Economy

Treasury prepares for road toll fees protests

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Ministry of National Treasury and Planning Cabinet Secretary Ukur Yatani. PHOTO | FRANCIS NDERITU | NMG

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Summary

  • Cabinet Secretary Ukur Yatani told Parliament that regulations guiding the use of toll roads allow the Treasury to meet the shortfalls linked to reduced payment of tolls.
  • The rejection could be the form of public protests or through legal suits that might make difficult for private investors building the infrastructure to recover their investments.

The Treasury has promised to pay private investors in highways from taxes should motorists reject user fees, revealing fears in government about possible public resistance to road tolling.

Cabinet Secretary Ukur Yatani told Parliament that regulations guiding the use of toll roads allow the Treasury to meet the shortfalls linked to reduced payment of tolls in the wake of rejection.

The rejection could be the form of public protests or through legal suits that might make difficult for private investors building the infrastructure to recover their investments through toll charges.

Kenya is picking lessons from Nigeria where bloody protests led to the cancellation of toll fees in what was known as Lekki Toll Road. Motorists are staring at tough times ahead after the State tabled regulations, paving the way for the introduction of toll fees along the highways.

The regulations seek to implement the Public Roads Toll Act, Cap 407 and create a National Road Toll Fund, which guide the imposition of user fees on major national roads.

“Toll revenues failure is not really linked to poor project selection or laziness but has everything to do with social acceptability of tolls and potentially permutations in traffic volumes in future,” Mr Yatani told MPs.

“It is a necessary provision for the bankability of the National Road Toll Fund Regulations.” The clause is a sweetener to private contractors seeking to build roads and recover their investments from levying toll fees over an agreed period before handing the infrastructure back to the government.

This is an indication taxpayers will bear the cost of toll roads if targeted motorists refuse to pay for access.

In 2016, the government dropped plans to toll Nairobi Southern Bypass in 2016 after a huge public outcry.

Kenya is seeking more private investment in public infrastructure to maintain the pace of spending on new railways and other vital assets while reducing the budget deficit. 

The government has initiated several Public Private Partnership (PPP) projects to build roads, energy plants and housing, including the Nairobi Expressway that is being constructed by a Chinese firm.

The fees motorists pay for the use of roads jointly developed by the government and private investors under the PPP model will be deposited into a National Road Toll Fund.

The fund will be administered by an officer appointed by Treasury Cabinet Secretary and use the proceeds to pay private sector toll operators and service providers.

The State plans to construct several key highways through the PPP model, including the 243-km Nairobi-Nakuru-Mau Summit and Nairobi’s Southern Bypass, where motorists will pay toll charges when complete.

If implemented, the new charges, which amount to a new layer of taxation, will see motorists pay toll charges on top of the fuel levy despite the fact that roads are funded using tax revenues. The roads maintenance and fuel levies were also introduced in place of toll fees.

Road tolls were initially introduced in Kenya in the late 1980s, but were scrapped in the 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.

Road tolling was conceptualised in the developed world as a form of taxation through which governments could recoup the cost of road construction and maintenance given the huge rise in the number of vehicles.

The system allows a private entity that has built a road to charge a fee – better known as tolls – to recoup its investment before eventually handing over the highway to the State.

The Parliamentary Budget Office (PBO) has also questioned the viability of toll roads given the prevailing negative attitude, citing the case of Nigeria where the tolls collection was cancelled on the Lekki Toll Road after community riots against it.

This has made private contractors jittery, forcing governments to give assurances they will recoup their investments through guarantees on political risks and revenue shortfalls under PPP models.