Several roads in the outskirts of Nairobi and the counties will be constructed using an annuity model, where banks provide the cash in loans, with financing planned to hit Sh170 billion in two years.
Among the roads to be tarmacked or improved are the Uplands-Githunguri-Ngewa-Ruiru and Bomas-Karen-Dagoretti-Ruiru, Kiserian-Magadi roads, 68-kilometre Modogashe-Samatur road in Wajir County, 75-kilometre Rhamu to Mandera road, says the Budget Policy Statement provided to Parliament for 2018-19.
The projects include the construction and rehabilitation of the 28-kilometre roads to augment select urban roads in six counties in Central Kenya (Nyeri, Embu, Kirinyaga, Murang’a, Tharaka-Nithi, Lakipia) and 32-kilometre roads in counties of Vihiga, Kakamega, Bungoma and Busia in western Kenya.
Some 67km will be paved to augment the existing road network from Illasit to Taveta through Njukini, a Treasury update says.
The Treasury has signed and done a financial close for the Kajiado-Imaroro and Ngong-Kiserian-Isinya roads, with the distance totalling 90.55 kilometres. KCB Bank is financing Intex Raf for the construction of the road.
For the other contract, negotiations with private parties have been concluded and await financial close. For most of the projects in the annuity payments, the State is using Design, Build, Finance, Operate and Maintain (DBFOM) model to ensure sustainability.
“The construction and rehabilitation of the roads to augment the existing roads from Modogashe–Habaswein–Samatar (68km) and Rhamu-Mandera (75km) is on a DBFOM model funded through annuity payments.
The project is in negotiations towards financial close,” the Treasury says in an update.
The Bomas-Magadi road involves rehabilitation of 71.5 kilometres.
“The project is the construction and rehabilitation of the 71.5 km roads to augment the existing roads from Bomas to Magadi; Bomas to Ruiru via Dagoretti and other link roads on a DBFOM model funded through annuity payments.”
Only two banks – including CfC Stanbic – have so far shown interest in the annuity financing model, putting into doubt the timing of the start and completion of the projects.
Initially, the Treasury had expected a quick uptake but this has not been the case several years since the announcement of the model for financing major projects including in the energy sector.
The annuity model of financing — where the Treasury reimburses the lender the loan over a period of time at a uniform rate — had stalled up to mid last year due to what was described as inflated rates asked by banks.
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