Infrastructure, Transport, PPPs and Construction

HIGHLIGHTS
In 2025, the following are likely to be the major trends and developments in the infrastructure, transport, PPPs and Construction industry:

• The principles of transparency, accountability and public participation will feature prominently in the structuring of PPPs in 2025 following the cancellation of two key PPP projects in 2024 to be implemented by the Adani conglomerate.
• PPPs still remain a solution to infrastructure development in Kenya owing to the country’s tight fiscal space.
• More private sector investment in water sector PPPs will be witnessed following the enactment of the Water (Amendment) Act, 2024 that empowers the National Water Harvesting and Storage Authority and Water Works Development Agencies to enter into PPPs
• The property rating system will be more streamlined following the enactment of the National Rating Act 2024.
• Increased awareness and adherence to the National Building Code 2024 will enhance the safety and quality of constructions.

1. PPP Governance Challenges in 2024

In 2024, two key PPP projects which the government was considering for implementation by the Indian conglomerate, Adani Group, were cancelled. One of the PPP projects was for the expansion of JKIA under a 30- year lease and the other was a deal with the Kenya Electricity Transmission Company (KETRACO) for building and operation of power infrastructure, including transmission lines.

The deals cancellations followed the indictment of the Chairman of Adani Group before a New York Court for his role in an alleged multibillion-dollar bribery and fraud scheme. Furthermore, the deals were shrouded in secrecy leading to public resistance. The JKIA deal in particular had sparked public outrage with the Law Society of Kenya (LSK) and the Kenya Human Rights Commission challenging the same in court on the basis of unaffordability, threats of jobs losses and lack of value for money.

In a state of the Nation address in late 2024, the President ordered the cancellation of the two deals citing credible information on corruption and the need to promote transparency and accountability.

Key Implications

• For PPPs structuring in 2025, one key lesson from the cancelled PPP projects with the Adani Group, is the need to conduct thorough public participation to educate citizens. This will enhance legitimacy and promote widespread acceptance of PPP projects.
• The principles of transparency and accountability enshrined in the Constitution of Kenya 2010, should also be adhered to. PPP should not be shrouded in secrecy as was the case with the Adani deals but the public should be provided with information and the chance to meaningfully engage.

2. PPPs- a Solution to Infrastructure Development

Despite the cancellation of two key PPP deals in 2024, the Government still views PPPs as a solution to infrastructure development in the Kenya owing to the country’s tight fiscal space.

Appearing before National Assembly’s Public Accounts Committee (PAC), following the cancellation of the Adani deals, the Principal Secretary for National Treasury intimated that the country’s fiscal position is untenable, making it impractical to finance key infrastructure projects like the upgrading and modernization of JKIA through the national budget. As per the 3rd Annual Report on the State of PPPs in Kenya 2023/2024, published in June 2024, the PPP projects pipeline comprises 37 projects.

Key Implications

• Despite the challenges of PPP structuring in 2024, leading to the cancellation of two key projects, there is a likelihood for rebound of PPPs in 2025. Kenya’s tight fiscal budget cannot allow the country to fund key infrastructure projects from the national budget and therefore recourse will still be had to partnerships with private parties to mitigate fiscal constraints.
• Notably, under the 4th Medium Term Plan (2023-2027), the government identified delivery of projects through PPP arrangements as a strategy to address Kenya’s infrastructural gap and mitigate fiscal constraints. Therefore, PPPs will remain a solution for the country’s infrastructure development even in 2025.

3. Water sector PPPs: The Water (Amendment) Act, 2024

On 4th December 2024, the Water (Amendment) Bill (National Assembly Bill No. 33 of 2023) was enacted and entered into force twenty days later. The Amendment law introduces provisions to facilitate PPPs in water service delivery. It empowers the National Water Harvesting and Storage Authority and Water Works Development Agencies to engage in bulk water purchase agreements with investors under the Public-Private Partnerships Act.

Key Implications

• The Water (Amendment) Act 2024 is likely to promote private investment in the water sector through PPPs in 2025. This will enhance access to bulk water services and ensure greater economic efficiency by leveraging private sector investment.

4. Implementation of new National Rating Act 2024 (to come into force in March 2025)

In December 2024, the President signed the National Rating Bill (National Assembly Bill No. 55 of 2022) into law. The new National Rating Act establishes a streamlined framework for property rating system for county governments. It also provides a more efficient, transparent and equitable framework for property valuation, taxation and management.

Some of the key objectives of the Act include the standardization of property valuations across the Country; introduction of a Property Taxation Reform; establishment of a centralized rating system; digitalization of Property records; establishment of appeal mechanism system; enhanced Local Authority involvement in property assessments and Exemptions (Agricultural lands are excluded from the implementation of the Act).

The Act replaces the Rating Act and the Valuation for Rating Act which were deemed outdated. It also establishes the Office of the Chief Government Valuer to oversee valuation processes nationwide and provide expert advisory services and enables formation of the National Rating Tribunal, comprising up to 15 members, to resolve disputes related to property valuation and rating.

Key Implications
• Accurate Taxation: The system would ensure that property owners with similar value of their property pay similar taxes without over taxation or under taxation.

• Increased Transparency: A clear, consistent rating system with accessible information would reduce confusion and increase confidence in the property tax system.

• Introduction of an appeal mechanism system: This gives room to property owners to appeal against their taxation if there are any discrepancies or errors.

• Improved efficiency: The streamlined taxation process which has been enhanced by the use of technology will be ensure there is proper tax valuation which are accessible by property owners.

5. The National Building Code 2024

The construction industry underwent significant changes in 2024 with the introduction of a new National Building Code to replace the 1968 Building Code. The 2024 Code is a comprehensive set of guidelines and regulations aimed at improving the safety, sustainability, and quality of buildings in the country. The purpose of this Code is to promote order and safety in constructions works and safety of persons in or about construction works to ensure they meet national standards for safety, accessibility, and environmental considerations.

The Code is however not be applicable to the construction and maintenance of a single storey residential building occupied by the owner and constructed by locally available materials whose design is influenced by culture and traditions of the locality of the building.

Key Implications

At the beginning of 2025, the National Construction Authority launched sensitization programs to popularize the code. Increased adherence to the Code in 2025 is likely to have the following implications:

• Enhanced Safety and Quality of Constructions: The Code is keen on ensuring that the safety of all persons in or about the construction sites is guaranteed by adhering to the stipulated guidelines in the Code. Notably, the preparation of the design and supervision of the works in a building are only to be undertaken by a professional thus ensuring the service rendered is of quality value.
• Increased sustainability and Environmental Protection: The Code emphasizes on obtaining an environmental impact assessment licence before kickstarting the construction works. The Code also encourages energy-efficient practices, the use of sustainable materials, and green building techniques to reduce the environmental impact of construction. This includes provisions for water conservation, waste management and energy efficiency.
• Improved Accessibility and Inclusivity: The Code emphasizes on designing buildings that are accessible to all individuals, including those with disabilities. This includes guidelines for ramps, door widths, elevators, and other features that ensure inclusivity.

Disclaimer:

The information provided in this article is intended for informational purposes only and should not be construed as legal advice. Don’t hesitate to get in touch with us at info@koassociates.co.ke for any queries or legal advice.