Private-Public Sector Partnership Bill overdue

Odhiambo Ocholla

Recently, Cabinet approved rules that will govern private-public sector partnership. This bill was long overdue and I believe it will streamline the relationship of how the Government engages the private sector in financing infrastructure projects.

Over the past two decades, public–private partnership (PPP) schemes have been used in many countries to provide services and infrastructure. Indeed, the proposed bill will develop a package of policy, legislative and institutional reforms to create an enabling environment for PPPs.

Vision 2030 identified the country’s infrastructure needs at Sh200 billion in the next decade. One way to address the need for more infrastructure investment is to attract more private capital for direct investment in the infrastructure.

A key issue is how to attract private investors willing to participate in infrastructure projects given their complex, risky nature and lack of legal framework.

Necessary expertise

PPPs entail sharing of responsibility between the Government and the private sector. The proposal under the bill to create the co-coordinating office of the public-private partnership is commendable.

A fully functional PPP coordinating unit helps to ensure availability of necessary expertise in the public sector for negotiation and implementation of PPP contracts.

As the need for investment in infrastructure continues to grow, private sector financing for infrastructure projects is gaining prevalence.

As a result of years of under-investment in our infrastructure and transportation system this policy framework is timely and most welcomed.

Although infrastructure investments are expensive, it is even more expensive for the country if we don’t invest in infrastructure.

There are real costs to not investing in infrastructure, including increased congestion and loss of productivity and jobs. Already, Kenyans are wasting too much time, money and fuel in endless traffic snarl ups. Kenyans deserve safe and reliable infrastructure.

The private sector has long provided goods and services to the public sector. However, a trend seems to be emerging in a number of countries - and Kenya is not excluded - towards increasing involvement of the private sector in the provision of goods and services traditionally provided by public sector.

This entails a shift in the role of the public sector from supplying to buying services, with private firms designing, constructing, financing, operating and maintaining infrastructure, and the public sector paying for these services.

Direct investment

There is very little direct private investment in our country’s highway and transport systems due to the current method of funding infrastructure, which lacks mechanisms to attract and direct investment. The approval of the Public-Private Partnership bill will create the conditions for greater private sector co-investment in infrastructure projects. Research has shown that well designed infrastructure investments can raise economic growth, productivity, and land values, while providing significant positive spillovers to areas such as economic development, energy efficiency, public health and manufacturing. I believe the average Kenyan family spends more than Sh36,000 a year on transport alone. This burden is due to lack of alternatives to expensive and often congested road travel.

Traffic congestion

Well-maintained roads, coupled with access to driving alternatives, can lower traffic congestion and accident rates. These benefits can also improve energy efficiency if the public-private partnership is well executed in the energy sector.

Public support for infrastructure is not surprising, given that for the average Kenyan family, transport costs rank second only to housing expenditures.

Improved public transport will enable middle class families to save time and money. Definitely the bill will unlock private investments in provision of public services as the legal framework guaranteeing protection of their investments would be in place.

—The writer is an Investment Banker.

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