Economy

Motorists to pay Chinese firm in dollars for expressway toll charges

Nairobi Expressway

The ongoing construction of Nairobi Expressway to the Jomo Kenyatta International Airport, along Mombasa Road in this picture taken on November 8, 2020. PHOTO | DENNIS ONSONGO | NMG

The State has opened a window allowing a Chinese company to adjust the Nairobi Expressway toll charges annually based on inflation in fees that will be paid in dollars.

In a gazette notice published last Thursday, Transport secretary James Macharia said the concessionaire, Moja Expressway, a subsidiary of China Road and Bridge Construction (CRBC), will be at liberty to review the set base toll rates (BRT).

Motorists using the road linking Mlolongo to the Nairobi-Nakuru highway via Jomo Kenyatta International Airport (JKIA) will pay between Sh100 and Sh1,550, depending on the size of the cars and distance travelled.

The rates are based on the dollar trading at Sh103.79 and will be reviewed based on inflation and the rate of Kenya shilling to the dollar, which currently stands at Sh109.17.

This means that the toll charges are dollar-based and will cushion the Chinese operator from exchange rate losses.

The Chinese firm, which will build and operate the Nairobi Expressway, is expected to earn an estimated Sh106.8 billion profit for the 27 years it will own the double-decker road.

“The BRT rates may be adjusted as per the Consumer Pricing Index (CPI) and exchange rate on and after the commercial operation date. The exchange rate on the execution date will be 1USD to Sh103.79,” it said.

The shilling has been under pressure against the dollar for most of this year after earnings from the crucial tourism sector collapsed due to the coronavirus crisis.

High-capacity vehicles like transit lorries will pay between Sh500 and Sh1,550 to use the expressway depending on distance travelled on the road, while low-capacity vehicles like saloon cars will pay between Sh100 and Sh310, according to the Kenya Gazette.

Motorbikes and three-wheelers commonly known as Tuk Tuks are banned on the double-decker road whose construction started early this year and will take two years to complete.

The privately funded project was last Thursday gazetted as a toll road that will remain under concession for the next 27 years upon commissioning.

The expressway involves a four-lane and six-lane dual carriageway within the existing median of Mombasa Road/Uhuru Highway/Waiyaki Way and 11 interchanges or exits and entry routes that will act as toll ramps.

The toll charges are forecast to generate Sh302.5 billion revenues, which will offer the Chinese firm an annual profit of Sh3.9 billion.

At Sh3.9 billion, CRBC’s forecast annual earnings from the double-decker road dwarf the profits of the majority of firms listed on the Nairobi Securities Exchange (NSE) — underlining the outsized cash the expressway will generate within the period.

Toll fees were introduced in the late 1980s but were scrapped in the mid-90s in favour of the roads maintenance levy currently charged at Sh18 per litre of petrol and diesel.

The return of toll fees is the result of using private investments in State infrastructure to build roads, energy plants and housing with investors recouping their cash from charging user fees like toll.

Kenya is seeking to maintain the pace of spending on new infrastructure with funding from private backers while reducing borrowings and budget deficit.

Besides the Nairobi Expressway, the Rironi-Nakuru-Mau Summit road will soon become a reality after the government entered into a public private partnership (PPP) with French Consortium of Companies to build the 233km highway at a cost of Sh160 billion.