Economy

The mechanics of toll roads in the era of public, private partnerships

BDHighwayone

An artistic impression of Nairobi to Mau summit toll road. KeNHA plans to mobilise Sh12.5 billion for the Mau Summit-Malaba section. FILE PHOTO | POOL

Kenya's planned most expensive toll road is back in the news following reports that the new administration has put the $1.5 billion (Sh185 billion) Mau Summit highway on ice.

This has rekindled the debate on the viability of toll roads in Kenya, as the idea of charging motorists to use the 233-kilometre road remains unpopular among those who fear it would drive up the cost of commuting to and from Nairobi to this part of the country.

But for a government —or at least that of retired President Uhuru Kenyatta who built the Nairobi Expressway and conceived the Nairobi-Nakuru-Mau Summit Toll Road—letting a private investor design, finance, construct, operate and maintain such a project was one way for a debt-laden Kenya with massive infrastructural funding gap to eat its cake and have it.

Read: Financiers wait for Ruto nod on Mau Summit road

What is the mechanics of a toll road?

A toll road or highway is one that drivers must pay to use like motorists are doing on the Nairobi Expressway. The toll revenues are generally used to recoup the cost of road construction and maintenance.

Toll roads, according to the Treasury, are some of the projects being undertaken under the Public Private Partnership (PPP) model, with the government providing support such as land and also de-risking the project by taking a letter of support.

To incentivise the private investor, the government might, for example, provide land and pay for the evacuation of such utilities as electric poles and lines, fibre optic cables and sewer lines.

Also, the government accepts to carry the risk of the project in its books as a contingent liability, with the State taking out a letter of support covering political risks to insure against lawsuits in case of a call-up by the investor.

For example, taxpayers will pay Sh24.9 billion for land compensation, evacuation of utilities, and upgrade of the old Mombasa Road while building the 27.4-kilometre expressway.

How many projects are currently under PPP?

Kenya’s PPPs have 45 projects under implementation or in active operation, six of which are road projects totalling 639km under the Roads Annuity and Tolling Programmes.

Another 39 are electricity generation projects totalling 3,034 megawatts of installed capacity.

Read: Ruto puts Uhuru's most expensive road on hold

Road tolls were introduced in Kenya in the late 1980s but were scrapped mid-1990s in favour of the Roads Maintenance Levy to eliminate corruption at toll stations.

The levy is currently charged at Sh18 per litre for petrol and diesel.

Why is the government so keen on toll roads?

With a toll road, a government that is quickly running out of space to borrow due to high debt levels or tax, but still needs to open up the country, believes it can still achieve its objective.

“The government enacted the Public Private Partnerships (PPPs) Act in 2013 to prioritize PPPs as a mechanism to address the major infrastructure funding gap in a time of constrained fiscal space, competing development pressures, particularly in the social sectors, and rising public expenditure demands from the national and devolved structure,” said the Treasury in the Budget Policy Statement, 2022.

The IMF describes this uniquely African problem, Kenya has been partnering with the private sector to fund some of its mega infrastructural projects.

Generally, Kenya has been running out of fiscal space (it can neither tax Kenyans to the bone nor incur more debt) to fund the building of roads, railways, bridges, ports, and dams.

Why has it not been easy to do toll roads?

The major hurdle for the launch of toll roads in Kenya is getting the buy-in of the population, with a lot of them offended by the idea of paying for a road from their pockets.

Even when they are not being charged a toll fee to use a road, motorists pay a fuel maintenance levy for the maintenance of the road, which in itself is like a levy to use the road.

Mau Summit highway tolling resistance has also come from the residents of the three counties through which the road would traverse.

It is also the reason the government decided to shelve plans to introduce pay-for-use charges on the Nairobi-Thika highway, choosing instead to distribute the cost of maintaining the road to all motorists.

The Kenya National Highways Authority (Kenha) decided to outsource the maintenance of the road to a private contractor and to pay for it from the Road Maintenance Levy Fund (RMLF).

When are toll fees prohibitive?

Last June, logistics firm Siginon Group announced that it had pulled its trucks out of the Dar es Salaam-Lubumbashi route due to hefty road toll charges that made the route unviable.

According to the firm, it had become unstainable to pay $1,670 (Sh195,724) in road toll charges when moving a truck from Dar to Lubumbashi, the third largest city in the DRC.

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