Effect of Financing Structure on Performance of Public Private Partnership Infrastructure Projects in Kenya

Abstract

The financial framework of a Public-Private Partnership (PPP) revolved around the allocation of financial resources and risks between the public and private entities engaged in the project. The primary aim of this study was to assess the impact of the financing structure on the performance of Public-Private Partnerships in Kenya. To achieve this objective, a descriptive research design was employed to provide a detailed examination of the relationships between the various variables under consideration. Importantly, the study spanned a six-year duration, encompassing the period from 2017 to 2022, providing a comprehensive analysis of the factors that influenced PPP project performance. Data for the study was collected from secondary sources, ensuring the availability of reliable and well-documented information for analysis. The statistical software STATA was utilized to elucidate the correlations among the variables. The results of the analysis indicated that the estimated panel regression model accounted for approximately 39.3% of the total variations observed in the performance of PPP infrastructure projects. It was, therefore, inferred that the variables BOT (Build-Operate-Transfer), BTO (Build-Transfer-Operate), and political risk were significant determinants of PPP infrastructure project performance and collectively explained 39.3% of the total variations in project performance. Specifically, the estimated coefficient for BOT was statistically significant and positive, indicating that improvements in the BOT model positively and significantly impacted PPP infrastructure project performance. The BOT model represented a distinctive form of public-private partnership in which a private entity took on the financing, construction, and operation of infrastructure for an extended period, relieving the financial burden on the public sector. Similarly, the estimated coefficient for BTO was statistically significant and positive, signifying that enhancements in the BTO model positively and significantly influenced the performance of PPP infrastructure projects. Conversely, the estimated coefficient for political risk was statistically significant and negative, suggesting that any increase in political risk inversely and significantly impacted the performance of PPP infrastructure projects. Political stability and risk mitigation strategies were, therefore, critical factors in ensuring the success of such projects. In conclusion, this study strongly recommended further research endeavors to delve deeper into the factors that influenced the efficiency of PPP infrastructure projects in Kenya. A more comprehensive understanding of these factors was essential for enhancing the effectiveness and success of future PPP initiatives.