Keywords: National Infrastructure Fund Kenya, NIF Act 2026, Kenya PPP contracts, NCA foreign contractor registration, PPADA procurement, performance bonds Kenya, parent company guarantees

President William Ruto assented to the National Infrastructure Fund Act, 2026 on 9 March 2026, creating one of the most ambitious financing vehicles in Kenya’s history — a pool targeting roughly KSh 5 trillion to co-fund roads, railways, ports, and energy infrastructure. For contractors, engineering firms, and institutional investors, the Fund represents a rare pipeline of large-ticket, PPP-structured opportunities. It also arrives wrapped in litigation, making early, informed legal positioning essential for any business considering involvement.

This guide sets out what the Fund is, why it is being challenged in court, how contracts under it will actually be procured, what foreign contractors must do to qualify, and how the security instruments — performance bonds and parent company guarantees — that clients will demand actually work.

WHAT IS THE NATIONAL INFRASTRUCTURE FUND?

Legal Basis and Mandate

The Fund is established under the National Infrastructure Fund Act, 2026 (Act No. 4 of 2026), sponsored by National Assembly Majority Leader Kimani Ichung’wah. Its purpose is to mobilise capital from non-traditional sources such as domestic pension funds, collective investment schemes, sovereign wealth funds, and climate finance institutions. The Act frames this as a shift away from Kenya’s traditional reliance on sovereign borrowing toward an investment-led model for delivering large national projects.

The legislation establishes a vehicle intended to mobilise over KSh 5 trillion within a decade to finance strategic infrastructure across the country. Structurally, the Fund is a body corporate capable of owning assets, entering into contracts, and investing directly in infrastructure projects, but it is explicitly barred from borrowing or leveraging debt against its own balance sheet — positioning it as an equity-driven investor rather than a lender.

The Act defines “national infrastructure” broadly to cover transport systems such as highways and railways, energy generation and transmission, ports and airports, water and irrigation infrastructure, and digital connectivity systems. Early projects already linked to the Fund include the Jomo Kenyatta International Airport expansion and grid upgrade works funded through the FY2026/2027 budget.

Governance Structure

The Act creates a two-tier governance model. A Governing Council provides overall direction, chaired by the Treasury Cabinet Secretary and including the Governor of the Central Bank of Kenya, the Attorney-General, and six non-public members appointed by the President for three-year terms. A nine-member Board — comprising the Treasury CS or a representative, a chairperson, four independent directors, two directors with development-banking experience, and the CEO — is responsible for approving funding decisions and preparing detailed investment and business plans, including feasibility studies confirming commercial viability.

Funding Sources

The Fund draws on government allocations, private-sector investment, privatisation proceeds, grants, and loans. Its early seed capital has come from asset monetisation: proceeds from the Kenya Pipeline Company IPO and the partial sale of the government’s Safaricom stake to Vodacom Group have already been earmarked for the Fund, alongside a pipeline of at least ten further state corporations lined up for privatisation.

HIGH COURT CHALLENGES: GROUNDS AND CURRENT STATUS

The Fund’s rollout has been contested in the High Court almost continuously since its inception as a Cabinet proposal, and investors should treat this litigation risk as a live, evolving factor rather than a settled matter.

First Wave — Executive Fiat Challenge (December 2025–March 2026)

Before the Act was even passed, a petition filed by Nakuru-based surgeon Dr Magare Gikenyi, Eliud Matindi, and others challenged the Fund’s creation through a presidential communiqué dated 15 December 2025, arguing it amounted to executive fiat without parliamentary approval, public participation, or a clear legal framework. The petitioners relied on Article 206(1)(a) of the Constitution, which they argued permits a national public fund to be established only through an Act of Parliament or the Public Finance Management Act — not by incorporating it as a limited liability company under the Companies Act. A related case was filed by the Consumers Federation of Kenya (COFEK).

On 24 December 2025, Justice Bahati Mwamuye issued a conservatory order at the Milimani Law Courts restraining the government from establishing, incorporating, registering, operationalising, or funding the proposed entity pending determination of the case. The Treasury pushed back: Treasury CS John Mbadi told the court in a replying affidavit that the entity was a government-owned company, not a constitutional public fund under Article 206, and that it had not yet been incorporated or received any public money.

Once Parliament enacted the law in March 2026 — arguably curing the original “no legal basis” objection — High Court judges Lawrence Mugambi and Bahati Mwamuye declined to issue fresh conservatory orders halting the now-enacted law, while noting the petitions raised urgent matters warranting a prompt hearing.

Second Wave — Constitutional Challenge to the Act Itself (March 2026–ongoing)

A day after presidential assent, Katiba Institute filed a fresh petition arguing the NIF Act was enacted without properly involving the Senate, despite carving out functions that fall within county government mandates and affecting resources counties are constitutionally entitled to. The petition also contends the Act sidelines the Controller of Budget from the constitutional expenditure-oversight role, and seeks to block privatisation proceeds — including the KSh 106.3 billion raised from the Kenya Pipeline sale and roughly KSh 244 billion tied to the Safaricom divestiture — from being channelled into the Fund pending the outcome.

Katiba Institute’s core constitutional argument is that legislation enacted to defeat the Constitution cannot stand, invoking Article 2(4), and that excluding the Controller of Budget from expenditure pre-approval under Article 228 places the Fund’s borrowing and spending activity outside the constitutional fiscal-control framework entirely.

Status as of July 2026

Despite the pending litigation, the Fund is operational and being used to finance live budget lines: Treasury has allocated Sh30.9 billion from the Fund toward the FY2026/2027 electricity grid upgrade, including Sh7.5 billion for national grid works. This confirms that, absent a fresh restraining order, the Fund is proceeding with disbursements while the constitutional questions remain unresolved before the High Court. Investors and contractors should therefore treat any NIF-backed contract as carrying residual legal risk: an adverse ruling could, in principle, unwind funding arrangements or governance structures put in place in the interim. Engaging counsel to monitor the Katiba Institute petition and any consolidated hearings is a prudent, low-cost safeguard before committing capital or mobilising for a project.

PPADA PROCUREMENT RULES GOVERNING NIF-BACKED CONTRACTS

Contracts funded or co-funded through the NIF that involve public procuring entities remain subject to the Public Procurement and Asset Disposal Act, 2015 (PPADA), Kenya’s general procurement statute, except to the extent the Fund’s enabling law or a specific bilateral/multilateral financing agreement displaces it.

Available Procurement Methods

PPADA recognises open tendering as the default, preferred method, with several alternative methods available where specific conditions are met: restricted tendering, direct procurement, two-stage tendering, design competitions, request for proposals, request for quotations, low-value procurement, and specially permitted procedures. Open tender is mandatory for most large-value works unless the Act’s conditions for an alternative method are satisfied.

Key Procurement Stages (Open Tender)

• Initiation and planning — the procuring entity’s procurement function prepares tender documents and an annual procurement plan.
• Advertisement — the tender is advertised through the government e-procurement portal, the procuring entity’s website, or notices in newspapers of national circulation, and tender documents are made available electronically.
• Tender preparation and submission — bidders are given a prescribed minimum period to prepare and lodge tenders, typically alongside a tender security in an approved form (a bank guarantee, an approved insurance guarantee, or — for reserved categories — a tender-securing declaration).
• Opening and evaluation — tenders are opened publicly, then evaluated by a tender evaluation committee against the published criteria; for two-envelope processes, financial bids of technically unsuccessful bidders are not opened.
• Contract award and notification — the successful bidder is notified, with all award outcomes reported through the e-procurement system.
• Standstill and contract signing — an aggrieved bidder may seek administrative review before the Public Procurement Administrative Review Board (PPARB) before the contract is signed.

Local-Content and Preference Rules That Apply to Foreign Bidders

Foreign contractors bidding into NIF-linked infrastructure works should plan around several mandatory local-participation requirements built into the PPADA framework: a substantial share of procurement value is reserved for enterprises owned by women, youth, and persons with disabilities; county-level tenders reserve a share for local residents; and successful foreign bidders are typically required to transfer skills and technology to Kenyan staff, reserve the bulk of project employment for Kenyan citizens, and demonstrate an inability to source locally where local preference would otherwise apply. Bilateral or multilateral loan-financed procurement may instead follow the financier’s own procurement guidelines (for example, those of the World Bank or African Development Bank) where the financing agreement expressly displaces PPADA.

QUALIFYING AS A FOREIGN CONTRACTOR FOR INFRASTRUCTURE FUND PROJECTS

Winning an NIF-backed tender is only the first hurdle. Before a foreign contractor can lawfully mobilise on site, it must separately register with the National Construction Authority (NCA).

Timing and Category

Registration is project-specific and sequenced deliberately: a foreign contractor is required to seek NCA registration after issuance of an award letter and before signing the contract, and may only undertake works within the value limit of category NCA 1 — the Authority’s highest-value class. Because the certificate is tied to that specific contract, a foreign firm cannot “bank” a general registration for future, unrelated tenders.

Local Partnering Requirement

A foreign firm applying for registration must give a written undertaking to subcontract or enter into a joint venture with a local contractor for not less than 30% of the value of the contract work, and to transfer technical skills not otherwise available locally to a Kenyan firm or individual in a manner the Authority determines.

Documentation

Typical supporting documents for a foreign contractor’s NCA application include:

• Certificate of incorporation, CR12, and passports/work permits for directors
• Three years of audited accounts certified by an ICPAK-registered accountant, plus other financial information
• Proof of the firm’s past experience locally and in other jurisdictions, and details of ongoing projects
• Proof of plant, equipment, and machinery holdings, with certified ownership documentation
• A sworn affidavit and the written local-subcontracting/technology-transfer undertaking described above
• Sector-specific licences where relevant (e.g., Communications Authority of Kenya clearance for telecoms works, EPRA clearance for energy works)

Fees and Ongoing Compliance

Registration carries a flat NCA 1 fee, payable alongside a separate one-time application charge, and the resulting certificate and practising licence are valid only for the specified project period. If the project overruns its original timeline, the contractor must apply through the NCA portal for a project extension rather than allowing the registration to lapse. Foreign contractors must also attend at least one continuous professional development training each financial year and earn 10 CPD points to remain in good standing.

PERFORMANCE BONDS AND PARENT COMPANY GUARANTEES

Given the scale of NIF-backed works, clients — whether the Fund itself, a procuring state entity, or a special purpose vehicle — will almost invariably require layered security from the contractor beyond the PPADA tender security posted at bid stage.

Performance Bonds

A performance bond is a guarantee, typically issued by a bank or licensed insurer, undertaking to pay the client a specified sum (commonly 10% of contract value, though this varies by contract) if the contractor fails to perform its obligations to the standard and timeline agreed. It protects the client’s downside if the contractor defaults, under-delivers, or abandons the works, giving the client a readily accessible fund to complete or remedy the project without first having to litigate the underlying breach. For the contractor, arranging a performance bond requires satisfying the issuing bank or insurer of its financial standing and project capacity — the bond issuer will, in turn, usually require security or a counter-indemnity from the contractor.

Parent Company Guarantees (PCGs)

Where the contracting entity is a local subsidiary, joint-venture vehicle, or thinly capitalised special purpose company — common structures for foreign contractors satisfying the NCA’s local-partnering rules — the client will typically also require a parent company guarantee. A PCG is a direct undertaking from the contractor’s ultimate parent (often incorporated overseas) guaranteeing due performance of the local entity’s obligations under the construction contract. Unlike a performance bond, a PCG is not usually capped at a fixed percentage and is not necessarily backed by a bank instrument; it is a contractual promise resting on the parent’s own balance sheet. It matters most where the local contracting vehicle lacks the assets to satisfy a large damages claim on its own, giving the client recourse further up the corporate chain.

What Clients Look For

Clients funding projects through the NIF will typically require, at a minimum: a performance bond from a bank or insurer acceptable to the client (often requiring local licensing by the Insurance Regulatory Authority or approval by the Central Bank of Kenya); a PCG where the contracting vehicle is not the ultimate parent; advance payment guarantees if mobilisation funds are released upfront; and retention or defects-liability security covering the post-completion warranty period. Contractors should negotiate the trigger conditions, cap, and expiry of each instrument carefully at contract stage — an unconditional, “on-demand” bond exposes the contractor to a call on the guarantee even where the underlying breach is disputed, whereas a conditional bond requires the client to first establish the default.

COMMON STRUCTURING RISKS FOR INVESTORS AND CONTRACTORS

• Treating litigation risk as resolved. The Act is in force and the Fund is disbursing money, but the constitutional questions raised by Katiba Institute remain live before the High Court. Contracts and financing structures should build in provisions for the possibility of adverse orders affecting fund flows.
• Underestimating NCA lead time. Because foreign registration can only begin after award and must be resolved before signing, contractors should factor NCA processing time into their mobilisation schedule rather than assuming a seamless transition from award to site start.
• Overlooking the 30% local-participation threshold. This obligation applies at NCA registration stage in addition to any local-content expectations built into the underlying PPADA tender — the two are not the same requirement and both need separate compliance tracking.
• Assuming a performance bond alone is sufficient security for the client. Large NIF-backed works commonly require both a performance bond and a parent company guarantee; contractors that only price for one risk an unexpected renegotiation once the client’s legal team reviews the security package.
• Failing to distinguish NIF financing from PPP structuring. Parliament deliberately stripped clauses from the Act that duplicated the Public Private Partnership Act, meaning project preparation still runs through the PPP Directorate even where the NIF supplies capital — investors should map which statute governs which stage of a given project.

CONCLUSION

The National Infrastructure Fund is, on paper, the most consequential financing reform in Kenya’s infrastructure sector in a generation — a genuine attempt to unlock trillions of shillings of private and institutional capital for roads, rail, ports, and energy without further straining public debt.

For contractors and investors, that scale of opportunity is real. So is the legal uncertainty surrounding it.

Businesses considering NIF-backed projects should pair commercial due diligence with active legal monitoring of the pending constitutional petitions, build procurement and NCA registration timelines with realistic buffers, and negotiate security instruments — performance bonds and parent company guarantees — with terms that reflect the scale and novelty of the Fund itself.

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FREQUENTLY ASKED QUESTIONS (FAQ)

1. Is the National Infrastructure Fund legally operational right now? 

Yes. The National Infrastructure Fund Act, 2026 was assented into law on 9 March 2026 and the Fund is actively being used to finance budget allocations, including electricity grid works in the FY2026/2027 budget. However, constitutional petitions challenging aspects of the Act remain pending before the High Court.

2. Can the courts still shut down the Fund? 

It’s possible, though not guaranteed. Courts declined to freeze the Act after it was passed into law, but the underlying constitutional questions — particularly around Senate involvement and Controller of Budget oversight — have not yet been finally determined.

3. What law governs procurement of NIF-backed contracts? 

Generally the Public Procurement and Asset Disposal Act, 2015, unless the specific project is financed under a bilateral or multilateral loan agreement that expressly applies the financier’s own procurement rules instead.

4. Do foreign contractors need to register with the NCA before bidding? 

No — registration is sought after an award letter is issued and before the contract is signed, not as a pre-bid requirement. However, contractors should confirm project-specific pre-qualification criteria set by the procuring entity, which may reference NCA standing separately.

5. What percentage of a contract must a foreign contractor subcontract locally? 

At least 30% of the contract value must go to a local contractor, either through subcontracting or a joint venture, as part of the NCA’s foreign registration undertaking.

6. What’s the difference between a performance bond and a parent company guarantee? 

A performance bond is a third-party financial instrument (bank or insurer) that pays out on contractor default, usually capped at a fixed percentage of contract value. A parent company guarantee is a direct promise from the contractor’s parent entity to make good on the local subsidiary’s obligations, and is not necessarily capped or bank-backed.

7. Which NCA category can foreign contractors register under? 

Foreign contractors are restricted to NCA 1, the highest-value category, and cannot register under the lower local-contractor classes (NCA 2–NCA 8).

8. Where does NIF seed funding come from? 

Primarily privatisation and asset-monetisation proceeds, including the Kenya Pipeline Company IPO and the partial sale of government shares in Safaricom, alongside government allocations, grants, and private investment.

This guide is for general informational purposes and does not constitute legal advice. Given the ongoing litigation and evolving regulatory guidance around the National Infrastructure Fund, investors and contractors should obtain project-specific legal and tax advice before committing capital or mobilising resources.