NAIROBI, Kenya, Feb 13 – As Kenya continues to implement its ambitious Vision 2030 plan, the role of the private sector will be key in reducing the infrastructure deficit that the government is set to incur over the next couple of years.

It is estimated that there is a funding gap of approximately $44 billion needed to address Kenya’s infrastructure requirements in the next five to eight years.

Ministry of Finance Permanent Secretary Joseph Kinyua said on Monday that with such a financial demand, Public Private Partnerships (PPP) will become even more crucial if the infrastructure development in the country is to be a success.

“The PPP arrangements offer an opportunity for Kenya to attract enhanced private sector participation in financing, building and operating infrastructure services and facilities in order to close this huge funding gap,” he said.

Even more important, Kinyua said, is the preparation of bankable projects, which can be clearly understood by both public and private sectors.

The process of identifying, prioritising and preparing PPP projects in the country has been slow and uncoordinated often discouraging prospective investors from committing.

“The government with financial assistance from the World Bank recruited a consultant to help it prepare a prioritised Public Private Partnership investment program,” he said.

The investment program has been set at a tentative amount between $100 million and $130 million which will form the basis for developing PPP projects in Kenya.

The PS was speaking at a Public Private Partnership Workshop discussing challenges impeding the sector as well as a way forward in contributing to infrastructure development in the country.

Several inadequacies in the current legal and regulatory frameworks governing Public Private Partnerships in the country have proven to be a hindrance in facilitating private sector investments.

Director of Public Private Partnerships at the Ministry of Finance Stanley Kamau said issues within the current regulations include limiting procurement guidelines and unreasonable timelines.

“We have a subsidiary legislation anchored on a public procurement and disposal act, which is limiting. PPP is not just about tendering, it’s a long-term relationship with an investor to provide funds to build and operate the facility and even collect revenue for a period of 25 years,” he said.

The PPP Bill 2011 which is expected to be tabled in Parliament in the next one month is will further strengthen the legal framework and consolidate all issues relating to PPPs into one law.

Kamau said the government has been trying to improve the environment for private sector participants in PPPs especially in the area of the delivery of key infrastructure services.

“A PPP project requires a conducive environment that’s why we are trying to put this legislative framework in place. Second, is money so we’re also looking at working with the Capital Markets Authority, looking at pension and insurance funds and third is the project,” he said.

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