Taxpayers have paid Sh30.89 billion to contractors and lenders involved in the funding and construction of roads under the road annuity programme across 11 counties.
The scheme is a variant of the public-private partnership model whereby contractors design, build, and maintain the roads for a predetermined period.
Under this model, the contractor and the government each meet agreed portions of the total construction cost.
The government then repays the contractor its portion (for which the contractor will typically have sought financing from commercial banks) in equal instalments (annuity) over a set period from the time a road is completed.
The Treasury disclosures show that Sh20.56 billion has gone to the lenders that funded the firms that built the 90.55-kilometre roads in Kajiado County.
Kenya has also paid a further Sh5.94 billion to the banks and firms behind the construction of 44.72 km of roads connecting six counties in the central Kenya region, and also Sh4.39 billion for those who funded and built 35.3km of roads linking four counties in western Kenya.
The roads constructed under the road annuity model in Kajiado County have been in operation since May 2018, while those in the six counties of central Kenya have been in service since February 2022.
The payments, made since motorists started using the roads, have averted breaches of contract on the side of the government, ensuring that the firms continue to maintain the roads for the agreed time.
“Based on the respective SPs (service providers) financial performance and the directors for the seven projects are of the opinion that the companies will continue operations for the foreseeable future,” said the Treasury in the disclosures.
The 90.55km roads in Kajiado County are referred to as Lot 33, linking Ngong to Isinya and Kajiado to Imaroro, while those in Central Kenya are Lot 15 and connect several towns in Nyeri, Kirinyaga, Murang’a, Embu, Laikipia, and Tharaka Nithi.
The combined 35.3km of roads in western Kenya are Lot 18 and link urban centres in Kakamega, Vihiga, Bungoma, and Busia.
The three projects cost a combined $230.92 million (Sh29.82 billion at prevailing exchange rates) and have been key to boosting connectivity across the 11 counties. The firms agreed to operate and maintain the roads in Lots 15, 18, and 33 for 10 years. They are expected to recoup their investment and pay off the bank loans they took to fund the projects.
Kenya adopted the roads annuity projects, where banks fund construction firms to build roads without putting pressure on the Exchequer.
The government pays the investors by taking a portion from the collections of the Roads Maintenance Levy. The levy is currently charged at the rate of Sh25 for every litre of petrol and diesel that they buy. The levy was increased from Sh18 last year. Kenya established a Road Annuity Fund under the Public Finance Management (Roads Annuity Fund) Regulations 2015 to provide capital to meet the national government’s annuity payment obligations for the development and maintenance of roads.
