AU Agency Urges Kenya to Leverage Private Sector for Infrastructure Development
Kenya’s fiscal constraints have intensified under President William Ruto’s administration, which is grappling with limited borrowing options and slowing economic growth. Efforts to raise taxes and secure concessional loans have met resistance, prompting the government to seek alternative funding sources.
Nardos Bekele-Thomas, CEO of AUDA-NEPAD
The African Union Development Agency-NEPAD (AUDA-NEPAD) has called on Kenya to harness its robust private sector to fund critical infrastructure projects such as airports, roads, and railways. The appeal comes amid mounting fiscal challenges and a growing debt burden, underscored by warnings from the International Monetary Fund (IMF).
Speaking recently, AUDA-NEPAD CEO Mrs. Nardos Bekele-Thomas emphasized the importance of innovative financing models, including blended finance and risk guarantees, to attract private investment. “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.
Bekele-Thomas noted that Africa faces an estimated $278 billion infrastructure funding gap by 2040, with many projects struggling to achieve bankability due to inadequate preparation and concerns about risk. She underscored that innovative mechanisms like risk guarantees could reduce perceived risks and encourage private capital engagement.
“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 explained.
Kenya’s fiscal constraints have intensified under President William Ruto’s administration, which is grappling with limited borrowing options and slowing economic growth. Efforts to raise taxes and secure concessional loans have met resistance, prompting the government to seek alternative funding sources.
To address these challenges, the National Treasury has proposed diversifying debt instruments by issuing Panda, Samurai, and Sukuk bonds in international markets while prioritizing concessional loans. Public-private partnerships (PPPs) are also being promoted as a viable solution to ease financial pressures and attract investment in large-scale infrastructure projects.
Local Ownership in PPPs
Bekele-Thomas stressed the importance of local participation in PPPs, noting that such partnerships must empower communities and include local businesses to ensure sustainable development. “Infrastructure must belong to the communities it serves. Public-private partnerships that include local businesses and empower communities unlock possibilities for genuine engagement and ongoing maintenance,” she said.
Kenya’s push for PPPs comes amid scrutiny of recent deals. President Ruto recently canceled a $2 billion agreement with India’s Adani Group to construct a second runway and upgrade facilities at Jomo Kenyatta International Airport. A separate $736 million PPP deal with Adani for power transmission lines was also terminated, following public concerns over transparency and value for money.
Experts have pointed out that the success of projects such as the expansion of Jomo Kenyatta International Airport and the Mombasa-Nairobi Standard Gauge Railway extension hinges on attracting private investment while ensuring proper risk mitigation and value for money.
As Kenya explores innovative financing avenues, AUDA-NEPAD’s call highlights the need for collaborative approaches involving both local and international stakeholders to drive infrastructure transformation while safeguarding public interest.
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