New rules for companies that work with the Kenyan government

The government has stated that economic growth in Kenya depends on modern infrastructure. However, funding for developing such infrastructure is limited. The government hopes to bridge the financing gap by involving the private sector in public projects. The Public-Private Partnership Act of 2013 (PPP Act) provides the framework for the involvement of the private sector in the provision of public goods and services.

PPP Act

The PPP Act requires proposed PPP projects to be approved by the PPP Committee, which is an oversight body constituted under the PPP act. The PPP Committee’s secretariat and technical arm is the PPP Unit (PPPU), which is charged with overseeing the implementation of all PPP projects. The PPPU is required to publish the national priority projects proposed by various contracting authorities (state departments, agencies, state corporations or county governments, which intend to have functions undertaken by them performed by a private party.) UPCOMING WORKS: Based on this, the PPPU has published a list of 47 upcoming projects in addition to the ongoing ones. The main projects currently under way are independent power production projects and the concession of the national railway to Rift Valley Railways. A glance at the list of the upcoming projects reveals a wider focus; they cut across agriculture, hospitality and housing in addition to independent power production.

Transport features prominently on the list, with several major port projects, including the development of the Lamu Port, the Kisumu Port and other ports on Lake Victoria, as well as a new terminal at Kenya’s main international airport, Jomo Kenyatta International Airport, a second container terminal at Mombasa’s port and the expansion of various highways. These are just some of the transport developments that are currently being initiated.

The list of projects published by the PPPU is by no means exhaustive. A PPP project whose value is less than KSh85m ($935,000) undertaken by the national government is not subject to the provisions of the PPP Act and would therefore not be included in the list published by the PPPU. Similarly, county governments may undertake a PPP project with a value of less than KSh5m ($55,000) without the involvement of the PPPU.

This provides scope for smaller projects to be implemented using a relatively simpler procedure. There are differing opinions as to whether the thresholds have been set too low, but there is no provision in the PPP Act requiring revision of the thresholds. Thus, it is left to the Cabinet secretary to the National Treasury to determine whether the thresholds will be revised and when.

Procurement

The PPP Act requires all projects to be procured through a competitive process and in accordance with the PPP committee’s guidelines for identification, selection, pre-tender approval, tendering, negotiation, post-tendering approval and monitoring. However, a contracting authority may be cleared to accept a privately initiated investment proposal. The project must provide value for money, be affordable and appropriate risks must be transferred to the private party.

Although the second schedule to the PPP Act prescribes the types of arrangements that may be entered into in a PPP agreement, it is not exhaustive. Other arrangements that are not explicitly listed may be approved by the Cabinet secretary to the National Treasury.

The PPP Act has been in force for just over two years. Ultimately, its success is expected to hinge upon, among other things, the number of implemented PPP projects that are economically successful and provide value for money. Time will tell whether the PPP Act can achieve these objectives.