FRAMEWORK FOR PRIVATE SECTOR INVOLVEMENT IN FINANCING LONG-TERM DEVELOPMENT PROJECTS : A CASE OF KENYA This short artifact has been designed with general public, legislators and private investor financiers and all those who have a role in managing development finances in mind. The paper discusses the importance for Private sector involvement in infrastructural development projects through formal public-private partnerships (PPPs). However, it is clear that PPPs are not possible without a concrete framework to induce private sector to action. The paper makes it concise that the framework should seek to harmonize the Public-Private risk-return objectives in order to attract private long-term investments with assurance of a stable return. According to this artifact, other than private sector risk-return perspective; corruption, lack of transparency, unstable political climate are great impediments to private sector involvement to infrastructural developments.

1. FRAMEWORK FOR PRIVATE SECTOR
INVOLVEMENT IN FINANCINGLONG-TERM
DEVELOPMENT PROJECTS:
A CASE OF KENYA
A Public-Private Partnership (PPP) involves the private
sector in aspects of provisions of infrastructure and
services that have traditionally been offered by
governments. Private companies finance projects and
provide expertise to ease fiscal constraints and increase
efficiency. By engaging the private sector and giving it
defined responsibilities; governments broaden their
options for delivering better services.
The infrastructure development is vital and cannot be
done away with since the benefits are enormous and cut
across both national and international economies,
including, in the long-term, a promise for a healthier
operating environment for the businesses thus a
multiplier effect on return on investments and a boost to
the generaleconomies. Moreover, the urgency with
which such developments are needed is very high and
cannot wait for the constraint public resources to finance
all of them. It is desirable the private sector chipped in
essential part of its resources in enhancing the initiation
and implementation of these development projects.
Private resources are usually weightier in size as
compared to public resources. In Kenya,although the
urgency levels for infrastructural development are
demanding, the private sector has not been material
contributor to national developments due to the private

2. sector risk-return perspective and other obstacles
discussed in this paper.
This makes it urgent for a precise framework to be set up
outlining the procedures on how private resources can be
unlocked and channeled to the financing of long-term
development projects while ensuring a meeting point of
the public-private risk return objectives. This will
involve coming up with efficient risk mitigation
strategies providing the private sector with investment
incentives that attract them to provide long-term
financing. The framework will be like an emphasis of
timing, certainty, stability and size of return which are
usually the main considerations by private investors to
committing finances to any project. In Kenya,such
framework is not there or adequate campaign has not
been done for it.
Risk-Return Relationship versus the private sector
profit objectives.
Conventionally, risk and return have a positive
relationship where a higher risky event may be
accompanied by a higher but more uncertain return. Due
to this uncertainty in return as risk heights, private sector
with the main objective as making profit and
maintaining positive cash flows and high liquidity,
become hesitant to invest in risky opportunities unless
are convinced of certainty in return. Long-term
determination of risk and return are normally surrounded
by much uncertainty and thus the longer the timing; the
more reluctant profit-making firms will be willing to
take risk unless attractive investment incentives are

3. offered. Infrastructure financing are long term initiatives
and thus accompanied by uncertainty in returns. To
attract private investor financing, risk mitigation
strategies must be framed to thwart this uncertainty in
return thus encouraging private investment. This can be
achieved by applying blended financing where a
portfolio of financial instruments with correlated returns
can be composed to overcome this timing effect. In
Kenya very little has been done about this and private
sector is still indifferent whether to take any core
responsibility in infrastructure financing.
Other obstacles to private sector participation in
infrastructure financing in Kenya include:
Corruption:
Corruption has been a great impediment to national
developments. Anti-corruption campaigns have been
overcome by corruption, with Oversight bodies failing in
their oversight role. Anti-corruption initiatives have been
overturned through kick-backs and bribes. For example;

4. the main source of government revenue is taxes paid by
its citizens. Due to high levels of corruption, citizens get
discouraged and find ways to evade tax payment
including giving bribes to some tax authorities in order
to god-father them from paying taxes. This sees
government lose essential part of the tax revenues
leading to budget deficit. Moreover, the main avenue for
illicit financial outflows is corruption. Because of this,
private sector becomes hesitant to deploy any resources
for national development.
Lack oftransparency:
Full accounting for resources which have been put under
ones stewardship is a necessity if the contributor will be
encouraged to donate more. Many financial reports by
the Kenyan government in the recent past has lacked
transparency,where resources which had been deployed
for a particular project are partially accounted for and no
or little action is taken to recover the resources not
accounted for. This lack of full accountability and follow
up on resources lost leads to so many questions by
donors and other contributors turning them back from
further participation.
Poor political climate:
Poor legislation and lack of a concrete legal system has
adversely impacted the investment climate in Kenya and
this has much discouraged long-term private investment
in Kenya. It is just this year (2015) when the accounts

5. for many charitable and other non-governmental
organizations were frozen with the claims that some
were funding terrorism. After much vetting by
commissions set up by the government, many have been
found to have legitimate existence and mission and re-
licensed to continue with their operations. To avoid
interruption of operations of the legitimate
organizations, vetting should have been done at the
registry level, by checking the legitimacy of the
registration documents. Lack of political stability has
further turned back many foreign private investors
focusing infrastructure.
Conclusion
In conclusion, firm framework needs to be set up
outlining the scope and guidelines for private sector
participation in financing long-term projects; especially
infrastructure developments if material progress is to be
attained within the time frame set for achieving
sustainable Development Goals (SDGs)-year 2016
through year 2030.