Mbadi to MPs: These are the projects fit for Sh340bn infrastructure fund

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The Treasury wants Parliament to approve a policy that will lock out projects that cannot demonstrate commercial viability from being funded by the National Infrastructure Fund (NIF).

Treasury Cabinet Secretary John Mbadi told the National Assembly’s Finance and National Planning Committee that the National Infrastructure Fund Investment Policy 2026 sets out strict investment procedures for financing commercially viable national projects.

He said the policy seeks to provide mechanisms for using the Sh340 billion National Infrastructure Fund to finance projects in key areas where capital will be preserved, investments must generate income, and projects must be capable of attracting private capital.

Mr Mbadi said the policy scope covers nationally significant assets, where additional priorities must remain consistent with the NIF Act.

Under the policy, the NIF will finance bankable projects in the transport sector, including highways, railways, airports, seaports and logistics infrastructure; energy, covering generation, transmission, distribution and nationally significant energy systems; and ICT, where telecommunications, fibre, cloud, data centres and digital infrastructure will be funded.

The NIF will further finance projects in the water and irrigation sector, including water supply, storage, dams, irrigation, desalination and bulk water, while in the agriculture and livestock sector, funding will be directed to production, storage, processing, logistics and value-add infrastructure projects.

Mr Mbadi said no priority sector will account for more than 40 per cent of the NIF, while investment in a single project will be capped at 20 per cent of the total fund value.

He said with the fund currently holding Sh340 billion, this would place the theoretical maximum NIF exposure to one project at Sh68 billion.

Mr Mbadi said politically attractive projects, or those with strong social benefits but weak financial returns, will not automatically qualify for NIF financing.

“A project may be socially important, but if it is not commercially viable, it is not a candidate for NIF,” Mr Mbadi said.

He told the committee, chaired by Molo MP Kuria Kimani, that allowing non-viable projects into the fund would undermine its sustainability and expose public funds to unnecessary losses.

The NIF, which currently holds Sh340 billion from the proceeds of the sale of the government's 15 per cent shareholding in Safaricom Limited and 65 per cent stake in Kenya Pipeline Company, will provide seed capital for financing infrastructure outside the national budget.

Mr Kimani asked Mr Mbadi to explain how the Jomo Kenyatta International Airport (JKIA) upgrade is seeking NIF financing, who the other investors will be and whether the airport project will pass the same commercial tests being imposed on all other projects, yet it has been awarded to a contractor by the Ministry of Transport.

“It is important to tell the country how JKIA modernisation has been taken over by NIF, who the other investors in the project, and how much it will cost,” Mr Kimani said.

“You have indicated that each project to be funded by NIF will have a special purpose vehicle (SPV) comprising government equity and debt from private investors, who will take the risks in case the project fails?”

Mr Mbadi said one of the key safeguards would be the requirement for projects to attract substantial debt financing.

He said at least 60 per cent of a project’s capital structure is expected to come from debt, creating an additional commercial test because lenders will only provide non-recourse financing to projects capable of generating adequate returns.

“If the project is not properly appraised and found to be commercially viable with adequate and sufficient internal rate of return, that would convince an investor,” Mr Mbadi said.

Mr Mbadi said projects would have to demonstrate commercial viability, financial sustainability and the ability to mobilise additional capital before receiving approval.

“Parliament is being asked to approve the policy guardrails. Project-specific investment decisions will follow feasibility, investment appraisal and NIF Board approval in accordance with the Act,” he said.

“NIF exists to shift commercially viable infrastructure beyond the national budget.”

He said the projects would undergo technical and financial feasibility assessments, with the NIF Board retaining the final authority to approve investments.

Mr Mbadi warned that allowing political considerations to influence investment decisions would destroy the fund, saying the government was deliberately setting high thresholds to keep non-viable projects out.

The NIF will focus on priority infrastructure sectors, including transport, energy, agriculture and livestock, water and irrigation, as well as other sectors approved through the government’s policy framework.

James Mworia, a member of the NIF Board and the Centum Investment chief executive, told MPs that the NIF’s exposure would be limited to its equity investment in the SPV, while debt raised for the project would be non-recourse to the shareholders.

“This means that if a project fails, creditors would not automatically have a claim on the wider NIF or its other investments,” he said.

“The maximum value at risk for the NIF is the equity that has been invested in that particular SPV vehicle,” Mr Mworia said.

Reporting originally appeared via Nation Africa. Read the full source for additional context.