KENYA: Strategic Business Plan for Operationalizing the Viability Gap Funding and Contingent Liabilities Windows of the PPP Project Facilitation Fund
Kenya aims to transform its infrastructure landscape by 2030 as outlined in its Vision 2030 development plan. PPPs are a key mechanism for closing the estimated $2.1 billion annual infrastructure financing gap. To strengthen PPPs in Kenya, the World Bank has provided assistance to Kenya’s PPP Directorate through its Infrastructure Finance and Public-Private Partnership Project. PPIAF has contributed by supporting the government’s institutional and technical capabilities through technical assistance.
Recent progress includes establishing the PPP Project Facilitation Fund (PFF) under the 2021 PPP Act to support the preparation and implementation of PPP projects in Kenya. The PFF contains two windows—the viability gap funding (VGF), which helps bridge the financing gap between the cost of PPP projects and the expected return by the private sector, and the contingent liabilities (CL) window to manage contingent liabilities that may emerge from PPP projects. The government expressed its commitment to fully operationalize the PFF.
PPIAF is providing targeted support by reviewing relevant PPP laws and regulations and consulting with stakeholders such as the National Treasury, the Public Debt Management Office, and contracting authorities. The aim is to understand VGF and CL expectations and align with international best practices. Additionally, PPIAF is supporting the Kenya PPP Unit in disclosing climate-related risks to develop the final strategic business plans for each window.
The outcome will be strategic business plans enabling the PPP Directorate to operationalize the VGF and CL windows of the PFF. This will allow the effective allocation of resources for the specific purposes of VGF and CL. Operationalizing the funding windows will also boost private investment confidence and participation through proactive disclosure of climate risks.
PPIAF’s assistance builds on years of collaboration with Kenya’s PPP Directorate to establish robust capabilities and sound regulatory frameworks. Its support of strategic planning and climate integration will activate and optimize these instruments.
With targeted expertise in operationalizing innovative PPP financing tools, PPIAF’s work is providing Kenya with the building blocks it needs for sustainable infrastructure development. Mobilizing private investment through PPPs will be crucial for Kenya to deliver Vision 2030. Operationalizing the VGF and CL windows of the PPP PFF is crucial for enhancing access to improved infrastructure services. This is particularly important for the increasing number of social sector PPP proposals, such as student accommodation, water treatment, and waste management, which have risk/return profiles less attractive to private investors.