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Njoroge Regeru & Co. Advocates
Public private partnerships, which are generally referred to as PPPs or P3, are arrangements between a contracting authority and a private entity. In such an arrangement, the private entity undertakes to perform a public function or to provide a service on behalf of the contracting authority and is generally liable for risks arising from the performance of such function. The Party must abide by the terms of the project agreement. The private party is remunerated by way of compensation from a public fund, charges or fees collected by the private party from users or consumers of a service provided to them or a combination of such compensation and such charges or fees.
Kenya’s Vision 2030 blueprint seeks to make the country an industrialized middle income economy by the year 2030. Pursuant to the Blueprint, the Government of Kenya has planned to spend an estimated sum of USD 60 Billion to put up infrastructure whilst relying heavily on PPP arrangements to achieve that goal. The Government has therefore been working on providing the right environment for implementation of PPPs by creating the legal and regulatory framework through the enactment of laws and regulations that promote and encourage PPPs. It is in this regard that Parliament enacted the Public Private Partnerships Act No. 15 of 2013 (“the Act”) to provide for the participation of the private sector in the financing, construction, development, operation and maintenance of infrastructure projects of the government through concessions or other contractual arrangements.
The Act also establishes institutions that will regulate, monitor and supervise the implementation of project agreements on infrastructure. One of the key features of the Act is the creation of the Public Private Partnership Unit (PPPU) which is a Special Purpose Unit within the National Treasury of the Government of Kenya. The PPPU is responsible for the systematic coordination of all the PPP projects review and approval process, which is geared towards promoting the flow of bankable, viable and sustainable projects that further the Kenya’s National Policy on PPPs. It serves as a centre of PPP expertise.
In a bid to attract foreign investors and in cases where the domestic workforce lacks expertise, Kenya’s PPP policy provides for the compensation of such foreign investors if the project is terminated due to political instability or other unavoidable circumstances. The Kenyan government has also put in place performance monitoring mechanisms to evaluate PPP projects. Moreover, there is risk mitigation through letters of comfort/support, guarantees and subsidies. Private entities can also enter into direct agreement with lenders to finance PPP projects.
Expectedly, Kenya stands to gain a lot by using PPP arrangements to undertake various projects. One of the main advantages is that PPPs reduce the burden on taxpayers having to pay for a project, especially where the private sector finances the whole project. The government and the private sector will be able to share and allocate risks amongst themselves. By using PPPs, corruption and wastage can be significantly reduced since both partners are held accountable for the project. PPP arrangements also help to create job opportunities for the local people who are often hired to work on such projects. Furthermore, PPPs will also supplement the government’s ability to meet the demands for increasing and improving infrastructure.
Kenya has a successful track record in infrastructure projects that have been built using PPPs. These include the Port of Mombasa Grain Terminal that was built in 1998; the Malindi Water Utility which was built in 1999 on a 5-year management contract; the Jomo Kenyatta International Airport Cargo Terminal (JKIA Cargo) which was built in 1998; the Kenya-Uganda Railway Concession in 2006, among others.
Some of the ongoing and planned PPP projects which the government intends to undertake include the establishment of a Kenya Flying School; the construction of a Second Terminal at the Jomo Kenyatta International Airport; the establishment of a 980 Megawatt Coal Plant; a two-phase Geothermal Development Project to generate a total of 1,200 megawatts; establishment of a four-tier National Data Centre, among many other projects.
The different types of PPPs that Kenya can invest in are Build Operate Transfer (BOT) arrangements; Build Own Operate (BOO) arrangements; Lease Renovate Operate Transfer (LROT) arrangements; Build Lease Transfer (BLT) arrangements; Design Construct Manage Finance (DCMF) arrangements and Build Own Operate Remove (BOOR) arrangements.
It is hoped that Kenya’s economy will improve greatly through the increased use of PPPs in infrastructure development and providing services to its citizens. The advantages that Kenya stands to gain by using PPPs far outweigh the disadvantages of using the same. The livelihoods of the citizens will definitely improve as Kenya transitions from a developing country to a developed county.
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