US$200 million sought for university hostel expansion

The Kenyan government has asked foreign and local private investors for more than US$200 million to build hostels at three public universities this year.

In anticipation of a growth in student numbers, in a fresh round of fundraising, the country’s treasury has asked potential bidders for proposals to add extra bed capacity at three institutions: South Eastern Kenya University (SEKU), Embu University College and Moi University.

Treasury Cabinet Secretary Henry Rotich said this week that the infrastructure plan is expected to provide more than 30,000 new beds. Under the arrangement, Moi University will get 16,000 beds, Embu College 8,000 and Seku 6,000.

The government has asked a consortium of transaction advisers, led by South African firm Genesis Analytics, to structure the proposal which will see the government publicly seek bids for implementation in the coming weeks.

“We have witnessed tremendous growth of public universities which has put a strain on the budgetary allocations. We are keen to partner with the private sector in meeting especially the accommodation needs, where demand outstrips supply,” Rotich told reporters in Nairobi.

It is understood that another phase is in the pipeline that will serve four other institutions – Jomo Kenyatta University of Agriculture and Technology , Maseno University, Egerton University and the Kenya School of Government – introducing 60,000 new beds in the coming two years.

The projects, undertaken through public-private partnerships, are expected to help the institutions handle an expected surge in student numbers, following changes in admission criteria.

Earlier this month, Kenya’s Education Cabinet Secretary, Fred Matiang’i, issued a directive to public universities ordering them to absorb all secondary school leavers who scored a mean grade of C+ and above in the 2017 examinations. As a result, more than 70,000 students are expected to join 35 public institutions to pursue government sponsored education. Previously, at least half of these students enrolled at private universities on self-sponsored programmes.

However the number of those joining public universities is 10,000 lower than last year, following poor performance in the secondary education. Additionally, the government has directed that only those who got the cut off C+ in the secondary education will join universities to do degrees, locking out thousands of others who were initially joining the public institutions to pursue parallel (self-funded) programmes.

These two developments have seen some observers question the wisdom of expanding infrastructure in the institutions.

In terms of the infrastructure plan, the universities will provide land for construction while investors develop the hostels, and run them for 20 years, to recoup investments, and hand them back to the institution, a model known as Build-Own-Transfer.

The move towards private funding in higher education comes at a time when Kenya's public coffers are strained by growing budgetary needs.

This has seen the country turn to borrowing to finance deficits, pushing Kenya’s debt to US$4.5 billion from US$2.2 billion five years ago. Kenya has been criticised for failing to cut borrowing after taking up debt.

Government statistics show that higher education admissions have risen by around 40% annually for the past five years, while real subsidies to public universities have increased by a miserly 9%. This means universities can no longer cope with rising student numbers or build adequate infrastructure to accommodate students.

As part of the trend towards public-private partnerships, New York-based private equity firm Africa Integras is constructing hostels at Kenyatta University, Kenya’s largest institution by student numbers, under a US$50 million partnership deal. Kenyatta University has allocated 20 acres to the project, which will house up to 10,000 students.

The University of Nairobi, Kenya’s second largest tertiary institution, is looking for investors to construct a dwelling to accommodate 4,000 students on its main campus, just outside the city’s central business district.

In September, the International Finance Corporation said it was considering funding a construction project by two private equity firms – Acorn Group and London-based Helios – to build 3,800 university hostel units in Nairobi, estimated at US$40 million. The hostels will be built near Kenya’s three top private universities – United States International University-Africa, Daystar University and Strathmore University – and are expected to cost at least US$75 million.