Assented to on 9th March 2026 and in force since 25th March 2026, the National Infrastructure Fund Act, 2026 creates a statutory investor mandated to co-invest with private capital in commercially viable infrastructure but on deliberately constrained terms. Here is what the Act builds, why it matters, and where the transactional risk now lies.
INTRODUCTION
For decades, Kenya’s infrastructure ambitions have run ahead of its fiscal headroom, with each flagship project deepening reliance on public debt. The National Infrastructure Fund Act, 2026 marks the most deliberate attempt yet to break that cycle. Yet what distinguishes this Act is not the breadth of the Fund’s powers but the discipline of its restraints. For financiers, sponsors and their counsel, the Act rewrites the assumptions on which state co-investment transactions are structured. This update distils what the Act establishes, why it matters, and where the transactional risk now sits.
1. A NEW STATUTORY INVESTOR WITH ITS OWN LEGAL PERSONALITY
To wit, we note that Section 5 establishes the National Infrastructure Fund as a body corporate with perpetual succession, able to sue and be sued, hold and dispose of property, and contract in its own name. The Fund is not an arm of the National Treasury, and counsel papering transactions with it should verify execution authority under section 19 rather than assume sovereign backing an assumption the Act, as shown below, deliberately forecloses.
2. GOVERNANCE: OVERSIGHT DIVORCED FROM MANAGEMENT
Importantly, the Act splits strategy from operations. A Governing Council, chaired by the Cabinet Secretary and comprising the Central Bank Governor, the Attorney-General and six presidential appointees, develops the Investment Policy and recruits directors, but section 6(3) expressly denies it day-to-day control, which section 13 reserves to the Board of Directors.
The independence architecture is unusually rigorous: section 15 imposes a five-year look-back disqualifying candidates with government-enterprise employment, political party affiliation, or advisory and audit relationships with the Fund. Conflict-of-interest declarations under sections 12 and 16 must be minuted and non-compliance is criminal.
Takeaway: Run the section 15 checklist before nomination, not after appointment.
3. THE INVESTMENT POLICY: A PARLIAMENTARY GATEKEEPER
The Fund cannot originate projects at will. The Council’s Investment Policy, priority sectors, target returns, asset allocation and exposure limits requires Cabinet approval, after which section 27 obliges the Cabinet Secretary to table it before the National Assembly, which has ninety days to approve, approve with reservations, or decline it.
A declined policy must be reworked and resubmitted within six months; an approved one runs five years and takes effect only upon gazettement. The bankability consequence is stark: a project outside the gazetted Investment Policy has no statutory basis for Fund participation, however commercially attractive.
Takeaway: Confirm a project’s standing under the current gazetted Policy before advancing transaction costs.
4. BROAD INVESTMENT POWERS- BUT NO BALANCE-SHEET BORROWING
Then, Section 19(1) confers wide transactional latitude: equity, quasi-equity and debt investment, security taking and enforcement, agency arrangements with government, and the creation of special purpose vehicles and pooled instruments to crowd in private capital, with exit proceeds reinvested.
Section 19(2) then checks that latitude decisively as the Board cannot borrow or take credit against the Fund’s own balance sheet, and is confined to project-level financing. The structural consequence is that financing gravitates to non-recourse or limited-recourse project finance, with security sitting at project or SPV level. The Fund’s balance sheet is simply not available as a credit backstop.
5. GOVERNMENT SUPPORT MEASURES ARE BESPOKE, NOT AUTOMATIC
Also, under section 34, the Cabinet Secretary may issue credit enhancement in favour of Fund projects binding undertakings, letters of support or credit, partial or full guarantees, and approvals for partial risk guarantees and political risk insurance but only to lower political-risk premiums or underwrite approved commercial risk under a negotiated project investment agreement, and always in compliance with the Public Finance Management Act (Cap. 412A).
For DFIs and international lenders, this is the provision that determines whether sovereign-linked enhancement attaches at all: each measure is a distinct instrument demanding its own PFM compliance review.
6. TRANSPARENCY, CUSTODY AND REAL PENAL EXPOSURE
Key is that the reporting cascades quarterly and annually to the Cabinet Secretary and onward to Cabinet and the National Assembly, with audited accounts published on the Treasury website.
Section 37(c) compels disclosure of any director or close-relative transaction, however the pecuniary benefit is routed, and section 40 anchors the Fund’s monies at the Central Bank of Kenya. The teeth are sharp as misappropriation under section 46 attracts repayment of twice the sum taken, a fine of not less than Kshs. 10 million or five years’ imprisonment (or both), plus surviving civil liability. Suffice, section 47 on general penalty floors at Kshs. 5 million or two years. These floors materially exceed comparable state-corporation statutes, directors and their advisers should treat them as live personal exposure, not boilerplate.
7. PRIVATIZATION PROCEEDS REDIRECTED
Finally, Section 49 amends section 54 of the Privatization Act, 2025, substituting the National Infrastructure Fund for the Consolidated Fund as the destination for privatization proceeds, is a quiet amendment with immediate drafting consequences for proceeds-flow clauses and disclosure schedules on live privatization mandates.
8. IMMEDIATE ACTION POINTS
| Action Item | Who Should Act | Statutory Basis |
|---|---|---|
| Confirm the project sits within the current gazetted Investment Policy before incurring transaction costs on Fund co-investment. | Sponsors; financiers; in-house counsel | ss. 25–31 |
| Structure lending on a limited-recourse, project/SPV basis — the Fund cannot borrow against its own balance sheet. | Lenders; project finance counsel | s. 19(2) |
| Treat every Government support measure as a distinct instrument requiring its own PFM Act compliance review. | Banking & finance counsel; DFIs | s. 34 |
| Update privatization precedents: proceeds-flow clauses must name the Fund, not the Consolidated Fund. | Transactional counsel | s. 49; s. 54 Privatization Act |
| Run the s. 15 disqualification checklist and conflict-of-interest protocol before accepting a Council or Board seat. | Corporate/governance counsel | ss. 12, 15, 16 |
This article is provided free of charge for information purposes only; it does not constitute legal advice and should be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary as set in the article should be held without seeking specific legal advice on the subject matter. If you have any query regarding the same, please do not hesitate to contact Litigation Department at Litigation@wamaeallen.com
About the author
Preston Ndombi Wawire is an experienced litigator of over 10 years standing and has perfected his art in civil and commercial litigation. He has vast experience in banking and recoveries litigation, insurance and malpractice law, and securities enforcement. Prestone has been involved in some of the most ground breaking litigation in injunctive matters and medical malpractice. Prestone is an active member of the Law Society of Kenya, Environment and Land Court Bar Bench Committee.
Denis Mutugi specializes in Commercial Litigation and Alternative Dispute Resolution.
Denis graduated with a Bachelor of Laws, LLB (Hons) from The University of Nairobi in 2021 and was admitted to the Roll of Advocates of the High Court of Kenya in the year 2023.
Denis has amassed a considerable wealth of experience in conducting legal research on various complex legal matters touching on Commercial, Insurance, Employment and Insolvency law and bankruptcy.
Nadio George is a dedicated Advocate of the High Court of Kenya, passionate about legal excellence, societal progress, and environmental stewardship. Admitted to the Roll of Advocates in 2023, he combines deep legal expertise with a strong commitment to making meaningful contributions to both the legal profession and the community.
