Says the Sh340bn fund will be on a strict commercial principle National Treasury CS John Mbadi and Centum Investment chief executive officer James Mworia when they appeared before the Finance and National Planning Committee on August 20 /Douglas Okiddy State projects with no commercial viability will be locked out of the National Infrastructure Fund (NIF), with the Treasury setting strict investment tests.
The National Treasury is designing the Sh340 billion fund around a strict commercial principle, where capital must be preserved, investments must generate income and projects must be capable of attracting private money. According to Cabinet Secretary John Mbadi, " politically attractive" projects, or those with strong social benefits but weak financial returns, will not automatically qualify for NIF financing.
“A project may be socially important, but if it is not commercially viable, it is not a candidate for NIF,” Mbadi told the finance and planning committee. He warned that allowing non-viable projects into the fund would undermine its sustainability and expose public capital to unnecessary losses.
This means that projects deemed not profitable in the short and medium term will continue relying on the Exchequer for funding. The hardline position comes as the government moves to operationalise the NIF, which will be seeded with proceeds from the privatisation and divestiture of State assets and is expected to become a major new vehicle for financing infrastructure outside the conventional national budget.
But while the Jomo Kenyatta International Airport (JKIA) upgrade has emerged as the first major project seeking NIF backing, questions remain over how much the fund will ultimately commit, who the other investors will be and whether the airport project will pass the same commercial tests being imposed on all other projects.
Mbadi told lawmakers that social importance alone will not be enough to unlock money from the fund. Instead, the Treasury argues that commercially viable projects financed through the fund will free up budget resources for roads, schools, hospitals and other projects with high social returns but limited ability to generate direct financial returns.