The Government’s Role in Encouraging Public Private Partnerships in Kenya. Presented at World Services Group, African Regional Meeting 2011 held at Hotel Intercontinental, Nairobi, Kenya PRESENTED BY: ENG STANLEY K. KAMAU DIRECTOR/HEAD, PUBLIC PRIVATE PARTNERSHIP SECRETARIAT MINISTRY OF FINANCE/TREASURY Oct 28, 2011 WSP Regional Meeting 2011 1
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The Government’s Role in Encouraging...Oct 28, 2011 WSP Regional Meeting 2011 7 KENYA - INFRASTRUCCTURE INVESTMENTS 2011-2015 SECTOR AMOUNT IN USD MILLIONS 1Energy (power and others)
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The Government’s Role in Encouraging Public Private Partnerships in Kenya.
Presented at
World Services Group, African Regional Meeting 2011
held at Hotel Intercontinental, Nairobi, Kenya
PRESENTED BY: ENG STANLEY K. KAMAU
DIRECTOR/HEAD, PUBLIC PRIVATE PARTNERSHIP SECRETARIAT
MINISTRY OF FINANCE/TREASURY
Oct 28, 2011 WSP Regional Meeting 2011 1
STRUCTURE OF PRESENTATION
1. The PPP Concept
2. Factors of a Conducive PPP Market
PPP Projects
Financing for PPP
PPP Framework
3. Potential PPP Projects in Kenya
Oct 28, 2011 WSP Regional Meeting 2011 2
What is a PPP?
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Outsourcing
• Capitalisation is for the Government Account
• Government buys specific services but retains risk
• Fixed and movable assets typically belong to Government
Privatisation
• State assets sold
• State liabilities dispensed
• Government has Regulatory function only
PPPs
• Private Party:
• Finances (whole or most)
• Designs
• Builds
• Operates
• Government purchases complete service and/or enables business
• Fixed assets belong to Government
Degree of Risk Transfer
What is a PPP?
Oct 28, 2011 WSP Regional Meeting 2011 4
A formal agreement between Government
institution and a private party.
Private party performs a public function on
behalf of Govt. according to output specifications.
Substantial project risk (financial, technical,
operational) is transferred to the private party.
Government becomes purchaser/ enabler of
services.
Payment received by private party either:
▫ Fees from government budget
▫ User fees
▫ Some combination of government fees and user fees
Why PPPs? Increase infrastructure stock to promote social
and economic development.
Funding Gap – USD 47 Billion in 5-8 YRs
Efficiency and competitiveness
Fund outside budget (Debt: GDP Ratio = 45%)
Increase and expand business opportunity for private sector
GDP growth resulting in higher taxes for the country
Malaysia PPP Investments - USD 50 Billion
UK PPP Investments - ₤56 Billion
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KENYA - INFRASTRUCCTURE INVESTMENTS 2011-2015
SECTOR
AMOUNT IN USD
MILLIONS
1 Energy (power and others) 19,808
2 Ports 4,800
3 Roads 6,046
4 Water and sanitation 4,567
5 Railways 7,248
6 Airports 906
7 Tourism 2,050
8 ICT 7,850
9 Local Government 2,000
10 Housing 2,901
11 Public Works 1,000
12 Lamu Transport Corridor 3,723
TOTAL REQUIREMENTS 59,176
AVAILABLE FROM GOK (2011-2015) 15,000
FUNDING GAP 44,176
Sept 9, 2011 NESC meeting of Sept 2011 8
Key Requirements for PPPs Strong Government Support
Appropriate Regulatory Framework: clear, stable and detailed regulation
Well prepared projects
Stable, predictable and reliable revenues
Long-term investors (equity and debt) Positive business outlook: potential for growth, market driven environment, transparency
International market standards: contracts, financing structure, risk allocation, insurance
Creditworthiness of contractual counterparties
Risk – Return balance
Bankability
9 Oct 28, 2011 WSP Regional Meeting 2011
Factors of a conducive PPP market
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Finance
Framework
Projects
The projects
Oct 28, 2011 WSP Regional Meeting 2011 11
Projects
National planning (Vision 2030)
Sectoral planning (line Ministries)
Budget process Multi-year Medium Term
Expenditure Framework (MTEF)
Sector Working Groups (SWGs)
PPP Pipeline
List of Potential PPP Projects (Not prepared)
Financing available for PPPs
Oct 28, 2011 WSP Regional Meeting 2011 12
Equity is readily available Domestic private equity:
Development of Road, Rail, Airport, Refinery, Pipeline, Resort Cities (US$ 16 billion)
Potential PPP Projects ICT
Konza ICT City - located 60 km from Nairobi on a 5,000 acres of land; Estimated cost of US$ 7 billion - US$ 2.1 Billion for infrastructure and US$ 4.9 billion for real estate
National Data Centre Others i. Housing for public servants (Police - 50,000, Prison
Wardens – 16,000) ii. Hostels – Universities (KU – 5000 students) iii. Solid Waste Management -Nairobi, Mombasa, Nakuru iv. Off- Shore Oil Jetty/ Oil Storage facilities v. Uni-city -Kenyatta university vi. Health Facilities (Oxygen plants, vii. Conventional Centre in Mombasa viii.Lake Victoria Transport ix. Transit Hotel, JKIA, Kitchen, Hangers,