PPP Projects Faces Uncertainty Following Major Policy Changes

The Kenyan government has withdrawn financial and risk guarantees for over 70 projects being implemented under the public-private partnership framework.

In a major policy changes announced to various stakeholders in the industry, the government has insisted on supporting only projects that are strategic and in the public interest.

The move is expected to make it impossible for private investors to mobilise financing from either local or international lenders.

The PPP projects will also be barred from accessing government support mechanisms in the form of letters of support and comfort, repayment guarantees and political risk covers.

“For the avoidance of doubt, not all projects may be supported by a government support measure. A GSM shall be issued in very exceptional circumstances for projects that are considered strategic and that are of public interest, as approved by Cabinet,” the policy stated.

Prior to this, private investors relied on these assurance to secure financial aids which acted as insurance for lenders in the event of emergencies that make it impossible for the borrower to repay.

Private investors will now be required to execute the projects in ways that do not require the government financial support.

There are various PPP projects being implemented in the country across sectors like transport, housing manufacturing and health.

Some of these projects include; Likoni Cable car project, Nyali Bridge project in Mombasa, Nairobi-Nakuru-Mau summit highway, 35 MW Ormat Orpower geothermal power plant project, Lamu-Garrissa-Isiolo highway among others.

The adoption of the PPP unit framework was initially meant to involve the private sector in bridging the infrastructure and financial gaps and subsequently achieve sustainable development in the country.