The challenges notwithstanding, successful implementation of the Nairobi Expressway Project will propel the PPP journey in Kenya and the region.
By Johnson Mwawasi, CEO Lean Africa Consultants Limited.
Kenya through the Kenya National Highways Authority (KENHA) is currently implementing the Nairobi Expressway project, an ambitious road project that cuts through the Nairobi’s Central Business District totaling to 26.7km. According to KENHA, the project which starts from Mlolongo in Machakos County and terminates at James Gichuru in Nairobi County is part of the Northern Corridor that provides passage of 85% of the cargo destined for the neighbouring landlocked countries. It is expected to ease the traffic congestion thus enhancing the economic vitality of Nairobi city.
The project will have a center alignment on the current A8 section of the Mombasa Highway with the first 15.5km constructed on ground level while the remaining 11.2km will be constructed on an elevated road. Details from the KENHA indicate that the four-lane road project will cost approximately $600 million on completion and is procured through a Public Private Partnership (PPP) between the KENHA and the China Roads and Bridge Corporation (CRBC), one of the China’s state-owned companies.
According to the agreement, CRBC will construct the project for a period of 3 years and operate and maintain it for a period of 27 years. During the operation and maintenance period, the contractor will charge and collect toll fees from vehicular traffic using the road leaving the current A8 section of the road for free use by the public.
Kenya, like many other African countries is facing a huge infrastructure financing gap currently standing at approximately $ 2billion annually. According to the National Treasury of Kenya, the private sector is key in closing on this funding gap. As part of Covid-19 economic recovery plan, the Country plans to raise up to $ 2billion from the private sector to fund an infrastructure project pipeline which currently has more than 80 projects. So as to achieve this ambitious target, the country plans to institute reforms in the PPP regulatory framework so as to make it an efficient tool for attracting more private sector financing. This according to the Government includes the removal of unnecessary and redundant processes, strengthening of institutions involved, streamlining and standardization of credit enhancement tools like Letters of Support, Partial Risk Guarantees, Viability funding among others.
Kenya has a relatively robust PPP regulatory framework which has undergone improvement for almost a decade. The Government and other partners including the World Bank and the Pubic Private Infrastructure Assistance Facility (PPIAF) have invested heavily in improving the framework and building local capacity so as to attract more private sector financing in infrastructure projects. The PPP Unit, established under the National Treasury is the key organ that advises the government on PPP matters.
Under selective circumstances, the Kenya’s PPP regulatory framework allows the contracting bodies like the KENHA to consider Privately Initiated Investment Proposals (PIIP) for the construction of infrastructure projects. Under the PIIP, the contracting authority, once given the go ahead by the PPP Unit, shall negotiate and award the contract after confirmation that the project provides value for money, is affordable and that it provides for efficient transfer of risks to the private party.
The PIIPs if well managed allows a government to benefit from innovative solutions from the private sector and also helps in identifying areas where the private sector has keen interest in. However, unlike in solicited proposals whereby the contracting entity invites bids through a competitive process, PIIPs have been criticized as they are seen to undermine the checks and balances necessary to ensure the projects deliver value for money through competition.
According to the Benchmarking PPP Procurements report 2018, out of the countries evaluated, only Kenya and Vietnam did not require competitive process for evaluating unsolicited proposals. Going forward, the introduction of competition might go a long way in enhancing competition thus increasing chances of achieving more value for money.
The challenges notwithstanding, successful implementation of the Nairobi Expressway project will herald a new era in the PPP journey in Kenya and the region. Demonstrated capacity by the KENHA to manage the project will go a long way in building the much-needed confidence by the private thus attracting more participation from the private sector.
The KENHA needs to plan ahead and build the much-needed local capacity to manage the operations, maintenance and handover phases of the project so as to ensure seamless operations once the project is officially complete. Besides KENHA, many other governmental bodies will need to work together with the Contractor especially in ensuring seamless collection of tolls. This includes the National Transport and Safety Authority, the National Police Service, the Communications Authority, the Judiciary among others.
Since PPPs require long term and massive investment of capital by the private sector in public projects, demonstrated capacity and willingness of the different bodies involved will reduce the perceived risk in these projects thus attract more participation from the private sector in infrastructure projects in Kenya. More private participation in infrastructure projects will spur competition which will ultimately ensure value for money for Kenyans.