Private Public Partnerships in Kenya

Public Private Partnership (PPP’s) is the partnership between the government and the private sector which is aimed at financing, designing, implementing and operating public sector facilities and services. It allows the public sector to contract with private sector. A PPP is a Performance‐based contract under which the private Sector supplies public services over time and is paid by the public sector, end user or a hybrid of both. Output is specified by the Contracting Authority while input is the responsibility of the private sector.

The provision of public infrastructure (including power, roads, rail, sea and airports) and services (including water, health and sanitation) is a key mandate of governments the world over. These public goods are a fundamental prerequisite for economic growth and development.

In Kenya the adoption of a Public Private Partnership (PPP) framework reflects the Government’s desire to improve the quality, quantity, cost-effectiveness and timely provision of much needed public infrastructure and services in Kenya.

The private provision of public infrastructure and services has the potential to offer enhanced value for money and enables the Government to use the private sector’s delivery and project completion expertise and capability for the benefit of the people.

Since 1996, Kenya has attracted private investments into the country’s economic infrastructure sectors including telecommunications, energy, transport, water and sewerage.

These investments have demonstrated both the commitments of Government of Kenya (GOK) to PPPs and the interest by private investors, lenders and operators in these sectors. However, these infrastructure investments occurred without a specific policy, legal and regulatory framework for PPP.

Therefore, the Government of Kenya’s first step was to strengthen the legal and regulatory framework for carrying out PPPs in Kenya as part of a wider agenda of increasing private sector investments in infrastructure development:

  • In March, 2009 the Government of Kenya established an institutional framework through Regulations issued under the Public Procurement Disposal (Public Private Partnership) Regulations 2009;
  • In 2010, a review of Kenya’s legal and regulatory framework recommended the enactment of a PPP Law to address the identified gaps, inconsistencies, conflicts and overlaps;
  • In December 2011, the GOK approved a PPP Policy statement on PPPs;
  • On 5th December 2012, the Government of Kenya received a credit from the World Bank for the Infrastructure Finance and Public Private Partnership (IFPPP) Project. The overall objective of the IFPPP project is to increase private sector investment in the Kenyan infrastructure market and to improve the enabling environment so as to generate a pipeline of bankable PPP projects.
  • The PPP Bill was approved by Parliament in December 2012, received Presidential Assent on 14th January 2013, and was published as thePublic Private Partnership Act, No. 15 of 2013 in the Kenya gazette supplement No. 27 on 25th January 2013. The PPP Act came into effect on 8th February 2013.

Opportunities the Public Private Partnership Act Provides for Investors: –

  • Risk mitigation(Letters of Support, Guarantees (Demand/Traffic Guarantee), subsidies;
  • Inflation and interest rate indexation;
  • Performance monitoring mechanisms;
  • Direct Agreement and step-in rights to Lenders;
  • Compensation for termination/ extra-ordinary events/ direct impact of change of Laws/political event;
  • Establishment of a Viability Gap Fund to support economically viable projects which may not be financially viable without Government support;
  • A clear, transparent, fair and competitive process for PPPs, covering Project identification, selection, prioritization, preparation, appraisal, procurement , approvals and procurement of project Advisors;
  • A clear institutional framework for development and approval of PPP projects – Cabinet, PPP Committee, PPP Secretariat, Contracting Authorities and the role of Treasury in fiscal risk management and Contingent Liabilities;
  • Government will prepare bankable projects before going to the market; and
  • Use of Privately Initiated Investment Proposals (unsolicited) method of procurement when there is urgent need for continuity and where there is intellectual /innovation.

Opportunities for Infrastructure Investments 2012-2020

SECTOR AMOUNT IN USD M
Energy (power and others) 19,808
Ports 4,800
Roads 9,000
Water and sanitation 4,567
Railways 7,248
Airports 906
Tourism 2,050
ICT 7,850
Local Government 2,000
Housing 2,901
Public Works 1,000
Lamu Port Corridor 3,723
TOTAL NEEDS 62,176
AVAILABLE (GOK – 2012 – 2020) 25,000
FUNDING GAP 37,000

Public Private Partnerships in Kenya have been summarized to include

Legal and Regulatory Framework for PPP Kenya

Completed Projects under PPP

Projects Under PPP Kenya

Why is PPP an option in Kenya