​Housing the next generation of Kenya’s leaders: A PPP that makes the grade

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Many university students learn Newton’s third law: for every action, there is an equal and opposite reaction. At one Kenyan university, two very positive actions – narrowing the backlog of students admitted after high school graduation, and a 2002 government bill declaring free primary education for all – led to the nation’s first public-private partnership (PPP), a most unexpected reaction. 
Existing student hostel at Kenyatta University

Kenyatta University (KU) has 50,000 students, and because of the national momentum on education, enrollment is expected to increase to 70,000 in the next two years. The only problem with this huge step forward has been housing all of these new students; currently, the university’s 22 hostels house only about 10,000 undergraduate students. KU’s status quo-shattering PPP will result in housing for 10,000 more students, at the same time marking it as the first public institution to deliver a PPP project under Kenya’s Public Private Partnership Act of 2013. 
For the 10,000 graduate and undergraduate students who will now be able to live on campus, this PPP earns an “A” for a different reason – it’s the first time these students will have access to regulated, fairly priced accommodations with no commute or accompanying transportation charges to class. And by living on campus, these students can safely study long into the night at the library and other university facilities – which is critical to the intellectual development of this next generation.
The right time + the right partner + the right place = the right PPP
Until recently, Kenyan students graduating from high school were typically forced to wait two years before registering at universities, due to backlogs created in the late 1990s as a result of student unrests and lecturer strikes that led to long closures of educational institutions. In the past few years, however, the University Joint Admission Board, working through government, decided to reduce the backlog by one year.  Numbers tell the rest of the story: nationwide, university student enrollments grew from 96,000 to 160,000 in 2015.  In addition, the free primary education introduced in 2002 tripled the number of students in primary schools, which also energized enrollment. Predictably, these two positive developments stressed the capacity of university facilities, and Kenyatta University has been struggling to meet the need for students’ accommodation.
KU’s strategic plan commits it to increasing access to higher education as well as improving the welfare of both the undergraduate and postgraduate students, by partly improving associated physical infrastructure.  This element of the plan depends on the private sector to deliver some services and withdrawal of KU from direct development of physical infrastructure in non-core areas, such as student accommodation. Working through Kenya’s new PPP Unit of the National Treasury KU turned to IFC in 2011 for guidance in implementing an accommodation project on a PPP basis.
A strong PPP champion
IFC was engaged to provide transaction advisory services to establish student hostels through PPPs at KU’s main campus. Coincidentally, IFC’s PPP advisory department opened  an office in Nairobi the year before, which made close coordination possible. Another critical element in building this PPP was the support of  KU’s Vice Chancellor, Professor Olive Mugenda, a firm believer in the benefits of the project despite the many challenges along the way. She led a strong implementation team, and under her leadership, the project went to market in 2012; those involved were unsure whether the project would attract bidders with the capabilities that were needed. (Because 2012 was an election year, and the previous elections in 2007 were marked by political unrest, success was especially uncertain.)  

But at the tender stage, nine consortiums made up of local and international firms expressed interest and six were invited to bid. Four out of the six presented their bids. After evaluation, the bid was awarded and a solid team was appointed.
Under other circumstances, KU would have “graduated” its PPP at this point. However, when Kenya’s new government was put in place, the successful bidder’s consortium lead investor was appointed KU’s Chancellor.  He was concerned about the perception of impropriety, and although Kenya’s attorney general ruled that there was no conflict of interest or improper influence, the new Chancellor opted out of the bid. 

The PPP process re-launched in 2013, moving ahead more quickly and smoothly the second time, with a similar number of bidders and more favorable bids. Negotiations continued until December 2014 and the PPP agreement was finalized and ready for approval by the Government of Kenya. The team approached the government PPP Unit for approval, which was given in February 2015. The team was  then required to approach Kenya’s Cabinet for approval.  However, some changes were made among the Cabinet leadership that  led to a long waiting period. Ultimately, approval was given in early June 2015, and the PPP Agreement was signed on June 19, 2015. 
A Continuing Education
One of the most exciting elements of the KU PPP is its potential for replicability. In fact, the model will be followed again in a “phase 2” at KU itself, which has ample land at its main campus and satellite campuses to build more accommodations under the same sort of PPP structure. University officials across the nation are also eager to learn from KU’s example, and potential investors are already raising their hands. These investors cite IFC’s involvement – specifically its credibility and the institutional transparency it requires – as a major reason behind their confidence. 
It’s been an education for the IFC team behind the PPP as well. Because replicability holds such promise and is such a high institutional priority, we have studied the process and outlined changes that would speed future PPP processes while also lessening PPPs’ vulnerability to political shifts. One particular priority for us is simplifying the system here in Kenya; a proposed change is to have one cabinet approval at the commencement of the project making it easier for other universities to close their own PPPs according to a timeframe that the urgency of the situation demands.

What’s at stake is nothing less than next generation of Kenya’s leaders, scholars, educators, and activists. 


Evans Kamau

Investment Officer

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