On 20 November 2018, the Kenyan government moved to strip financial and risk guarantees from more than 70 projects being developed under the public-private partnership framework, a change that could make it harder for investors to raise funding.
The revised policy narrows state support to projects the government considers strategic and clearly in the public interest. Under the new approach, support measures such as letters of comfort, repayment guarantees and political risk cover will not be available as a matter of course.
According to the policy, government support measures will be issued only in exceptional cases and only after Cabinet approval. The statement said:
“For the avoidance of doubt, not all projects may be supported by a government support measure. A GSM shall be issued in very exceptional circumstances for projects that are considered strategic and that are of public interest, as approved by Cabinet,”
Before the change, private investors depended on those assurances to help secure financing from local and international lenders. The guarantees acted as protection for lenders if a borrower ran into trouble repaying the money.
The policy shift affects PPP projects across transport, housing, manufacturing and health. Among the projects mentioned are the Likoni Cable car project, the Nyali Bridge project in Mombasa, the Nairobi-Nakuru-Mau summit highway, the 35 MW Ormat Orpower geothermal power plant project, and the Lamu-Garrissa-Isiolo highway.
The PPP model was originally introduced to bring private capital into infrastructure and help close financing gaps in the country. The new rules now place the burden on investors to structure projects in ways that do not depend on direct government financial support.
