Financing Public

Water Utility which was built in 1999 on a 5- year management contract; the Jomo Kenyatta International Airport Cargo Terminal ( JKIA Cargo) which was built in 1998; the Kenya- Uganda Railway Concession in 2006, among others. Kenya’s Vision 2030 blueprint seeks to make the country an industrialized middle income economy by the year 2030 and the Government of Kenya has planned to spend an estimated sum of USD 60 Billion to put up infrastructure whilst relying heavily on PPP arrangements to achieve that goal. Through the Public Private Partnerships Act of 2013, the Government has created an enabling legal and regulatory environment for PPPs to thrive in Kenya.

While the Government of Botswana has not specifically issued Infrastructure and Project Bonds themed as such, Government has raised in excess of P15.0 Billion on the BSE to finance an array of development projects, mainly infrastructure projects. Botswana has a huge potential in terms of utilising the stock exchange to raise infrastructure finance, by both the public and private sector – and especially now and going forward in the context of the increased ceiling of the Government Note Programme to P30.0 Billion as well as the pipeline of projects envisaged under this model. Botswana has deeper pools of liquidity from pension funds in excess of P109 Billion, and empirical evidence has shown that the use of bonds to finance PPP projects is more extensive among countries with significant pension schemes having long- term liabilities that need to be matched to long- term assets. As it stands, the capital market regulations are supportive of the development of infrastructure financing through bonds issued by Government, Development Banks, local authorities as well as corporate bodies and also through pooled investment vehicles that can be listed on the stock exchange, or remain off- market. Given the abundance of capital in Botswana vis- à- vis the availability of investment instruments, project sponsors and issuers should explore Botswana’s deeper pools of long term capital to support PPP projects.

Stock exchanges, as capital raising avenues, can enable the efficient raising of both equity and debt finance usually used in PPP project financing. The BSE has a key role to play in ensuring that the domestic securities markets can be used for capital raising in respect of infrastructure development, through models such as PPPs. Over time, the BSE’s regulatory regime has been modernized to ensure that it appropriately addresses the need to raise capital by various forms of institutions, including Government, and vehicles such as Special Purpose Vehicles ( SPVs) and to ensure that it does not unintentionally hinder the use of the BSE for accessing infrastructure finance. From a regulatory point of view, just like any issuance of a debt instrument, the offering of such instruments considered for PPP financing requires the submission of a series of information to the BSE, including a Programme Memorandum or a Circular ( referred to as Disclosure Documents), which entails provisions for disclosure of elements such as information about the issuer, information about the instruments and the financial information. In addition, the issuer is subject to periodic and ongoing disclosure requirements, including submission of periodic financial statements and annual audited financial statements and material events disclosure. The BSE’s Debt Listings Requirements are very detailed in terms of the contents to be included, at a minimum, in the Disclosure Documents.

The execution of infrastructure projects through PPP has proven to not only create value in the form of quality public goods such as infrastructure but also enables sustainability and maintenance of infrastructure assets in the long- term. The model allows for private sector development while the Government achieves its objective of addressing infrastructure needs sustainably. As demonstrated, the capital market, both private and public can play a supporting role in the implementation of PPP project financing. The Ministry of Finance has mentioned that PPPs still involve costs to the budget, thus the need for risk- sharing through the capital market cannot be overemphasized. Further, there is some form of relieve from the burden of immediate implementation of projects and evidently the scope to modernize infrastructure projects.