US firm to build student hostels in US$11 million project

Kenyatta University – Kenya’s largest institution by student numbers – has teamed up with New York-based private equity firm Integras to build hostels with a total of 10,000 beds. The US$11 million project is to be executed under a public-private partnership.

The project agreement was signed by the two organisations in mid-June, and the public-private partnership is the first of its kind for a public university in Kenya.

With a student population of over 70,000 against a hostel capacity of 10,000 beds, Kenyatta University has been facing an accommodation crisis.

The university’s managers said the hostel initiative would go a long way towards meeting huge accommodation demand at the premier institution.

The project is designed to provide beds for 9,350 undergraduate students, 500 postgraduate students and 150 married students, said Kenyatta University Vice-chancellor Professor Olive Mugenda.

“This is certainly a trend-setter as far as financing university education is concerned in Kenya. The project is a big milestone for the university,” Mugenda added.

Private infrastructure investment

The initiative is one in a series under a public-private partnership framework approved by Kenya’s Cabinet on 21 May 2015, through which the government is expecting KES2.5 trillion (US$25 billion) in private funds to be invested over the coming decade.

The deal and the cabinet approval, analysts said, could open the floodgates for private funds to enter Kenya’s higher education sector, with investors eyeing the billions of dollars the sector generates annually due to rising student numbers.

“Given the urgent need for student accommodation in Kenya, we have been keen to demonstrate that such investments can be structured to allow for private capital to partner with the Kenyan government in the expansion of critical infrastructure that helps in the development of the country’s most precious asset – the youth,” said Andrea Pizziconi, managing partner at Africa Integras.

“We are very excited to have brought together a consortium of international and local government and private financiers to ensure the quick mobilisation of resources for this project,” she added.

Africa Integras invests capital in the development of education infrastructure including classrooms, student hostels, faculty housing and related commercial and leisure facilities, under the public-private partnership model.

Olive Mugenda said the project was based on the build-operate-transfer system, in which the university will provide land for construction while the investors will develop the hostels, run them for 20 years to recoup the investment, and then hand them over to the university.

“Engaging the private sector in non-core infrastructure development will ease funds for core operations in the university,” said Mugenda.

Funding gap

The public-private partnership model is seen as a promising new avenue to allow private investors to put money into the public education sector to supplement government funding.

“We have a big gap in infrastructure that the private sector can help bridge,” said Education Cabinet Secretary Jacob Kaimenyi, adding: “The Ministry of Education will continue to support similar private-public deals.”

Government investments have failed to match surging growth in student numbers and the accompanying demand for expanded infrastructure.

In the coming fiscal year, starting in July, Kenya’s public universities will have to tighten their belts following a decision by the Treasury to cut funding by 6% – despite a 28% expansion in student numbers.

Final spending plans released on 11 June showed that subsidies would be capped at US$588 million, down from US$627.2 million in the current fiscal year. Meanwhile enrolment numbers have more than doubled since 2012, when there were 218,628 students, to 443,783 students at public and private universities last year.

Universities grasping opportunities

Like other public universities, Kenyatta has faced challenges over students living off-campus due to security issues and students not being able to fully access services such as libraries, computer labs and recreational facilities that add to quality campus life.

Moi University, Kenya’s third largest, has also been pursuing a public-private partnership initiative, which is expected to be made public in the coming months.

And it is understood that Masinde Muliro University of Science and Technology, one of the newest public institutions, has been looking for South African investors to help fund expansion.

According to Mugenda, the new hostels, whose construction will begin immediately, will have rooms for students with special needs, data points for free internet and shared kitchenettes for undergraduate students.

The facilities will also have individual cooking areas and bathrooms for married students, offices for hostel managers, common rooms for entertainment and reading areas.

“Certainly, this is going to be a relief for a majority of students who have had to seek accommodation outside campus. More students will now be accommodated at affordable cost,” said George Thuku, president of the Kenyatta University students’ association.

Trailblazer

Kenyatta University has been a trailblazer in the hunt for commercial avenues to generate funds to expand.

The university is in the process of constructing a state-of-the-art referral hospital at a cost of US$95 million, which is more than the institution’s annual budget. The 500-bed facility will be the country’s first fully-fledged university hospital.

In 2009, Kenyatta University surprised the country by venturing into the mortuary business, constructing a 50-body morgue at the school of applied human sciences, which also trains morticians.