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DR DANIEL MUTEGI GITI:Public Private Partnerships provide the most plausible alternative to our National and County Developments

The government is implementing the Bottom-Up Economic Transformation Agenda (BETA), which is pegged on the economic transformation of the people at the bottom of the pyramid
The then Deputy President Dr William Ruto speaks during the launch of Kenya Kwanza manifesto at Kasarani stadium on June 30, 2022. Part of his Presidential victory was anchored on Bottom Up economic model.DPPS/File

The effective implementation of the key pillars of the Bottom-Up Economic Transformation agenda namely- Agriculture, Micro-Small and Medium Enterprise (MSME) economy, Housing and Settlement, Healthcare and Digital Superhighway and Creative Economy, on one side and the nine value chains including leather, cotton, dairy, tea, rice, blue economy, natural resources and building materials, which are aligned with the Vision 2030 development blueprint and pillars, will transform the living conditions of Kenyans.

The key sectors touch on the livelihoods of Kenyans in many ways. Agriculture is our economic mainstay, and generates 20 percent of our GDP, employing over 40 percent of the total population and over 70 percent of the rural population. The Micro-Small and Medium Enterprise (MSME) economy on the other hand employs 14.9 million Kenyans (6.28 million licensed and 8.62 million unlicensed). The sector has the potential for generating more employment and revenue generation under the right conditions. Thirdly, housing and settlement which is intended to lead to the creation of over 250,000 affordable, accessible, adequate and quality housing units per year in a clean and secure environment, will provide the necessary incentives for national economic growth and development. 

Housing has forward and backward linkages with many sectors of the economy including industry, manufacturing, labour, technical and training institutes among others. 

Fourthly, Healthcare – more so preventive health will ensure that the workforce is available for many working hours to perform various national building activities, including great reduction on households’ expenditure on health.

The fifth agenda of Digital Superhighway and Creative Economy-the government has prioritized reinvigoration of the role of the arts, sports and culture in national economic growth. Digital economy is an enabler upon which innovative and disruptive transformative economy is based.

The financing needed to operationalize these key sectors and the entire Plan of the government cannot come from the normal public sector financing. The Nation has to turn to the greater application of Public Private Partnerships (PPPs) to support various programmes and projects. PPPs imply the close working together of the public and private players through well-defined structures and models as enumerated in the PPP Act 2021. PPPs have been used globally since 381 BC when the independent city state of Eretria (Greece) contracted a private contractor, Chairephanes to drain a lake. The discovery of the Americas, the colonialization of the world, the railway and steam engine building, the canals and turnpikes and the agrarian and industrial revolution are all examples of successful PPPs, which involved more of the private players than public sector players.

The Imperial British East Africa Company (IBEA.Co) which was a precursor to the advent of colonial rule in Kenya was privately owned hence a PPP project.

There are several reasons for use of PPPs. First, globally, the public pulse has been declining, while the demand for infrastructure and services has been increasing due to rapid rate of urbanization, high population growth rates and increased poverty levels. For example, infrastructure financing in Kenya requires over US$ 40 billion per year in the next 10 years for infrastructural development, of which only 15 billion is available, leaving an annual infrastructural financing deficit of US$ 25 billion. Such deficits in infrastructure financing can only be addressed through PPPs.

Secondly, well-structured PPPs have the potential to avail innovative finance, technology, managerial expertise, efficiency and effectiveness in the development process. PPPs models reduce operation & maintenance costs (O&M), which consumes huge government finances through the concept of whole life cycle of project, where the developer factors in the O& M during the bidding, design, financing, constructing and operating a project.

Thirdly, PPP projects are designed as per the agreed specification, outputs and deliverables, involving a lot of participation by all stakeholders throughout the project cycle. Focus is on the functionality of finished product/ outputs than inputs, which leads to cost reductions and huge savings.

Fourthly, the involvement of the private sector who possess superior technology and innovation in project delivery, reduces additional expenses as well as improving the life of a project, which eliminates the need for constant development of infrastructure assets.

Fifthly, Kenya has the unutilized private capital potential as found in the private equity firms, insurance firms, Cooperatives and Saccos, high net worth individuals and other private players, who have massive resources for participation in PPPs. This is backed by the greater appreciation of user pays principles as result of a growing middle class and as evidenced by the greater utilization of the PPP built Nairobi expressway.

Sixth, PPP is not a debt as critics have been pointing at. It is off-balance sheet project financing method, where the state doesn’t incur any financial implications. The public is only obligated to provide an enabling environment like laws and regulations which Kenya has enacted, constant monitoring and evaluation and setting of standards and specifications, which the government is best placed to undertake.

 Seventh, the private entity returns the asset developed through PPP to the public once they recoup their investments and such surrender is made when the asset is well operated and maintained.

OPINION By Dr. Mutegi Giti, Urban Management, Public Private Partnerships (PPPs) & Environment Specialist., 
Twitter: @DanielGiti.

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