The African Development Agency has urged Kenya to harness its robust private sector—comprising local and international commercial banks as well as institutional investors—to fund critical, capital-intensive infrastructure projects, including airports, roads, and railways.
This call comes amid Kenya’s challenging fiscal environment and an impending debt crisis, as highlighted by the International Monetary Fund (IMF), emphasising the need for innovative financing solutions.
Mrs Nardos Bekele-Thomas, CEO of the African Union Development Agency–NEPAD (AUDA-NEPAD), emphasized that engaging the cash-rich private sector could unlock essential funding to address Kenya’s pressing infrastructure needs without exacerbating its debt-laden economy.
She advocated for innovative financing mechanisms such as blended finance and risk guarantees to mitigate perceived risks that have traditionally deterred private investors.
“Guarantees act as a form of insurance for banks and investors, shielding them from the risk of non-payment by governments, often seen as precarious investments,” she said adding, “Political risk refers to the potential for an investment’s returns to be adversely affected by political changes or instability within a country.”
In a statement to newsrooms, Bekele-Thomas said innovative financing mechanisms, such as blended finance and risk guarantees, are critical to mobilising the resources needed to close the funding gap.
“These mechanisms create an environment where private capital can engage with confidence, paving the way for transformative projects that redefine economies and connect regions,” she said.
Despite an estimated $278 billion funding gap by 2040, many projects across Africa, including those in Kenya, struggle with bankability due to inadequate preparation and risk-related misconceptions, she warned.
“Many projects struggle to reach bankability due to insufficient early preparation and persistent misconceptions about risk,” she explained. “One of the most significant obstacles is risk mitigation. For far too long, perceived risks have kept private sector investments at bay, leaving critical financing gaps unaddressed.”
Her remarks come as President Ruto’s administration faces mounting fiscal constraints, struggling to raise new taxes and secure fresh borrowing amid a slowing economy and costly global debt.
Kenya Kwanza is seeking billions of shillings from global partners to fulfil its ambitious development agenda, which includes completing new roads and railways, with elections just three years away.
However, the cash-strapped National Treasury has been forced to slow down on new commercial borrowing, opting to diversify funding sources to strengthen debt sustainability and protect the economy from volatility.
The government plans to shift from commercial debt by issuing Panda, Samurai, and Sukuk bonds in China, Japan, and Gulf markets, prioritizing concessional loans.
Public-private partnerships (PPPs) are also being pushed as a solution to the cash crisis and limited borrowing and revenue mobilization options.
Experts note that the success of major initiatives—such as the expansion of Jomo Kenyatta International Airport (JKIA) and the extension of the Chinese-built Mombasa-Nairobi Standard Gauge Railway (SGR) to the Malaba hinterland—depends heavily on attracting private capital.
Bekele-Thomas also highlighted the importance of local ownership in PPPs.
“Local ownership brings another layer of importance to this agenda. Infrastructure must belong to the communities it serves. It cannot simply be imported solutions dropped into unfamiliar landscapes,” she stressed.
She said, “Public-private partnerships that include local businesses and empower communities to unlock possibilities for genuine engagement and ongoing maintenance. Strengthening local capacities makes these projects not only viable but cherished as engines of growth and transformation.”
President William Ruto recently cancelled a procurement process that would have handed control of Kenya’s main airport to India’s Adani Group after its founder was indicted in the United States.
The proposed $2 billion deal involved the Adani Group constructing a second runway at Jomo Kenyatta International Airport and upgrading the passenger terminal in exchange for a 30-year lease.
Ruto also terminated a separate $736-million, 30-year PPP agreement with the energy ministry and an Adani Group firm for building power transmission lines.
The deals had sparked sharp criticism from politicians and the public, citing concerns over transparency and value for money.