Kenya's National Infrastructure Fund (NIF) plans to generate approximately Sh42 billion every year by investing part of its capital in long-term government securities.
NIF chief executive James Mworia said the fund expects returns of between 12 and 14 percent annually from government securities, with approximately 12.5 percent being used in its projections. The fund is working with Sh40 billion as a more conservative annual income benchmark.
The strategy is intended to preserve the fund's original capital while using investment returns to finance commercially viable infrastructure projects.
NIF currently has Sh310.3 billion in seed capital. This comprises Sh106.3 billion generated from the government's partial divestiture from Kenya Pipeline Company and Sh204 billion from the sale of a 15 percent stake in Safaricom to South Africa's Vodacom Group.
The government wants the fund to attract significantly more private investment rather than relying solely on public money. Its target is a 1:10 crowd-in ratio, meaning every Sh1 invested by NIF would seek to attract another Sh10 from investors such as pension funds and other long-term capital providers.
President William Ruto's administration ultimately wants to mobilise up to Sh5 trillion for infrastructure development through the fund. The government says the approach could reduce pressure on the Exchequer by shifting commercially viable projects away from direct budget financing.
Mworia estimates that a successful NIF model could eventually remove around Sh400 billion in infrastructure financing requirements from the national budget.
Among the projects expected to receive NIF investment are the proposed Dangote Refinery in Lamu and the planned expansion and upgrade of Jomo Kenyatta International Airport. For the airport project, NIF is considering providing around 30 percent of the required equity through a special purpose vehicle.
The fund is also considering establishing a National Infrastructure Development Fund that could be listed on the Nairobi Securities Exchange. The proposed vehicle would give institutional and other investors a more liquid and transparent way of participating in infrastructure investments.
NIF's mandate covers investments across highways, railways, airports, seaports, electricity, ICT, water reservoirs and agribusiness infrastructure.
If the model succeeds, Kenya could increasingly use public capital as an anchor for attracting private investment rather than financing large commercially viable projects almost entirely through taxation and government borrowing.
