Economy

US firm rejects toll fees for Mombasa-Nairobi road

road

A section of Thika Road. FILE PHOTO | NMG

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Summary

  • The US firm contracted to build the Sh300 billion Nairobi-Mombasa Expressway has rejected Kenya’s offer.
  • PBO on Tuesday said American contractor Bechtel has settled on a model where the State pays it for building the road instead of recovering its money through user fees.

The US firm contracted to build the Sh300 billion Nairobi-Mombasa Expressway has rejected Kenya’s offer to have it construct the road and recover its costs from charging motorists toll fees.

The Parliamentary Budget Office (PBO) on Tuesday said American contractor Bechtel has settled on a model where the State pays it for building the road instead of recovering its money through user fees.

This will force the government to borrow the billions of shillings, jerking public debt whose rapid growth has triggered warnings and throwing the road construction into limbo.

Motorists were expected to pay toll charges for the luxury of cruising on the route which is currently characterised by heavy congestion and slow speeds.

The budget office cited a study by Inter-America Development Bank showed a road is likely to be a viable candidate for construction through the toll model if it has a flow exceeding 5,000 vehicles per day unless the government offers a substantial subsidy to the contractor.

“This limits the number of roads that can be undertaken by the model in Kenya to a few sections of the main transport corridors. Along the A8 (Malaba – Eldoret – Nakuru – Nairobi – Voi – Mombasa) road, the Nairobi Expressway has so far proved to be a viable section for tolling while the Mombasa – Nairobi Expressway has proved difficult,” PBO said.

“The contractor has indicated that the country will get better value for money if the road is constructed under an EPC (Engineering, Procurement and Construction) model rather than a toll model.”

Bechtel argues that the alternative public-private partnerships (PPP) model where the contractor sources for funds would cost five times more at $15 billion (Sh1.5 trillion) and take much longer to complete.

The plan to build the Nairobi-Mombasa Expressway dates back to the July 2015, when then US President Barack Obama signed a memoramdum of understanding with the Kenyan government.

The US government nominated construction giant Bechtel Corporation to be considered for the project.

The new dual carriageway was set to have two lanes on either side and run parallel to the current Nairobi-Mombasa Road.

The project contract was signed in August 2017 and was single-sourced to the American firm, keeping with the tradition of state-to-state funding deals that favour companies from the financing country.

The toll model has been hailed as a solution to the road financing problem since it takes the pressure off a country to accumulate public debt.

Many countries, including the Canada, France, UK, India, South Africa and Nigeria, have adopted the toll model to fund their road infrastructure.

Toll fees were introduced in Kenya in the late 1980s but were scrapped in the mid-1990s in favour of the roads maintenance levy currently charged at Sh18 per litre of petrol and diesel.

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

The current Sh7.8 trillion public debt accounts for 72 percent of the GDP and is above the threshold set to measure sustainability.

The government has approved the construction of Nairobi Expressway by China Road and Bridge Corporation (CRBC) granting the firm a concession to operate the road and recover funds by charging motorists toll fees for 30 years before ceding it to the State.

The project is ongoing and is expected to be completed by December, 2021 at an estimated cost of Sh67 billion.

Roads targeted for tolling include Nakuru Highway, Mombasa Road, Thika Superhighway and Nairobi’s Southern Bypass.

The PBO has, however, raised concerns that toll roads may lead to civil unrest.

The Chinese contractor has kicked off the recruitment of attendants to collect toll fees as the pay-for-use project nears completion.

“The Nairobi Expressway project has also not won full support of the public since the project is shrouded [in secrecy], with lack of proper and comprehensive information disclosure and other ambiguities especially on assumptions behind the 30 years’ period given to the investor and the risk mitigation measures if the assumptions fail to hold,” the PBO said.

There are also concerns that tolls will be a double tax on many motorists who are currently paying for road maintenance through the fuel levy.

The budget office cited the case of Nigeria where the tolling collection was cancelled on the Lekki Toll Road after community riots against paying of tolls.

In Kenya, a proposal to introduce tolling in 2016 on the Nairobi Southern Bypass sparked public outcry.