20 March 2018

Kenya: Treasury Mulls New Sh300 Billion Loan for Nairobi-Mombasa Expressway

Photo: Daily Nation
Vehicles along the Nairobi-Mombasa highway.

The Treasury is considering a proposal to take a new Sh300 billion loan from the United States to finance the construction of a six-lane expressway to link Mombasa and Nairobi, which has attracted the attention of Parliament.

The National Assembly's Transport Committee has invited Treasury, Transport ministry and roads agency officials to a meeting in Nairobi Tuesday morning to discuss the options in financing the building of the new road by American construction giant Bechtel.

On the table is the option of entering into a Private-Public-Partnership and having a company or a set of companies build the road and then recoup their costs by charging tolls or taking the loan under the government-to-government model and using the tolls to pay for the cost.

OPTIONS ON TABLE

Mr Stanley Kamau, director of the Public-Private-Partnerships Unit at the Treasury, told the Nation that all the options were on the table.

"You have to look at the best action in terms of pricing, timelines and everything else, and that is what is on the table for discussion, so I wouldn't say that a decision has been made. Those decisions are being considered," said Mr Kamau.

Pokot South MP David Pkosing, who chairs the Transport committee, said the team wanted to hear from the Treasury, the Transport and Infrastructure ministry and the roads authorities on the project.

"For us, it is about what is best for the country. Being an oversight institution and representing the people, we are supposed to gauge what is the best model and what is in the best interests of Kenyans. Our yardstick is what is cheaper and what is deliverable," said Mr Pkosing.

The committee's meeting follows reports that the US firm wants Kenya to finance the new highway, initially estimated to cost Sh230 billion, with a loan from a United States bank and another institution in the United Kingdom.

Mr Pkosing said he had informally been told about the proposal by the American company, but wanted the MPs to receive the information officially from the parties involved.

DESIGN OF ROAD

Bechtel, which has already secured the job, and has been working with the Kenyan authorities on the design of the new road, is one of the largest engineering and construction firms in the world.

But its proposal has caused jitters within both the Executive and Parliament because of an increase in public debt that would come with a new loan of that size.

Kenya's use of a government-to-government loan to finance the construction of the standard gauge railway has been criticised, especially because the bulk of the money went back to China through the company building the new railway.

The planned six-lane road will run parallel to the existing one and will be 473 kilometres long with 48 kilometres of interchanges, 189 kilometres of local roads, 76 overpasses, 21 underpasses and 189 culverts.

FIRST TOLL ROAD

It will be the first toll road in Kenya, with motorists paying a fee, and the money then being used to finance its construction.

Bechtel is pushing for Kenya to enter into a deal with the United States and said at a meeting with Treasury officials on Tuesday last week that the project could pay for itself over 25 years.

From their calculations, building it under a public-private partnership would cost the government Sh540 billion over the same 25 years.

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