State sets sight on private capital to deliver modern infrastructure

The government is luring the private sector to finance huge infrastructure projects. This was clear Monday as Principal Secretary for Infrastructure John Mosonik addressed the press hours before President Uhuru Kenyatta opened the region's first ever infrastructure summit in Nairobi.

According to Musonik, the Government is relying on partnerships with the private sector to finance key infrastructure projects as Government seeks for alternative development approaches. Several studies have blamed Kenya's high cost of doing business on the country's poor infrastructure - an aspect Jubilee is now seeking to address.

The new arrangement will help Government plug the financing deficit in the sector - estimated at Sh40 billion annually. The shortage has meant a paltry eight per cent (14,000km) of the country's total road network is tarmacked.

Through the proposed Public-Private Partnerships, the Government hopes to provide 10,000km of tarmacked road in six years.

Eng Mosonik said the proposed model dubbed "Annuity model" would be discussed and evaluated by stakeholders during the summit.

He said under the model, the Government would negotiate for loans from banks and other financing institutions.

Contractors would subsequently access these funds through the support of Government, adding that the contractor would design, build and maintain the roads

"The banks will pay the contractor upon certification of the work done by the Government," Mosonik told a media briefing in Nairobi Monday. He said the Government would reimburse the banks over an agreed period such as seven to eight years.

He said the contractors would be expected to complete the projects within the stipulated time— not exceeding three years— and guarantee construction quality and undertake post-construction maintenance of roads for five more years.

Mosonik disclosed that under the proposed infrastructure funding model, the cost of road implementation would be about Sh44 billion per year over the next six to seven years.

He said the unit costs for construction of roads would range from Sh40 million to Sh100 million per kilometre depending on the scope of works.

Mosonik said the designs for majority of the roads to be implemented under this programme have already been concluded while the framework of engagement between the Government and private sector has been agreed upon.

He said three commercial banks have already been identified to provide the financing. They include Kenya Commercial Bank (KCB), National Bank and Co-operative Bank.

According to Mosonik, adoption of the new approach would drive efforts towards the realisation of the Vision 2030 strategy and Government objectives and targets of increasing the paved road network.

"Better surface roads supports existing and new transportation business opportunities, access to markets and enhanced rural production," he explained.