Multi-million-dollar hostel project for five universities

Kenya has kicked off a multi-million-dollar push to develop student hostels in five public universities by tapping into private funds, with the ultimate goal being to drive up enrolments. The project is expected to provide more than 50,000 new student beds.

The government recently announced that it had contracted a consortium of infrastructure advisory firms – Genesis and CRISIL – as well as consulting firm PKF as transaction advisers for the project to be implemented in Moi University, Egerton University, Embu University College, Kenya Technical Trainers College and South Eastern Kenya University.

The project is part of a larger government plan to draw on private capital to plug a growing infrastructure financing deficit in the education sector, with an eye on opening up similar opportunities for more than 20 universities in the next five years.

The project will be run as a public-private partnership or PPP, with universities and the government also providing partial financing.

It is understood that universities will engage the investors under the Build-Operate-Transfer scheme, where they provide land for construction while investors develop the hostels, run them for 20 years to recoup their investment, and then hand them back to the institutions.

On 19 April the consortium will host stakeholders in Nairobi to gather comments on the planned projects while assessing the potential environmental and social impacts, the government said in a public notice announcing the initiative.

State of play

While Moi and Egerton are established universities, the other three are relatively new, were recently upgraded from college to university status, and are grappling with growing numbers of students and serious accommodation shortages.

Dr Daniel Ngugi, an economics lecturer at the University of Nairobi, said universities could no longer afford to finance the infrastructure projects needed to meet student demand. “The next logical thing is to seek private capital to build the facilities.

“We are looking at a situation where there are billions of dollars in untapped funds. It is commendable that the government is opening up these avenues for public universities to tap private finances. This is a game changer for the education sector.”

In May last year, Kenya’s cabinet approved the PPP blueprint with the hope of attracting over KES2.5 trillion (US$25 billion) in private funds to be invested over the coming decade in key sectors of the economy such as transport, health and education.

Already Kenyatta University – Kenya’s largest by student numbers – has signed an agreement with New York-based private equity firm Integras to build hostels with a total of 10,000 beds under a US$11 million PPP initiative. The project is designed to provide accommodation for 9,350 undergraduate students, 500 postgraduate students and 150 married students.

The PPP model in the education sector comes amid massive shortages in funding for projects as government subsidies lag behind needs for surging numbers of students.

In the coming fiscal year beginning in July, public universities will only receive a 3.5% raise in state subsidies, while inflation is two to three times that.

Public universities will receive US$646 million in state funding for the 2016-17 year, up from the current US$624 million. During the period, enrolment is expected to rise by more than 10%, exacerbating the mismatch in financing.

The financing landscape for higher education is radically changing. Recently vice-chancellors of public universities resolved to adopt a new, differentiated unit cost system for charging tuition fees under which students will pay based on the cost of courses they undertake.