President William Ruto (left) with his Italian counterpart Sergio Mattarella at the Presidential Palace in Rome, Italy. President is in Rome attending the Italy-Africa Summit.
The controversial Kimwarer and Arror dams are among stalled mega infrastructure projects set to be revived under public-private partnership (PPP) financing deals, a Treasury report shows.
The report has disclosed that the development of the two dams in Elgeyo Marakwet County was “ongoing under the PPP framework,” placing them in the growing list of public projects being handed to deep-pocketed private investors such as Indian billionaire Gautam Adani.
The listing of the dams under PPP projects signals that Kenya is losing interest in funding the multi-billion-shilling projects using loans amid concerns about the commercial viability of the dams.
Kenya and Italy earlier agreed to renegotiate the Sh19.8 controversial loan that Nairobi took to construct Arror and Kimwarer dams, setting the stage for a restart in construction after former President Uhuru Kenyatta cancelled the projects.
The review of €578.2 million (Sh79 billion) syndicated loan provided by Italian commercial banks was the highlight of last year’s talks in Nairobi between President William Ruto and his Italian counterpart, Sergio Mattarella.
President Ruto said Kenya was looking to resolve legal hurdles that stalled the projects after Kenya froze payments of the syndicated loans in the wake of the fraud allegations.
The projects stalled after the Director of Public Prosecutions (DPP) said that the cost of parts of the projects was inflated and that the contracts were awarded without regard to procurement laws.
Former Treasury cabinet secretary Henry Rotich was in July 2019 charged alongside some senior officials and forced out of office over allegations that they conspired to defraud the government while implementing the dam projects.
Mr Rotich denied wrongdoing and was later acquitted due to insufficient evidence.
Up to Sh19.8 billion had been paid in advance to various offshore firms for the Arror and Kimwarer projects despite the dams not being built.
Now, the Ministry of Water, as part of its budget proposal for the financial year starting July 2025, notes that inadequate irrigation infrastructure is impeding farmers in the fertile Kerio Valley, Elgeyo Marakwet County, from irrigating their farms.
Though fertile, Kerio Valley does not receive adequate rainfall.
“Arror and Kimwarer dams to be actualised to irrigate along fertile Kerio Valley that does not have sufficient rainfall,” says the Treasury report.
“Most of the projects in water and irrigation are being prepared as privately Initiated proposals (PIPs).”
Currently, there are three PPP projects in the water and sanitation sector, all of them at the development phase. It includes the Sh34.5 billion Galana Dam that is to be built and operated by the China Roads and Bridges Corporation for 30 years.
Another PIP project is the Sh106.1 billion Lamu Water Desalination Plant. The project, which is at the feasibility study phase, has been proposed by Rasli Bahari Kenya Ltd who proposes to build and operate the water project for 30 years.
The Londiani Dam Water Project is to be built over 30 years following the PIP proposal by Turkish firm Gap Insaat Yatirim Ve Dis Ticaret A.S (GaP).
A PIP has also been submitted for the development of a 220 Km water supply pipeline to abstract and transmit water from Mzima Springs to Mazeras Tanks in Mombasa County. Known as the Mzima II, it is a Sh50.6 billion project that Sichuan Roads and Bridges Group wants to build and operate for 30 years.
The Adani projects in Kenya—building of electricity transmission lines and upgrading of Jomo Kenyatta International Airport (JKIA)— were through PIPs.
Under PIPs, investors initiate the process of building public infrastructure using their resources in a procedure that circumvents competitive bidding.
Kenya has turned to PPPs to finance the construction of highways and other infrastructure after public debt ballooned and now consumes over 65 percent of taxes in annual service costs.
Under the proposed Adani deal worth nearly $2 billion (Sh258 billion), the Indian conglomerate was to add a second runway at JKIA and upgrade the passenger terminal in exchange for a 30-year lease.
It also secured a $736-million (Sh95 billion) deal with the Energy ministry in October to construct power transmission lines and base stations.
Dr Ruto on November 21 ordered the cancellation of a procurement process for the JKIA deal and the electricity contract after group founder Gautam Adani was indicted in the US for allegedly paying about $265 million (Sh34.2 billion) in bribes to Indian government officials.
Former President Uhuru Kenyatta in September 2019 cancelled the Kimwarer dam project following an investigation that established that it was technically and financially unfeasible.
He also issued an order for the commencement of the Arror dam project at half the cost as the technical committee he appointed to look into the developments found it economically viable.
Kenya defaulted on the Sh19.6 billion loan for the controversial Arror and Kimwarer dams having failed to make the first instalment payments to Italian Bank Intesa San Paolo in May 2021.
Italy and Kenya had agreed to withdraw the court cases linked to the cancellation of the dams project.
Kenya filed a suit against Italian firms while the contractors have also sued Nairobi in a counter-suit.
