Public Private Partnerships in Kenya: Legal Guide, Key Cases & Strategic Insights

Table of Contents

1. What is a Public-Private Partnership (PPP) in Kenya

   
   

2. Legal & Regulatory Framework Governing PPPs

   
   

3. Recent Legislative Developments & Amendments

   
   

4. Major Recent PPP Cases & Judicial Decisions

   
   

5. Key Projects and Pipeline as of FY 2025/26

   
   

6. Benefits of PPPs: Why Kenya Chooses this Model

   
   

7. Key Steps in Structuring & Implementing PPPs

   
   

8. Challenges & How Kenya is Mitigating Them

   
   

9. Strategic Trends and Future Outlook

   
   

10. Conclusion

    
    

11. Frequently Asked Questions (FAQ)

1 What is a Public-Private Partnership (PPP) in Kenya

1. PPPs are legal contractual arrangements between a public authority and private entities to deliver infrastructure or services that have traditionally been the responsibility of government.

   
   

2. Under PPPs private partners may finance, design, build, operate, or maintain (or combinations of these) public assets or services; sometimes ownership transfers back at end of term.

   
   

3. PPPs aim to harness private sector efficiency, innovation, investment and risk management, to deliver public services or infrastructure on terms that protect public interest.

2 Legal & Regulatory Framework Governing PPPs

1. The Public Private Partnerships Act, 2021 is Kenya’s core law for PPPs. It sets out requirements for project identification, procurement, approval, risk-allocation, contract execution, accountability.

   
   

2. The PPP Act requires that PPP projects receive approvals by the PPP Committee of the National Treasury, go through rigorous Project Development Phases (PDPs), and meet criteria for value for money, feasibility, environmental/tariff/social considerations.

   
   

3. Other relevant laws include public procurement law, environmental laws, water laws, constitutional provisions concerning public participation and Parliamentary oversight.

   
   

4. Regulatory bodies involved include the PPP Directorate under National Treasury, Public Procurement Regulatory Authority (PPRA), sector regulators (e.g. for water, energy, transport), and oversight institutions such as the Office of the Auditor General.

3 Recent Legislative Developments & Amendments

1. Water (Amendment) Act, 2024: The Water Amendment Bill became law to facilitate PPPs in water service delivery. Under this amendment, the National Water Harvesting and Storage Authority and Water Works Development Agencies can engage in bulk water purchase agreements with investors under PPP Act. It also empowers relevant bodies to set and approve water/sewerage tariffs in line with consumer protection standards.

   
   

2. Mobilizing Domestic Capital Committee: In early 2025 the National Treasury established a Committee of Experts to explore ways to mobilize long-term capital from local financial markets to fund PPP projects. The final report (May 2025) recommended reforms and mechanisms such as a PPP Implementation Trust Fund to pool domestic savings/investments.

   
   

3. Infrastructure & Sovereign Wealth Funds: As of October 2025, the President announced setting up of a sovereign wealth fund and a dedicated infrastructure fund to support key sectors without overreliance on debt. These will complement PPPs as financing vehicles.

4 Major Recent PPP Cases & Judicial Decisions

1. Katiba Institute v National Assembly & 4 others; Ministry of Roads and Transport & 4 others (Interested Parties) (Petition E626 of 2024) [2025] KEHC 6358 (KLR) (Constitutional and Human Rights) (22 May 2025) (Ruling): Court challenged constitutionality of certain sections of the PPP Act, 2021 that confer ultimate authority for approving PPP concession agreements to the Executive without meaningful Parliamentary oversight. The petition addresses especially projects like the transmission lines with Adani Energy.

   
   

2. Adani-KETRACO Power Transmission Deal Suspended: A proposed $736 million deal between Kenya Electrical Transmission Company (KETRACO) and Adani Energy Solutions was suspended by High Court due to concerns over transparency, public participation, and constitutional compliance under PPP law.

   
   

3. Cancellation of Nairobi-Mombasa Expressway PPP Proposal (2025): The government terminated the KSh468 billion expressway proposal after its feasibility report failed to meet criteria under the PPP Act. The PPP Committee decided to restructure instead existing A8 highway.

   
   

4. Public Concern & Parliamentary Scrutiny: Recent debates including speculations about staged congestion on Nairobi-Nakuru highway to justify PPP toll projects have led to public statements by PPP Directorate clarifying that PPP projects follow strict assessments and that user charges must pass affordability and regulatory tests.

5 Key Projects and Pipeline as of FY 2025/26

1. The National Treasury targets KSh 293.6 billion through PPP projects in FY 2025/26 to reduce domestic borrowing.

   
   

2. There are about 37 PPP projects in Kenya: 5 operational valued at ~KSh 123.1 billion, 8 under implementation, and 29 in the pipeline.

   
   

3. Notable in pipeline:

   
   

   • University of Nairobi Purpose-Built Student Accommodation: ~4,000 hostel beds, 30-year DBFOT model, feasibility approved February 2025, procurement expected early FY 2025/26.

     
     

   • Galana-Kulalu Food Security Project: ~KSh 12.5 billion, to bring 20,000 acres under production annually, commercial close December 2024, financial close pending.

     
     

   • Smart Driving Licences Project: ~KSh 45 billion contract over 21 years, under negotiation; this is part of National Transport and Safety Authority projects.

     
     

   • Quantum / Menengai Geothermal Plant (35MW): A greenfield energy PPP, construction began Feb 2024, valued ~KSh 15.2B.

     
     

4. Projects halted or restructured:

   
   

   • Nairobi-Mombasa Expressway, as above.

     
     

   • High Grand Falls Dam hydroelectric project was terminated in July 2025 after failing to meet PPP criteria under the Act.

     
     

5. Affordable housing:

   
   

   • Athi River Affordable Housing: Govt seeks about KSh 9.2B private investment to build 2,320 units in first phase.

     
     

6 Benefits of PPPs: Why Kenya Chooses this Model

1. Access to Alternative Financing: PPPs help reduce pressure on government borrowing by attracting private capital, local and foreign.

   
   

2. Risk Transfer & Sharing: Many project risks (construction, operations, demand) are borne by private partners, reducing public burden.

   
   

3. Efficiency, Innovation & Accountability: Private sector tends to introduce better project management, technology, maintenance etc.

   
   

4. Faster Project Delivery: When well structured, PPPs can accelerate timelines compared to purely public projects.

   
   

5. Value for Money: Through competitive procurement, transparent evaluation criteria, and performance metrics.

   
   

6. Improved Service Quality & Sustainability: Maintenance, continuity, operations often better under PPPs due to long-term contracts and accountability.

7 Key Steps in Structuring & Implementing PPPs

1. Project Identification & Screening

   
   

   • Identify infrastructure or service gaps aligned with national vision (Vision 2030, Big 4 Agenda etc.)

     
     

   • Initial screening: sector, demand, risk, financial feasibility, socio-environmental impact.

     
     

2. Feasibility & Project Development Phase (PDP)

   
   

   • Detailed feasibility studies including technical, financial, environmental and social.

     
     

   • Drafting of risk allocation, revenue streams, user tariffs if any, operation & maintenance requirements.

     
     

3. Procurement & Competitive Bidding

   
   

   • Transparent RFPs, allowing qualified private entities to bid.

     
     

   • Evaluation of value for money, capacity, track record, cost, risk sharing.

     
     

4. Contract Negotiation & Approval

   
   

   • Negotiation of key terms: duration, payment model, performance indicators, penalties, exit strategy, transfer.

     
     

   • Approval by PPP Committee; sometimes oversight by Parliament or affected stakeholders.

     
     

5. Financial Closing & Mobilization

   
   

   • Secure financing (equity, debt, local capital markets, blended finance).

     
     

   • For many projects Kenya is exploring use of local capital markets as per the Domestic Capital Mobilization Committee.

     
     

6. Implementation & Monitoring

   
   

   • Build / operate / maintain as per contract.

     
     

   • Ongoing monitoring: compliance, audits, performance, public accountability.

     
     

7. Termination, Transfer or Handback

   
   

   • At end of concession or PPP term, hand over to public sector or follow agreed exit strategy.

     
     

   • Ensure facility meets minimum standard.

8 Challenges & How Kenya is Mitigating Them

1. Regulatory & Legal Risks

   
   

   • Challenges: ambiguity in law, constitutional challenges (e.g. oversight, public participation), delays in approvals.

     
     

   • Mitigation: recent judicial rulings (Katiba Institute case), improved law amendments (Water Act), clearer criteria in PPP Act.

     
     

2. Financial Risks

   
   

   • Cost overruns, currency risk, revenue underperformance, financing availability.

     
     

   • Mitigation: better feasibility studies, risk sharing, blended finance, mobilizing domestic capital, infrastructure fund.

     
     

3. Capacity of Public Sector

   
   

   • Insufficient experience in preparing bankable PPP projects.

     
     

   • Mitigation: technical assistance units (PPP Directorate), committee of experts, skills building, using reputable consultants.

     
     

4. Stakeholder & Public Trust

   
   

   • Public concern over transparency, tolls/user charges, environmental/social impact.

     
     

   • Mitigation: public participation requirements under PPP Act, judicial oversight, transparency in procurement, clearer tariff regulation.

     
     

5. Affordability & Social Considerations

   
   

   • Ensuring services remain affordable; avoiding creating burdens (e.g. tolls) for lower-income citizens.

     
     

   • Mitigation: tariff regulation, social impact assessments, government subsidies or guarantees where necessary.

9 Strategic Trends and Future Outlook

1. Increased Use of Domestic Capital

   
   

   Kenya is pushing to mobilize more funds from its own financial markets to reduce foreign debt exposure and improve sustainability of PPP financing.

   
   

2. Sector Expansion Beyond Transport & Energy

   
   

   New PPPs in water, housing (affordable housing), food security, health facilities, digital infrastructure. Water PPP-friendly law, housing project in Athi River.

   
   

3. Stricter Enforcement of PPP Criteria & Legal Scrutiny

   
   

   More projects are being evaluated and cancelled if they fail lawful criteria (Nairobi-Mombasa Expressway, High Grand Falls Dam). Courts and civil society increasingly active.

   
   

4. Innovation in Financing Models

   
   

   Use of blended finance, PPP trust funds, infrastructure fund, sovereign wealth fund, involvement of pension funds etc.

   
   

5. Improved Institutional Coordination and Transparency

   
   

   Stronger role of PPP Directorate, clearer guidelines, stakeholder participation, public communication (e.g. statements rebutting misconceptions, regulatory clarifications).

10 Conclusion

1. PPPs are an essential tool for Kenya in meeting its infrastructure and service delivery goals while managing fiscal constraints.

   
   

2. Legal reforms, recent case law, new laws (e.g. water law), and institutional mechanisms are improving the reliability and attractiveness of PPPs.

   
   

3. Investors and stakeholders should ensure full compliance with PPP Act requirements, focus on feasibility, risk allocation, stakeholder involvement, and value for money.

   
   

4. Continued vigilance over transparency, public participation, affordability and regulatory adherence will be key for PPPs to deliver their promise.

11 Frequently Asked Questions (FAQ)

Q1: Is Kenya’s PPP Act constitutional?

A: The PPP Act, 2021 has been the subject of judicial review. The Katiba Institute petition challenges parts of it for insufficient parliamentary oversight over PPP concession approval. Courts are currently weighing in on those sections.

Q2: Can foreign companies participate in PPPs in Kenya?

A: Yes. Provided they meet procurement and regulatory requirements, including technical capacity, financial capacity, and compliance with Kenyan law.

Q3: How are user charges or tariffs regulated in PPPs?

A: Tariffs or user charges must comply with sectoral regulations, be part of feasibility and financial modeling, and meet affordability and consumer protection standards.

Q4: How are projects financed?

A: Financing may come from equity, debt, blended finance, local capital markets, sovereign or infrastructure funds, development partners. Recent law reforms focus on mobilizing domestic capital.

Q5: What happens if a proposed PPP does not meet criteria under the law?

A: The PPP Committee (National Treasury) can terminate or reject such proposals. Courts also provide oversight. Projects such as Nairobi-Mombasa Expressway have been cancelled for failing evaluation.

Q6: How long do PPP contracts typically last in Kenya?

A: Durations vary depending on the sector and model (e.g. DBFOT, BOT, etc.), often from 15 to 30 years.

Q7: Are there risks that PPPs lead to higher costs for citizens?

A: Yes, particularly via tolls or user fees. But Kenyan law requires mechanisms to ensure value for money, social impact assessments, and public participation.

Q8: What are some flagship PPP opportunities now?

A: Projects in affordable housing, water supply, food security land use, student housing, energy (geothermal, transmission), smart driving licenses, transport corridor upgrades.

Q9: How is the government ensuring public trust and transparency?

A: Through legal requirements for public participation, transparency in procurement, regulatory oversight, publication of project pipelines, and judicial review of certain PPP agreements.

Q10: Why are some PPP projects cancelled / restructured?

A: If feasibility or evaluation reports fail to meet statutory criteria under the PPP Act; or because risk, cost, or public interest issues arise. Examples include Nairobi-Mombasa Expressway and High Grand Falls Dam.

To explore this further, see the Public Private Partnerships Act.

Public Private Partnerships in Kenya: Legal Guide, Key Cases & Strategic Insights