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Laikipia County has rolled out the process to commence a Sh1.16 billion seven-year infrastructure bond issue by presenting the National Debt Office with support documents.

Speaking yesterday when Governor Ndiritu Muriithi  met National Treasury Cabinet Secretary (CS) Ukur Yatani, the governor said cash from the bond issue will be used to fund urban infrastructure and water projects in the county.

Muriithi presented the bond’s debt management strategy, fiscal strategy paper, budget estimates, appropriation bill, and public participation report that expressed the views of County residents, documents he said had been approved by county assembly.

“We have handed over to the Cabinet Secretary for the National Treasury and the technical team here who will then look at it and we hope they find that we have complied with the law and therefore allow us to proceed,” said the governor.

County bond

If successful, the bond which will be sold through the National Treasury will make Laikipia the first devolved unit to raise money from the capital markets, since the advent of devolution eight years ago under Article 212 of the Constitution and Section 58 of the Public Finance Management (PFM) Act 2012 allowing counties to raise money through the capital markets.

Muriithi said once complete, levies raised from the targeted projects will help be used to repay the bond, making the move feasible. 

The governor said cash going into water production will facilitate 5,000 farmers and livestock producers access the commodity for irrigation and fodder production, while urban infrastructure project aims at fixing roads, improving drainage for street lighting, parking spaces, and increasing sewer connections.

“This water is not really for free. They will contribute a tariff and this is what will go to pay for the investment.

The urban infrastructure is very much along the lines of Kenya Urban Support Program (KUSP) where we have been investing in towns and this creates cash flow from those towns that are again used to pay this bond,” he said.

Laikipia is determined to grow the county economy four-fold from Sh100 billion to Sh400 billion per year in the medium term.

This will be achieved through enterprise development which will involve tripling agriculture production and well-planned urbanization.

The deal will raise additional financial resources to top up own resources, equitable share and conditional grants.

Conditional grants

In the year to June 30, 2021, the county raised Sh840 million from its own sources, in addition to Sh4.2 billion from the equitable share and an additional Sh750 million from conditional grants.

The bond will be sanctioned by the Intergovernmental Budget and Economic Council (IBEC) and the National Treasury to ensure the bond is attractive to investors.

Unlike other securities, infrastructure bonds are tax-free, making them more attractive to investors, including foreign buyers.

The Capital Markets Authority (CMA) has established guidelines for county governments that seek to tap money from local markets to finance huge infrastructure projects.