Mbadi now admits Sh5 trillion infrastructure fund is privately owned

Treasury Cabinet Secretary John Mbadi has confirmed that the National Infrastructure Fund isn't a public fund at all.

He told the court that it is a private limited liability company designed to handle trillions of shillings outside the normal constitutional framework governing public funds.  

The entity is intended to mobilise an excess of Sh5 trillion and to operate as a Limited Liability Company.

The entity was christened, the National Infrastructure Fund," CS Mbadi states in a detailed replying affidavit filed at the Milimani High Court yesterday.

The fresh details tendered in court by Mbadi now confirm fears of many Kenyans, including four petitioners led by Nakuru doctor Magare Gikenyi, who have challenged the constitutionality of the fund, that indeed, President William Ruto's administration is creating a massive corporate vehicle to manage public money while potentially sidestepping parliamentary scrutiny.

In what appears to be a deliberate strategy to circumvent constitutional requirements, Mbadi also makes the extraordinary admission that, despite its official name, the National Infrastructure Fund is not actually a fund in the constitutional sense, which governs public funds such as the Consolidated Fund.

"Though the entity was described as a 'Fund', its objects are not those of a 'Fund' within the meaning of Article 206 of the Constitution of Kenya, 2010," the CS declared in his affidavit.

Instead, the Treasury Chief revealed that the government intends to establish the entity as a Government Owned Enterprise under the Companies Act, complete with a corporate structure typically used for commercial state corporations, not for managing public infrastructure financing on a scale larger than Kenya's entire annual budget.

"It is the clear and unequivocal policy and legal intention of the Government that the entity be established, incorporated, and operationalised as a distinct corporate body under the Companies Act as a Government Owned Enterprise, vested with full corporate personality, capable of suing and being sued, acquiring, holding, and disposing of property, and entering into commercial, financial, and infrastructural transactions in its own name," Mbadi told the court.

The scale of the proposed entity is staggering. With plans to mobilise  Sh5 trillion, the National Infrastructure Fund PLC would handle more money than the country's entire 2024/2025 national budget of approximately Sh3.9 trillion.
Yet unlike constitutional funds, which are subject to strict parliamentary oversight and constitutional safeguards, this entity will operate as a private limited company, raising serious questions about transparency and accountability.

Dr Magare and three other petitioners challenging the Cabinet’s December decision to approve the fund's creation have filed a petition arguing that the structure and the establishment of the National Infrastructure Fund through executive action violate multiple constitutional provisions, including Articles 201, 204, and 206, which govern public finance management.

 They accuse the government of bypassing constitutional safeguards on public finance, parliamentary oversight, and public participation.

The petitioners argue that creating the entity through a Cabinet resolution threatens transparency and violates multiple provisions of the Constitution, including Articles on sovereignty of the people, prudent use of public resources, and separation of powers.  

Mbadi vigorously defended the corporate structure, arguing it would actually enhance rather than diminish accountability.

"The incorporation of the entity does not in any way diminish its public character, constitutional accountability, or statutory oversight, but rather provides an appropriate and robust legal framework for the transparent, efficient, and responsible management of public resources in line with sound corporate governance principles," He told the court.

The Treasury boss listed several oversight mechanisms he claims will apply to the company, including audits by the Auditor General and reporting requirements to Parliament.

"Pursuant to Section 34 of the Government Owned Enterprises Act, the operation of the entity is subject to audit by the Auditor General," Mbadi stated, attempting to assuage fears about a lack of oversight.

He further argued: "Pursuant to section 32(2) of the Government Owned Enterprises Act, the Cabinet Secretary is joined to make half-yearly reports to the Cabinet and the National Assembly on the performance of the entity."

In his affidavit, Mbadi outlined a complex funding mechanism that would see money flow from multiple sources into what he described as both public and private funding streams.
"The resources which will be sourced from both public and private sources to facilitate the financing of large-scale infrastructure," the CS explained.

On the critical question of how public funds would reach the company, Mbadi insisted all constitutional processes would be followed.

"Funding to the entity will be approved by parliament in an Appropriations Act as envisaged in Article 221 of the Constitution of Kenya 2010," he assured the court.

He further detailed a multi-layered approval process that proceeds from privatization will be paid into the consolidated fund in accordance with Article 201(1)(a) of the Constitution, and any withdrawals from such fund will be authorised by parliament through the appropriations act

"The withdrawals will be approved by an accounting officer of a national government entity, which in this case will be the National Treasury; Approved by the Controller of Budgets under Article 228(4) of the Constitution; and audited by the Attorney General in accordance with Article 229(4) of the Constitution, " the Treasury says.

The controversy traces back to a secret Cabinet meeting on December 15, 2025, where Mbadi and Attorney-General Dorcas Oduor jointly presented the proposal.

According to a confidential Cabinet communication signed by Secretary to the Cabinet Mercy Wanjau and attached to Mbadi's affidavit, Cabinet considered and approved the establishment of the National Infrastructure Fund PLC (NIF) and directed the Cabinet Secretary for the National Treasury and the Attorney General to take the necessary action.

The document, marked "SECRET" and labeled CAB/GEN.3/1/1 VOL.1 filed in court by the Treasury  CS, reveals that the decision was made at the 7th Cabinet Meeting - 2025 based on Cabinet Memorandum CAB(25)192.

Mbadi told the court the decision was driven by urgent national priorities.

"The establishment of the entity was necessitated by an overriding public interest to provide timely, efficient, and cost-effective mechanisms for the financing, development, and delivery of large-scale national infrastructure projects, while progressively reducing over-reliance on public borrowing and taxation."

Countering allegations by the petitioners that the fund has already been established, Mbadi insisted that the necessary processing is still underway and that no irreversible legal, financial, or operational actions have been undertaken so far.

"Contrary to the Petitioners' allegation that the National Infrastructure Fund has already been set up, I am aware that the necessary processing is still underway," he stated in the affidavit.

The CS said responsible state agencies are currently undertaking internal technical, legal, financial, and policy assessments to ensure utmost compliance with the law in its establishment.

Addressing concerns about accountability and transparency, Mbadi made several promises about how the company would operate within constitutional bounds.

He dismissed fears that the structure would weaken transparency.

 "Contrary to the Petitioners speculation, the incorporation of the entity does not weaken constitutional principles of transparency by taking away the oversight mandate of Parliament and the role of the Auditor General."

On public participation, Mbadi argued it was premature to claim violations since nothing has been implemented yet.

"The Cabinet decision complained of constitutes an internal executive policy determination which, at this stage, has not resulted in the enactment of legislation, appropriation of public funds, or the implementation of a binding legal instrument," he stated.

"Public participation shall be undertaken at the appropriate stage where constitutional or statutory processes, including legislation or parliamentary approval, are triggered, and it is therefore premature and speculative to allege a violation at this point,' Mbadi promised.

Perhaps most controversially, Mbadi argued that the courts should stay out of the matter entirely at this stage, warning that judicial intervention at this stage would offend the doctrine of separation of powers, as the action sought to be challenged still lies wholly within the purview of the Executive.

He further faulted the interim conservatory orders that halted implementation of the Cabinet resolution, maintaining that the applicants had not satisfied the legal test required to secure such relief.

Mbadi emphasised that no public funds have been appropriated or expended and that the matter has not moved beyond internal government deliberations.
  
“The Petitioners have not demonstrated that the failure to grant conservatory orders would render the Petition nugatory, particularly because no irreversible legal, financial, or operational actions have been undertaken,” he states.

CS Mbadi defended President Ruto's role in the process.

"The President acted within his constitutional mandate to direct and coordinate the functions of the National Executive and to chair Cabinet meetings at which policy directions of national importance are deliberated and approved."

Mbadi argues that the Cabinet has an exclusive mandate under Article 153(1) of the Constitution of Kenya to make policy directives approving the establishment of such entities.

 Mbadi dismissed allegations by the petitioners that the new corporate entity would duplicate or threaten the Equalisation Fund established under Article 204 of the Constitution.
"The establishment of the entity does not duplicate or divert functions of the Equalisation Fund established under Article 204 of the Constitution, as the Equalisation Fund is expressly limited to the provision of basic services in marginalised areas," He says.

The Treasury CS painted the infrastructure fund as a matter of urgent national importance, arguing that blocking it would harm public interest.

"The establishment of the entity was necessitated by an overriding public interest to provide timely, efficient, and cost-effective mechanisms for the financing, development, and delivery of large-scale national infrastructure projects, including roads and energy, while progressively reducing over-reliance on public borrowing and taxation," Mbadi explained to the court.

 Mbadi asked the court to throw out the petition entirely, characterising it as baseless fear-mongering.

"The Application is therefore misconceived, is unfounded in fact and law, is speculative, and is founded on unwarranted fears. I urge the Court to dismiss the same with costs," the Treasury boss stated.