Russian firm’s buy-in stalls major Nairobi road project

The construction of a major road meant to upgrade Nairobi’s infrastructure as part of the Vision 2030 development plan has stalled after the World Bank questioned the integrity of a company that won the tender for the works.

Nairobi Motorway Group, a consortium of A-Way/Strabag/HCH, was awarded the tender to build the Uhuru Highway overpass and the Southern by-pass as part of a 30-year concession deal that is also expected to introduce toll roads in Kenya.

But work on the project is yet to begin a year after it got Cabinet and parliamentary approval because the World Bank, a key financier, is opposed to the presence in the winning consortium of a Russian firm it has blacklisted.

“The consortium was formed by Strabag, an Austrian-German company and Housing & Construction Company, a subsidiary of Israel’s Shikun Binuy Arison Group,” said Mr Meshack Kidenda, the Kenya National Highways Authority’s (KENHA) director general.

People familiar with the matter said the Russian bought a 20 per cent stake in Strabag, the Austrian firm, after it was picked for the toll road concession, making it difficult for the government to act.

“This move has left the government between a rock and a hard place,” said a senior Roads ministry official, who cannot be named because he is not authorised to speak for the department.

The government cannot renege on the tender because such action could throw the project back for a number of years yet it cannot afford to upset a key partner such as the World Bank.

The Southern by-pass which runs along the Nairobi National Park fence across Langata Road into Kikuyu township to join the Nairobi-Nakuru highway at Rironi is meant to divert traffic from the centre and help reduce heavy congestion that is now estimated to cost Sh50 million in a day in lost man-hours and fuel.

Nairobi planners are worried that completion of the 12-lane Thika Highway in the absence of supporting infrastructure will cause a heavy build-up of traffic in the Central Business District eroding all the potential gains of the project.

“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 of Vision 2030.

Together with the planned overpass between Nairobi’s Nyayo Stadium and the Westlands roundabout, the Southern by-pass is meant to cut down traffic from Nairobi’s CBD by allowing the smooth passage of Mombasa or Nakuru-bound vehicles that have no business in the city centre.

Mr Mugo is concerned that the convergence of Thika Road and Mombasa, Nakuru bound traffic in Nairobi’s CBD will cause a major logjam and increase congestion instead of reducing it.

The toll road project is already a year behind schedule and senior Kenya government officials are said to be getting impatient with the World Bank’s grand-standing over the Russian firm, arguing that a 20 per cent stake does not even give the company a controlling stake in the project.

The WB is financing the toll road project to the tune of $40 million (about Sh3.2 billion) as part of the total $190 million (Sh15 billion) it has agreed to lend to Kenya under the Northern Corridor Transport Improvement Project.

The Cabinet authorized the Sh67 billion plan to lease out sections of Nairobi’s busy highways to private investors who will build, operate and transfer the roads back to the government under a 30-year concession.

World Bank officials in Nairobi said due diligence on the ownership structure of the concession company was on-going and its results will made public soon.

“Once this is done, a concession agreement will be signed to provide the details on the timing of invitation to bid and commencement of works,” said Mr Peter Warutere, the bank’s communication manager in Nairobi.

When it was picked as the winner of the concession tender in 2007, the Nairobi Motorway Group was shared equally between an Israeli and Austrian firms.

But the Russians later bought a stake into the company, causing the World Bank to demand a review of the tender.

Completes assessment

The World Bank says the review is particularly targeted at the company’s ownership structure to ensure it does not breach its lending regulations.

Construction of the Southern by-pass, including the building of interchanges, flyovers, box culverts, and standard pipe culverts, was to begin last December and last for three years.

It covers the Machakos turn-off -Athi River-JKIA-Westlands to Rironi, Kiambu, and the Southern by-pass from St James Hospital on Mombasa Road to Kikuyu, off the Nairobi-Nakuru highway.

A key plank of the project is construction of an elevated road from Nyayo Stadium to the Westlands round-about.

KENHA said the concession will be awarded as soon as the bank completes its assessment.

“If due diligence is successful, we will award the successful bid. The financiers need to get some level of comfort,” said Mr Kidenda.

Leasing of one of Kenya’s busiest highways is expected to reduce the time taken to cover the 106-km distance by more than two hours.

Privatisation of the stretch should give motorists a smooth ride on well maintained roads but at a cost.

Past 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.

Each motorist will pay between Sh120 and Sh1,426 every time they pass through a toll station, depending on vehicle size.

The cumulative charges between Athi River and Rironi, if all the toll stations are passed, would be 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 will pay Sh4,586.

The government invited international bidders for the Nairobi road concession in 2006 and three parties expressed interest in the project but only stayed to the bidding stage, according to information that Roads minister Franklin Bett tabled in Parliament.