Thinking Big

Kenya has unveiled some bold proposals for new infrastructure investment. PPP Unit head Stanley Kamau tells Amanda Nicholls how they will be implemented

Stanley Kamau is nothing if not ambitious when it comes to Kenya’s plans for new investment.

“Kenya is the only place to be for PPP in Africa,” says the director of the PPP Unit within Kenya’s Ministry of Finance. “We have a legal framework in place, we have a pipeline and now we have prepared projects for market.”

And he is not interested in restricting Kenya’s plans in any way. “We are looking at all the sectors,” he adds.

Nonetheless, he recognises that the building blocks need to be put in place before the country can expand its infrastructure programme across all sectors. “For next year the sectors that are going to be most active and where we have done the most work preparing projects are transport and energy,” he explains.

This is perhaps no surprise: improving access to both energy and routes to market are the fundamentals for many parts of Africa, and can ensure that the country is able to improve its economic position before moving to other areas, such as social infrastructure.

Roads in particular are to be a major focus as 2016 begins. In November, it was announced that the European Commission is to fund a programme to provide institutional support to the Kenyan transport sector, including PPPs. The contract will provide support to the relevant stakeholders in the Kenyan transport sector, including the Ministry of Transport and Infrastructure, Nairobi City County and Kenyan road authorities.

Meanwhile, Kamau confirms that the country will tender five road projects over the course of 2016 – with a combined capital expenditure of $3bn. “The viability studies have been completed and we will be inviting bids in January,” he says.

But the transport programme is not simply focused on roads. “There is a project to develop one of our sea ports and we are also developing another port in Mombasa,” says Kamau. “We are also constructing a rail line with the Chinese government which is 40% completed. Once that is completed we will be looking at bringing in the private sector to operate it and bring in the rolling stock.”

Meanwhile, energy will also get an important boost, as part of a major programme of investment in the sector that has been taking place over recent years – and the private sector is at the heart of that initiative. Indeed, back in March, Kamau said energy was at the centre of the government’s efforts to bridge its infrastructure gap.

“We are planning by next year to have generated 3,000MW of power,” says Kamau. “The government has already made a policy that generation of power in Kenya has to be done by the private sector.”

Across Africa, energy projects have tended to be the most successful schemes, largely through independent power purchaser (IPP) agreements, which some have argued can be a platform for the development of PPP initiatives.

Kenya, however, is looking at taking this to the next level. “We have already awarded contracts worth more than 1,200MW,” says Kamau. “In the renewable energy sector we have already received three proposals for around 1,216MW so that is what we are currently assessing.”

Many of these projects, says Kamau, are “quite small contracts for wind and solar”, rather than being a handful of large deals. It means that local players can get involved. “We have a lot of interest in the domestic market because some of them are small projects,” he explains.

However, with so much going on, there remains the threat that the Kenyan market could quite quickly overheat, finding itself with too many projects and not enough bidders. Kamau is aware of this challenge.

“The [road] deals are ready to tender,” he explains, but they will be staggered throughout 2016 rather than all issued together, with the first wave to be issued early in the new year.

Even so, he and the Kenyan government are keen to make sure the country stands out as an investment destination, so need to tread a fine line between overheating the market and not getting enough projects out there to tempt investors in the first place.

This is where Kamau will be vital to the Kenyan cause. A registered engineer with the Engineers Registration Board of Kenya, Kamau has spent his career in the public sector looking to develop the country’s infrastructure in a variety of sectors. This made him the ideal candidate to set up and run the PPP Unit when it was launched in 2010. Since then, he has worked to first of all set up the new unit and then coordinate and assess  PPP deals.

Kamau has over two decades of experience in infrastructure development and management having previously worked across a wide range of sectors in Kenya, including in a number of government positions covering water and sanitation, local government and road  and transport.

He is confident not only in his own experience, however. Kamau points to a long association with the PPP model in Kenya, which long pre-dates the creation of the PPP Unit. “We have done PPPs since 1996, we have a contractual framework that people understand,” he says.

While he admits that not all its experiences with PPPs have been successful, Kamau is confident that the country has learnt from the past and is now free from those shackles, and is able to move forward with its procurements by taking the experience of best practices from around the world.

It has clearly borne fruit. Interest in the country continues to grow from organisations outside Africa. Kamau also points to the fact that ratings agency Standard & Poor’s gives the country a rating of B+ stable, while its economy is expected to expand by up to 7% over the course of 2015. Moreover, that pace of growth is anticipated to continue over the medium-term, giving investors plenty of opportunities.

And while the energy market may be small enough for local organisations, that cannot be said of the country’s transport plans. As it looks to serve a population of nearly 46 million people, and ensure the conditions are in place for the economy to continue its expansion, its planned transport deals will be critical.

“For the transport projects there is a lot of interest from Europe,” says Kamau, “mainly the UK and Spain”. He adds that there is little interest from other parts of Africa, with the exception of South Africa, perhaps because of the scale of the programme.

The US is also taking a growing interest in the opportunities that are now crystallising in Kenya.

“Kenya is leading the way for energy projects in Africa and we have a lot of interest from US companies who are looking to mobilise their money in the region,” he says. “We have wind and solar projects where the US companies are involved.”

A blend of investors from different continents could also become one way of ensuring the money gets to Kenya’s ambitious pipeline. “[US investors] have already got involved in a power project which is 300MW of power in wind and we have some debt coming from Europe,” says Kamau, describing the scheme in question as a “big project”.

For 2016, big projects look like being Kenya’s main currency.