State eyes Sh200bn in PPPs for road tollsThursday June 11 2020
The Treasury is targeting Sh200 billion worth of public private partnership (PPP) projects that will allow for introduction of toll charges for use of infrastructure such as roads.
Treasury Cabinet Secretary Ukur Yatani said Thursday in his Budget statement that the government is revitalising the PPP framework, which has so far failed to deliver meaningful projects years after being mooted, to give the State an alternative channel to finance infrastructure in the face of fast rising public debt.
The two most prominent PPP projects are in the roads sector — the Nairobi-Nakuru-Mau Summit highway that will cost Sh180 billion and the JKIA-Westlands expressway costing Sh60 billion.
Already, a Bill is before Parliament that seeks to revive the 15 toll stations that previously saw motorists pay to use major highways such as the Nairobi-Nakuru, Nairobi-Mombasa, Nairobi-Thika, Kisumu-Busia, Nakuru-Nyahururu and Ahero-Kisii roads.
“The government through this arrangement targets mobilising approximately Sh200 billion in the 2020/21 fiscal year by concluding the financing of several projects that are currently at an advanced stage of negotiations. These projects are drawn from among others the transport, energy, health, housing and manufacturing sectors of the economy,” said Mr Yatani.
“To further support such partnerships, I propose to amend the Public Roads Toll Act to enable the persons, who enter into an agreement with the government to collect road tolls on roads constructed and managed under such agreements.”
Previous efforts to roll out PPP projects have floundered on the back of red tape and investor fears over the guarantee of returns.
Lack of enough laws backing the collection of revenue, such as the toll road regulations, have also discouraged investors from taking up the opportunities on offer.
Toll fees were first 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 for petrol and diesel.
The toll charge is however likely to face hurdles, including a demand that the government provides alternative freeways for those who are unable to pay, or those who do not want to use the new roads.
Mr Yatani promised to bring a package of reforms on the PPP Act to make it easier for project partners to start working.
“The reforms in this area will include amending the PPP Act to remove unnecessary approvals and redundant processes as well as restructure and strengthen institutions responsible for implementing such projects.”
Additional reforms will see government supporting credit access for would-be project partners by offering letters of support, partial risk and indemnity guarantees and viability gap funding where necessary to enhance bankability of projects.
These reforms will now see the much needed projects, both on road infrastructure and in other key sectors such as energy and housing take off.