Macro-Economic Factors Influencing the Financing of Build-Operate-Transfer Projects : Evidence from a Railway Project in Kenya

The Government of Kenya entered in a concessional agreement with Rift Valley Railways (RVR) in 2006, under the build-operate-transfer financing arrangement, to boost economic growth. However, 10 years later, RVR's performance failed to meet performance targets, due to financing and technical capacity constraints, as per anecdotal reports. This article examined the influence selected macro-economic factors on the project's financing. We sourced primary data from 348 staff of key stakeholders. We applied Relative Importance Index to rank the factors based on their importance; besides, we applied Kendall's Coefficient of Concordance (W) to determine the degree of agreement among participants. Findings show that inflation rates ranked highest, scoring an index of 0.8; followed by interest rates (0.7), debt ratio (0.6) and taxation burden (0.6). The study obtained a strong level of concordance in perceptions regarding influence of macro-economic factors on the project's financing, which was also statistically significant at 0.01 error margin (W = 0.833, χ2 = 41.8223, df = 3 & ρ-value = 0.000). Besides financial and technical capacity, stakeholders should consider macro-economic environments, when evaluating RVR's performance. The study suggests the need for appropriate adjustments of the monetary, fiscal, taxation and domestic borrowing policies, among other interventions