Avoid pitfalls of expensive partnerships in road works

The growing involvement of private investors in building public infrastructure such as roads, energy plants and housing must not be seen to overburden consumers through costly user fees.

While public-private partnerships (PPPs) help government undertake mega projects at reduced or no debt, they should be carefully assessed to avoid the risk of tying Kenyans to unfairly structured arrangements that may raise costs.

For instance, the revelation that a Chinese firm will earn Sh106.8 billion or 163 percent of the Sh65.5 billion estimated cost of building the Nairobi Expressway leaves much to be desired.

This means that China Road and Bridge Corporation through its local arm — Moja Expressway Company — will be pocketing about Sh3.9 billion annually or 35 percent of revenues generated from toll fees charged on motorists.

The tolling will see motorists part with between Sh109 and Sh1,640 each depending on the distance covered on the double-decker road and size of the car. This brings to the fore the risk of raising the cost of doing business and putting inflationary pressure on the prices of goods and services.

Toll fees on the expressway and the Rironi-Nakuru-Mau Summit Road will start upon completion of the two highways and will add to the Sh18 per kilometre fuel levy currently charged for maintaining Kenya’s roads.

As Kenya races to maintain the pace of spending on new infrastructure with funding from private backers while reducing borrowings and budget deficit, it is important to create a balance between investor returns and cost to consumers.

It is true that PPPs must be designed to allow investors recoup their investment and gain from the high risk ventures. However, a proper cost-benefit analysis is crucial.

We must avoid the pitfalls in the power sector that have left Kenya with expensive electricity from hurriedly arranged long-term contracts that the country cannot unwind.

Therefore, the State must ensure future PPP projects strike a balance between rewarding investors and ensuring the public gets value from the infrastructure at a reasonable cost.