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State snubs Strabag’s pleas to revive road deal

Sameer Business Park, one of the buildings the government planned to demolish to expand Mombasa Road and construct a toll station in the area. Photo/SULEIMAN MBATIAH
Sameer Business Park, one of the buildings the government planned to demolish to expand Mombasa Road and construct a toll station in the area. Photo/SULEIMAN MBATIAH 

The government has rejected an appeal by construction firm, Strabag International, to halt termination of a deal that would have seen it build a Sh67 billion pay-for-use road meant to ease traffic jams around Nairobi.

Official correspondence showed that the government is no longer willing to work with Strabag towards the implementation of the project, opening opportunities for other rivals in the construction industry.

“We regret to advise that the government will not rescind or amend the afore-mentioned notice of termination dated February 23, 2011,” Roads permanent secretary Michael Kamau said in a letter to the construction firm in reference to an appeal lodged on March 17.

The fallout between the government and Strabag followed a conditional offer by the World Bank that it would only finance the project once Strabag — the project’s contractor — complied with its social and environmental safeguards including land acquisition and Kenyan legal provisions.

Reacting to the position by the World Bank, Mr Kamau slapped Strabag with a letter on February 23, terminating all form of engagement that would have led to the close of financial deals for the project.

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“As you are aware, the World Bank has formally conveyed to the government the decision that it will not support the project as currently structured. In this regard, a decision has been reached to terminate the process towards commercial close,” the PS said in a letter to Strabag through its local partners, Nairobi Motorway Company Limited.

The project is the centre of a dispute between the government and property owners over intended demolition of buildings valued at billions of shillings while an alternative road can be designed to pass through a less built-up area.

Strabag however maintained it was ready to comply with the requirements set out by the World Bank and urged the government to review its decision.

“We are very ready to carry on with the work and our only appeal to the ministry of Roads in Kenya is that we be given a chance to do so,” Wolfgang Sommerbauer, the director in-charge of international projects at Strabag told the Business Daily in an interview.

“We remain committed to ensuring we have a financial close within twelve months after signing the concession agreement and begin actual construction early next year.”

According to an initial blueprint of the project, dubbed Nairobi Toll Road (NTR), would entail paving of a 77-kilometre overpass between the Athi River Junction on Mombasa Road and Kikuyu on the Naivasha Highway.

Six sections

The concession would consist of six road sections along Uhuru Highway, a stretch within the greater Nairobi area aligned to what is referred to as the Northern Corridor.

The seventh section would be a 29km bypass as an alternative to the urban stretch of 25km.

The project was to be run on a 30-year build-operate-transfer (BOT) model.

Motorists using the facilities would be required to pay toll fees of about Sh572 per day to the concessionaire.

Although the project was to take off two years ago, ground breaking has not come to fruition after the World Bank’s private sector lending arm, the International Finance Corporation (IFC) raised several objections over integrity compliance procedures within the consortium of firms that operated under Strabag’s fold.

“Furthermore, as is standard in projects of this nature, IFC participation would also be subject to satisfactory completion of our standard project due diligence, certain social and environmental safeguards including land acquisition,” Jean Phillipe Prosper, IFC’s director for Eastern and Southern Africa said in a letter to the Roads ministry.

Roads minister Franklin Bett has gone on record saying that the government was however still willing to work with the World Bank on the project. Legal analysts also pointed out that the removal of Strabag from the deal could have legal implications, implying hefty compensation for lost business.

“We are not ready to walk that path yet...our energy will for now remain focused on trying to have talks with the government of Kenya that we be allowed to carry on with the project,” Mr Sommerbaue said.

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