Kenya: Sh300 Billion Road Project Put on Hold Over Debt

23 October 2019

The government has suspended the construction of the Sh300 billion Nairobi-Mombasa expressway for two years over the country's debt concerns.

It would have been Kenya's first expressway and the largest single-contract road project.

The project, modelled to complement the Sh327 billion Standard Gauge Railway, was to be undertaken by Bechtel, a US-based private construction conglomerate.

The company won the multibillion-shilling contract in a government-to-government deal that formed part of President Uhuru Kenyatta's discussions with President Donald Trump during his US visit last year.

PROJECT SUSPENDED

Transport Cabinet Secretary James Macharia told the Nation the Cabinet had decided to suspend the project for at least two years to allow the country's debt levels to drop, while also prioritising other key projects.

"The expressway as part of the Northern Corridor remains very important to us," he said. "However, we decided to give priority to two Public Private Partnership (PPPs) projects. So this will see us put this Mombasa expressway on hold for two years as we complete other road projects."

The announcement came a day after US Ambassador Kyle Carter said his government is worried about Kenya's debt levels and had suspended the project.

"The US government fully supports the efforts to build this signature project," he said. "Bechtel and the US government have remained fully engaged with Kenya and we continue to follow up on President Trump's and President Kenyatta's commitment to make the project a reality. But Kenya's debt is spiralling out of control. We don't want to pile up more debt on Kenyans. We want to do business in a transparent and ethical way and the onus is on Kenya to put its debts in order."

ROAD PROJECTS

The government, Mr Macharia said, is now prioritising the implementation of two road projects. The first is the Sh59 billion Mlolongo-JKIA-Uhuru Highway road, which will be financed under the PPP with the China Road and Bridge Corporation as the investor.

Another project

The other is the Sh180 billion Nairobi-Nakuru-Kapsabet road, whose investor will be the Rift Valley Connect consortium.

The project will involve expanding the road into a four-lane dual carriageway from Rironi in Limuru to Mau Summit as well as refurbishing the Rironi-Mai Mahiu-Naivasha road.

The construction, the minister said, will begin in January next year. "We want to gauge the success of these two public private partnership projects before we embark on the Mombasa one. By then, we hope that our debt levels shall have dropped to allow us to accommodate this kind of investment," he said, adding that taxpayers will not get value for their money at this juncture.

Under the PPP model, investors are expected to raise finances for the two road projects and design, construct, maintain and operate them on pre-agreed standards and specifications. The concession for both roads has been capped at 30 years.

SH2.836 TRILLION DEBT

The country's total public debt load edged closer to the Sh6 trillion mark in the first week of this month, with the total domestic debt standing at Sh2.836 trillion, while the external portion was Sh3.066 trillion, pushing the grand total to Sh5.902 trillion.

A fortnight ago, Parliament approved an increase in the debt threshold to Sh9 trillion as part of its efforts to ensure the Treasury is able to meet its annual budget going forward. As of the end of the 2018/19 fiscal year in June, the total public debt as a percentage of GDP was 55.2 per cent.

According to Betchel, the Mombasa-Nairobi highway was expected to create more than 500 direct jobs and thousands of indirect employment opportunities.

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