Private investors seeking to partner with the government in Kenya’s new wave of mega projects will be required to shoulder the bulk of the financial risks.
The National Treasury told MPs that under the upcoming privatisation and public-private partnership (PPP) programme, the State is determined to limit its exposure to costly liabilities that could pile pressure on public finances.
Appearing before the National Assembly’s Finance and Planning Committee on Tuesday, Director at the Public Private Partnerships Directorate Christine Ng’ang’a said risk allocation is now a central condition before any project is approved.
She was responding to questions from Committee Chairperson Kimani Kuria, who sought clarity on how the Treasury is handling risk allocation, contingent liabilities and project financing.
Ng’ang’a told the lawmakers that the government will not greenlight a PPP project unless it is satisfied that most of the risk has been shifted to the private partner.
“Before any project is approved, one of the key areas we assess is how much risk can be shifted to the private party. We put several measures in place to minimise government exposure,” she said.
She added that while the government may still carry part of the risk, the intention is to avoid excessive financial exposure, especially as Kenya prepares to privatise or concession major national assets.
Under the PPP model, private firms finance, build and sometimes operate public projects such as roads, ports, dams and power plants, then recover their investment over time through user fees or government payments. Kenya has previously used the model for projects such as the Nairobi Expressway and independent power producers in the energy sector.
New framework to cap liabilities
To tighten oversight, the Treasury is developing a stronger contingent liability framework. This includes setting caps in advance on how much risk the government can take on from any single project. Contingent liabilities arise when the State guarantees certain payments or revenue levels to investors if projects underperform.
Samuel Onyango, Head of Finance and Administration at the PPP Directorate, said Kenya is benchmarking its framework against countries like Peru and the Philippines, which have established systems for managing PPP risks.
“In regard to our contingent liabilities management, we have a process that we coordinate with the Public Debt Management Office. Once we have a project that has gone through a negotiation and has been executed in agreement, there is a quantification based on the final agreement of what the contingent liabilities would be,” said Onyango.
“That number is then adopted by the Public Debt Management Office, which reviews and tracks it, and they monitor.”
Treasury is targeting at least Ksh80 billion in private financing between 2026 and 2027 through its PPP pipeline.
Among the flagship projects lined up for concession is the redevelopment of the Port of Mombasa and Lamu Port. The Lamu Port project is part of the larger LAPSSET corridor linking Kenya to Ethiopia and South Sudan. The plan is to package Lamu Port with the Lamu Special Economic Zone to boost trade and logistics along the northern corridor.
In the energy and water sectors, the proposed Hydran/Buka Falls project in Kitui County is expected to generate 700 megawatts of power and irrigate more than 500,000 acres of land once complete. Other dam projects in the pipeline include Maragor, Sabaki and Njoro Kupa.
Treasury is also preparing a new phase of the national electricity transmission lines programme after last year’s deal with Africa50 to finance and develop key power lines. At least 13 new transmission lines are targeted under the next phase.
Major road upgrades are also planned under the PPP model, including the Nairobi–Marsabit corridor and the Losamis–Malaba route, which are seen as key trade links within the region.
Other projects earmarked for private investment include a 2,000–4,000-unit prison housing scheme, the Tana Delta Irrigation Project, expansion of the government data centre and feasibility studies for a proposed national satellite launch facility.
PPP-backed teaching and referral hospitals, as well as several geothermal projects in the Rift Valley, are also expected to go to market in the coming months.
However, Ng’ang’a admitted that not all projects are commercially attractive on their own.
She noted that dams and other large water projects are critical for food security and flood control but do not generate enough direct revenue to sustain private investment.
As a result, the government will still be required to inject capital or provide structured support to make such projects bankable.
The new approach signals a tougher stance by the Treasury as it seeks to attract private capital while keeping Kenya’s public debt and hidden liabilities under control.
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