For decades, Kenya’s approach to developing its infrastructure has been the usual one – borrowing money to build roads or power plants. This has led to an increase in the national debt, and the government has had to face political and economic consequences. However, with the establishment of the National Infrastructure Fund (NIF), there seems to be an opportunity to develop infrastructure without constant borrowing.

However, given that National Treasury and Economic Planning Cabinet Secretary John Mbadi is being criticised by some Members of Parliament (MPs) for transferring responsibility for managing the state energy companies to the NIF, another issue arises. Does this initiative entail creating a new financing method or establishing a new mechanism for controlling state property? The problem has expanded beyond budgetary issues and now concerns accountability and management.

Why Was the Transfer So Contentious?

The controversy over the restructuring of strategic energy institutions in Kenya, including KenGen, Kenya Power, KETRACO, and the Geothermal Development Company, concerns their relocation into the NIF. This has sparked opposition from some MPs, who believe it may have been done without parliamentary consideration and has disrupted the ongoing budget formulation process.

From a constitutional perspective, the question that arises from this situation is whether major public institutions can be relocated to a new funding mechanism without proper parliamentary deliberation. These institutions play a key role in generating and supplying electricity to the country, and thus their restructuring may have considerable impacts on various other matters.

Does the Economic Logic Behind the NIF Fully Hold?

The proponents of the NIF argue that it addresses Kenya’s financial problems by pooling strategic assets into an efficient, professional investment vehicle and attracting private funds. Nevertheless, the efficiency of this strategy in addressing the problem of infrastructure finance remains questionable. This has led Kenyans to ask whether current investors are willing to take on the risks associated with infrastructure development in Kenya, given the existing problems of high energy prices, currency fluctuations, debt sustainability, and unstable policies.

Furthermore, there are concerns that the NIF could lead to the concentration of strategic state assets in a less accountable manner than through parliament. Previous experience of creating similar entities has often revealed problems, including governance failures and political influence. Therefore, even though changes to the infrastructure finance system seem necessary, it is crucial to assess whether creating the fund will strengthen or weaken its governance.

Could the NIF Disrupt Existing Development Projects?

A less discussed issue here is disruption. Alex Wachira, the Principal Secretary for the State Department for Energy, is said to have told the MPs that projects supported by development partners and requiring counterpart funding from government allocations may be hindered if this issue is left unresolved. In any case, it poses a critical policymaking challenge for the country. Efforts to revamp infrastructure financing policies aim to improve efficiency, but they can sometimes lead to instability.

When agencies are placed under new financing schemes, even if issues regarding budgeting, laws, and other aspects remain unresolved, operational problems can easily arise. This can result in reluctance among contractors, requests for clarification from donors, slowed procurement, and delayed electrification projects in counties.

However, while the fund was intended to facilitate infrastructure development, it will cause some disruption. This is not to suggest that the initiative is bad.

Is Parliament Defending Oversight or Protecting Influence?

Indeed, the political angle cannot be overlooked either. The reason for the vigorous reaction from parliament may well stem from genuine concerns about the constitution. Still, it also highlights a wider conflict within institutions over who will retain control of development finance in Kenya.

Any infrastructure spending is inherently political. This is due to its role in shaping regional development, its impact on procurement, and the direction of government funds. By centralising strategic agencies into a single funding body, the Treasury would effectively shift the balance of power on such matters.

It is therefore not surprising that there has been an element of hostility towards the proposal. Regardless of whether a political agenda is at play here, the issue of oversight must be addressed. In cases involving public financial institutions that manage key national resources, exceptionally high levels of transparency are warranted. This means the government must demonstrate the concept’s viability both financially and institutionally.

Kenya’s Bigger Infrastructure Question

In effect, this debate raises issues beyond infrastructure financing; it touches on a national predicament. Kenya requires infrastructure. The country also requires fiscal prudence. Yet Kenya must have the confidence that its resources are being utilised in a manner that is open and accountable to Kenyan citizens.

A concern about highly centralised systems for funding infrastructure investment projects is that they may not necessarily lead to failure. In certain cases, such systems operate in ways that make important economic policy choices increasingly opaque to ordinary Kenyans, yet they remain extremely relevant to their lives.

However, dismissing all attempts to reform existing infrastructure funding structures out of hand would lock Kenya into a vicious cycle of borrowing and development, one from which the country would be unable to escape.

For this reason, the ongoing debate should matter beyond the Energy Ministry and the Treasury.

What the country now must grapple with is the following challenge: How can Kenya update its approach to financing public infrastructure investment without compromising political accountability?