The 30-year concession would have seen motorists pay Sh572 for small vehicles, Sh1,147 for public service vehicles, Sh3,440 for buses and four-axle lorries, while heavy commercial trucks with five or more axles would pay Sh4,586. Photo/FILE
The government has invited Chinese contractors to take over construction of Nairobi’s Sh67 billion highway, a move that may spare motorists the burden of making daily payments to drive through the Kenyan capital.
Ministry of Roads officials said the World Bank’s exit had thrown them back to the drawing board to seek alternative means of financing the project after the preferred public private partnership involving a consortium led by Austrian firm Strabag collapsed last week.
Plans to privatise the road collapsed after it lost World Bank support over integrity, environmental and land acquisition concerns.
Congestion
“Public Private Partnership (PPP) was just one option of building the road,” said Mr Misheck Kidenda, the director-general of the Kenya National Highways Authority (KENHA).
“The government may decide to build the road and recover the money through taxes,” Mr Kidenda said, describing the road as key to easing congestion around the Kenyan capital.
Heavy budgetary commitments in the next couple of years as Kenya moves to the new constitutional dispensation have, however, left little room for pure government financing, opening a fresh window for Chinese contractors who had expressed interest in the project to come in.
China is being invited to revive its interest in the project that President Hu Jintao had committed to partly fund before the Chinese Parliament pulled the rug from under his feet.
The Chinese government had agreed to build a section of the highway connecting the Jomo Kenyatta International Airport to the United Nations offices in Gigiri at a cost of Sh5 billion but the MPs stopped the deal on grounds that Mr Hu had overshot the Sh2 billion limit that the law allows him to offer foreign governments without parliament’s approval.
Though abandonment of the PPP option may delay construction of the road, the move may come as a big relief to motorists who will now be spared the toll charges.
China is said to have emerged as a favourite to fund the project through a loan arrangement to be paid by the government over an agreed period of time.
Taking the project from Strabag – a western European company that was to build, operate and transfer the toll road under a 25 year concession – and awarding to the Chinese could however cause alarm in Western capitals, who may see it as yet another example of China’s rising commercial and geo-political influence in strategic African states like Kenya.
Pressure may even be brought to bear on the World Bank to soften its stance on Strabag to help stem ongoing loss of key infrastructure projects in Africa caused by China’s liberal approach to project financing.
An infrastructure finance expert, who did not want to be named because of his earlier involved on the toll road concession said the government should either address the shareholding issues surrounding Strabag or float the tender afresh.
“Who do you replace the World Bank with and why would they not have the same issue? The government should just re-tender the project,” he said.
The consortium of Strabag, A-Way and HCH - trading as the Nairobi Highway Group - won the concession for the 77 kilometre arc between Athi River and Rironi in Kikuyu under a build operate and transfer model where the World Bank was to contribute Sh3.2 billion as a lead financier.
When it was picked as the winner of the concession in 2007, the Nairobi Motorway Group was co-owned by the Israeli and Austrian firms.
But the Russians later bought a stake into the company – setting in motion a World Bank scrutiny that ended in last week’s collapse of the financing plan.
The World Bank demanded a review targeted at the company’s ownership structure to ensure it met the bank’s lending regulations.
Last week, the bank withdrew its financing until Strabag meets undisclosed integrity benchmarks.
Without the World Bank the project is technically in limbo because the bank’s involvement gives other lenders comfort that the contract meets international benchmarks and that the investment will be recouped as sovereign debt if it were to fail as a commercial enterprise.
“The project as it was originally constituted by Strabag and the consortium has collapsed. So the government is free to look for new partners,” said Roads minister Franklin Bett on Friday.
Asked if this would not attract punitive compensation claims from the consortium, Mr Bett said his foresight had mitigated against it.
“I refused to sign a commitment construct last year when the World Bank first raised opposition to the project partners. There is no opportunity for Strabag to seek compensation,” he said.
The 30-year concession would have seen motorists pay Sh572 for small vehicles, Sh1,147 for public service vehicles, Sh3,440 for buses and four-axle lorries, while heavy commercial trucks with five or more axles would pay Sh4,586.
Though longer, the 106 kilometre arc would see motorists cut by more than two hours the time taken to cover the 77 kilometre stretch through Mombasa Road, Uhuru Highway, Waiyaki Way and Naivasha Road.
Previous studies have shown that it takes the average motorist three hours to cover the stretch but the concession would reduce this to just 45 minutes.
Last week, the government constituted a committee to allow other forms of financing for the project which the Cabinet has agreed to fast track in order to realise the gains expected by the end of this year on completion of Thika Road.
It is feared that completing the 12-lane Thika Highway - being constructed by three Chinese firms at a cost of Sh27 billion - in the absence of supporting infrastructure would cause traffic jams in the city centre eroding its key benefit.
“Experience has shown that having super highways such as the upcoming Thika road pouring tens of vehicles into the city per minute without supporting arteries can only aggravate traffic congestion, “ says Mr Kibati Mugo, the director-general of the Vision 2030 Delivery Secretariat.
Mr Bett said the government was considering how the project could be fast tracked in order to address these concerns.
The toll road project is already two years behind schedule and had a project span of three years.
When President Hu visited Kenya six years ago, he had promised to provide Sh5.3 billion for the section linking Jomo Kenyatta International Airport with the UN headquarters at Gigiri.
However, this amount was scaled down to Sh2.2 billion, the maximum amount the President is allowed to commit the Exchequer to under Chinese law.
The money was used to construct an additional lane on both sides of Mombasa Road and to install set street lighting, leaving the expansion of Uhuru Highway and removal of rounds about along it undone.
After bilateral talks between President Kibaki and President Hu in 2009 in Beijing, China agreed to finance five projects - a seaport, road, railway, airport and refinery - meant to open up World Heritage site Lamu as a gateway to Ethiopia and the new state of Southern Sudan.
