Taxpayers paid investors Sh4.09 billion in termination costs for the construction of the Modogashe-Habasweini-Samatar/Rhamu-
, revealing the costly underside of the Roads Annuity Programme.
Disclosures from the Controller of Budget show that release of the money was approved on November 12, 2025, as the government moved in to pay off investors and contractors who had bagged the deal to fund and build the inter-county road.
The contractors had won the deal to build, operate and maintain the 143-kilometre (km) stretch of road linking Garissa, Wajir and Mandera counties but the government later dropped this plan and opted for an engineering, procurement and construction (EPC) model. Under the EPC model, contractors take the full responsibility, including shouldering the risk for designing, sourcing materials and building the roads.
Under the Roads Annuity Programme, which is part of the Public Private Partnership (PPP), the National Treasury must compensate investors and contractors for irregular termination of any deal.
The pay-off is meant to avoid lawsuits and also retain investor confidence.
“Sh4,093,106,803 to cater for the termination cost of the annuity project Lot 3 (Modogashe-Habasweini-Samatar/Rhamu-Mandera),” the report by the Controller of Budget reads.
The Kenya National Highways Authority had inked a deal for this project in November 2016. However, a value-for-money analysis and affordability review done in 2024 revealed that the project did not offer a compelling value for taxpayers, prompting the move to revoke it.
The project, referred to as Lot 3 is the second one under the annuity programme to be terminated, underscoring the negative side of the model that the government says offers an easier path to construct roads without burdening the Exchequer.
The lllasit-Njukini-Taveta Road project (Lot 32), spanning 63km was earlier cancelled with the government opting to construct it under the EPC model.
The penalty for this cancellation of the Lot 32 project was sh436.9 million, bringing to Sh4.529 billion the total penalties that taxpayers have paid for botched deals under the Roads Annuity Programme.
Kenya rolled out the Roads Annuity Programme in 2014 with the aim of delivering 10,000 km and thus increase the network of paved roads from 14,000 km to 24,000 km over a ten-year period.
Roads identified for construction through the Roads Annuity Programme in various counties were packaged into lots for ease of tendering and contract administration.
The Ngong-Kiserian-Isinya-Kajiado-Imaroro (Lot 33) stretching 91km, roads spanning 45 km in Nyeri, Kirinyaga, Muranga, Embu, Tharaka Nithi and Laikipia counties (Lot 15) and Lot 18 (35km of roads in Kakamega, Vihiga, Bungoma and Busia counties) have already been successfully delivered under this scheme.
The Treasury rolled out the Roads Annuity Programme as an alternative financing mechanism to relieve pressure on the exchequer in the construction and maintenance of the country’s vast road network.
