How Treasury's caution on PPP projects holds back mega investments

The National Treasury’s Public Private Partnership (PPP) Directorate is in the spotlight for stalled proposals of privately funded projects, resulting in failure to unlock billions of shillings of private sector capital for infrastructure projects and ensuring that Kenya continues to rely on debt to fund mega projects. 

Bidders have been forced to contend with cancellations of their proposals, some of which had gone through all the stages required by the procurement laws, only to be cancelled at the award stage. 

A source pointed us to more than a dozen tenders that were advertised over the 2025-26 financial year across different sectors.

The tenders moved through the steps prescribed by the procurement laws but  were cancelled at the last stage and restarted even as the PPP Directorate failed to communicate the reasons for the cancellation.  

“The tenders were across roads, power, data, irrigation and space technology. Not one was awarded. Not one contract signed. Not one financial close was achieved,” said the source. 

“The process runs its full course every time — tender advertised, technical evaluation, financial evaluation, formal award recommendation — then cancelled and restarted from scratch.”

“About 18 tenders, which were advertised last year, have stalled, collapsed or cancelled, and had been actively budgeted in Kenya’s 2025/26 national budget as live PPP projects. They have been presented to Parliament, to the public and to international partners as proof of a functioning infrastructure programme, but they are not functioning or progressing.”

The government has, over the last decade, tried to tap into private capital through PPP to build mega infrastructure.

The strategy is seen as critical as the government runs out of borrowing headroom and Kenyans resist the bid to tax them more to fund both recurrent and development budgets.

The National Treasury has repeatedly conceded that PPPs are among the viable options to the country’s budgetary constraints, away from debt and higher taxes. As Treasury champions private capital to fund projects, there is an emerging crack between the policy and delivery, with insiders citing major bottlenecks stifling the shift to private capital.  

This cycle appears to contradict the Public Procurement and Asset Disposal Act (PPADA), which states that if budget constraints arise after a bidder is selected, the law mandates price negotiations with the recommended bidder.

“Yet, across all 18 tenders, section 128 (of PPADA) negotiations were never once initiated. There was no legal justification given and no consequences faced,” said the source. 

The source noted that the scale and complexity of Kenya’s PPP projects—from transmission grids and highway concessions to large-scale irrigation schemes—mean that only a handful of the world’s largest advisory firms are capable of bidding. 

According to the source, by the time a bidder is recommended for award, firms have already invested millions of shillings in technical studies, legal work and financing arrangements, making it difficult to walk away if the procurement process takes a turn they believe is inconsistent with their compliance obligations. 

“Kenya’s PPP tenders demand a scope so vast that only the world’s most experienced global advisory firms can qualify,” the source said. “The more invested a firm is in the Kenya market, the harder it is to walk away when issues arise at the final stages of procurement. If the firm does not proceed, the tender is cancelled, the process restarts, and another international firm comes in.” 

The source further claimed that, in many instances, the recommended bidder is a globally recognised institution bound by strict international compliance standards, making it unwilling to depart from formal procurement rules.

According to the source, such tenders are then cancelled, often with budget constraints cited as the reason, before the procurement process begins afresh. 

While the source’s claims could not be independently verified, the concerns echo broader integrity of Kenya’s procurement system that have also been raised internationally. 

In its 2026 National Trade Estimate Report, the United States Trade Representative (USTR) identified procurement corruption in Kenya as a trade barrier, citing concerns over bribery, opaque tendering and political interference that it said disadvantage American firms subject to strict anti-corruption laws.  

In the report, USTR noted that corruption often influences the outcome of public tenders, and many of these tenders are challenged in the courts.

It noted, “the tenders are often not announced in a timely and transparent manner. Foreign firms, some without proven track records, have won government contracts when partnered with well-connected Kenyan firms or individuals”. 

The PPP Directorate defended the pace of the actualising public-private partnership projects, noting that they are inherently complex and require scrutiny to ensure taxpayers receive value for money while balancing investor returns and affordable user tariffs.  

The agency also rejected claims that bidders were not kept informed of procurement decisions. “There is dishonesty by any contractor who would say that they do not get communication. Whenever we make a decision, we communicate. All decisions are communicated to the contracting authority and to the bidders,” said the directorate’s Director General Kefa Seda. 

“We also make public disclosures on any decision that we make.” 

Seda said the government has established a multi-agency steering committee bringing together project implementers and policymakers to speed up approvals and address bottlenecks that have historically slowed project delivery. 

He added that the PPP Directorate is also taking a more hands-on role in structuring projects before they are taken to market, working closely with transaction advisers. 

“This way we have more control,” he said, referring to both the speed at which the project is actualised but also arguing that there have been many instances where privately initiated proposals have previously left the government “getting the short end of the stick.” 

According to Seda, delays can also stem from the need to ensure proposed user charges are fair, given that private investors must recover their capital and operating costs through project revenues such as tolling roads. 

He attributed some of the slower approvals to growing public scrutiny of PPP projects, saying the government has become more deliberate in engaging citizens and disclosing information throughout the procurement process, particularly. 

“We have learned from some of the missteps in the past,” he said. “That is why we have been making disclosures and consulting wananchi throughout the different stages.” Despite these assurances, several flagship PPP projects have struggled to move beyond the procurement stage. 

Among the projects that have failed to take off due to the back and forth between the PPP Directorate and contractors is the Mombasa-Nairobi Expressway.

The road, which has been in the making for more than a decade now, appeared to gather momentum in 2023 when it was given first-stage approval.

The project, which has been proposed by the US private equity firm Everstrong Capital, then proceeded to the project development and feasibility study phase, where the firm has been sent back to the drawing board several times. 

A fresh transaction advisor tender was launched in March this year. Sources say that major firms applied, but the process was never completed. Then KeNHA was directed to approach the World Bank, simply to fund the advisory budget, which has also not been completed. 

Another project is Lot 3 of the roads built and maintained under the road annuity programme. The roads – the Wajir–Habaswein–Samatar road (68km) and the Rhamu–Mandera road (75km) — under Lot 3 of the PPP annuity road programme have failed to take off for years.  

The annuity programme that was meant to deliver it collapsed without a single kilometre being completed. President William Ruto acknowledged the failure at a rally in Habaswein in May 2026, telling the people of Wajir that the road “had stalled under the annuity programme”.

He, however, promised, for the second time under his presidency, to revive it with World Bank support and personally come to launch it in August 2026.  

The multipurpose Kibuka Dam on Tana River has faced the same fate. The project, designed to generate between 500MW and 1,000MW of hydropower and bring 400,000 acres under irrigation, was terminated by the PPP Committee on July 2, 2025, after the feasibility study failed statutory requirements.  

A fresh Request For Proposal (RFP) was issued in March 2026 to hire a transaction advisor with a projected 20-month timeline to financial close.  

PPP projects in Kenya suffered a sluggish start, attracting only Sh10 billion over 10 years to June 2022, according to data by the PPP Directorate.

They have however, appeared to gather momentum, and the Directorate said private capital investments had cumulatively surged to Sh145 billion as of June 2025. 

Over the current financial year, Treasury has said PPPs will mobilise another Sh90 billion worth of private sector capital investments in PPP projects.

It expects to mobilise another Sh70 billion over the 2026-27 financial year.  

While still low relative to Kenya’s annual development budget of Sh800 billion and the government’s borrowing at over Sh1 trillion over the next financial year, the interest that Kenya has received from firms keen on pumping money into infrastructure indicates that PPPs have the potential to account for a significant proportion of the country’s required investments in development projects. 

However, Seda cautioned against viewing PPPs as a substitute for public investment, saying they are designed to complement government spending rather than replace it.

He argued that while private capital can help bridge Kenya’s infrastructure financing gap, the State will remain the primary financier of many development projects. 

Treasury Cabinet Secretary John Mbadi has described PPPs as a key pillar of the government’s infrastructure financing strategy, saying they will help mobilise private capital, innovation and technical expertise to bridge Kenya’s infrastructure funding gap while reducing pressure on public finances. 

“The scale of Kenya’s development ambitions demands that we leverage not only public resources but also the capital, innovation and expertise of the private sector,” said Mbadi when delivering his budget statement in Parliament mid-June. 

“PPPs have therefore become a central pillar of our development financing strategy. Beyond mobilising additional resources, PPPs enable the government to harness private sector innovation, technical expertise, operational efficiency, and risk-sharing arrangements that enhance project delivery while preserving fiscal sustainability.” 

He noted that among the projects that the government would focus on in the coming financial year include the Nairobi–Mombasa Expressway and the Mau Summit–Eldoret–Malaba Highway, the latter being an extension of the Rironi-Mau Summit Road.