The Kenyan Government wants to deepen its partnership with the private sector to raise more private investment and expertise in a bid to accelerate infrastructure capital formation.
The country has been facing significant financing gaps in infrastructure and utilities and the new initiative, through the Public-Private Partnership (PPP), could increase private participation in Kenya’s infrastructure market and support economic growth and employment creation.
“Kenya faces a significant infrastructure financing deficit estimated at $2.1 billion (Sh178.5 billion) annually, and this imposes a serious constraint to growth and doing business in Kenya,” says Johannes Zutt, World Bank Country Director for Kenya.
“Our analysis shows that Kenya’s per capita growth rate can be increased by three percentage points if infrastructure financing is increased.” The Government and the Bank have identified pipeline projects that are ready for financing under this structure once a PPP framework is in place.
The country spends about $1.6 billion (Sh134 billion) annually on infrastructure. But it requires a sustained expenditure of $4 billion (Sh336 billion) a year, which is about 20 per cent of the Gross Domestic Product (GDP), over the next decade, according to the Africa Infrastructure Country Diagnostic Report 2010 produced by the World Bank in collaboration with the African Development Bank and other development agencies.
The PPP program is being supported by a $40 million (Sh3.4b) Infrastructure Finance Public-Private Partnership Project, which was approved by the World Bank last week.
The project will help Kenya improve its enabling environment and generate bankable public-private partnership projects in transport, energy and other sectors that are critical for the actualisation of the country’s Vision 2030 blueprint, which seeks to turn the country from a low income, to middle income status by the year 2030.
It will also focus on financing institutional support and regulatory reforms necessary to develop a bankable project pipeline that the Government can take to market for private sector financing.
“Kenya has a large and diversified capital market with promising prospects of becoming a sustainable source of financing for infrastructure project,” says Yira Mascaró, Task Team Leader of the project.
“But it requires structural changes and an enabling legislation to develop a long term debt market for financing infrastructure and other PPP projects.”