After years of road projects in Kenya being put on hold, contractors are returning to work on estate roads and major highways. Roads CS Davis Chirchir assured contractors of plans to settle the outstanding payments. The sites had been quiet for months as contractors withdrew due to the billions of shillings in unpaid government payments. The government has invested over KSh 175 billion in the road industry through the fuel levy securitisation. “It’s an idea we toyed with for some time until we got support from the highest office in this country for us to move on,” Kenya Urban Roads Authority (KURA) director general Silas Kinoti said, as reported by Citizen TV.
What is fuel levy securitisation? Kenyans pay a KSh 25 tax on each litre of fuel they purchase for road maintenance. Now, the government is taking KSh 7 out of KSh 25, putting it into a financial instrument, and selling it to investors. Over the following seven years, they will get their money back. The transaction has generated KSh 175 billion in immediate upfront cash. The funds are currently being utilised to reimburse contractors for unpaid invoices, which is anticipated to revive over 580 stalled road projects, many of which are located in Nairobi. “Some of the KSh 175 billion will go toward road construction, some will cover interest on past-due payments, and some will be used for land compensation to clear the way for the construction of those roads,” Kinoti explained. Has the government paid contractors? Since 2016, pending bills have increased over time.
In 2022, President William Ruto’s administration revealed it inherited KSh 140 billion in unpaid dues in the roads sector. The state noted that 40% of the total amount owed to contractors has been paid thus far. It said the remaining 40% will be paid out in around two weeks, and the balance will be settled soon after. However, it has come to light that contractors were compelled to forfeit almost 35% of the interest on these unpaid invoices, even as they begin to receive payment. This raises concerns about potential coercive government actions. Ongoing road construction. How did stalled road projects affect Kenya?
In the third quarter of 2024, Kenya’s economic growth slowed to 4% from 6% in the same period in 2023. On Tuesday, January 7, the Kenya National Bureau of Statistics (KNBS) published its quarterly Gross Domestic Product (GDP) report, which showed slower growth in the majority of the economy’s sectors. Construction activity decreased by 2% during the reviewed period. Ruto’s administration cut road construction by 69%, a decline last seen during the former president Daniel Moi era. The nation’s road agencies built only 1,037 kilometres of roads during the first two fiscal years of the Kenya Kwanza Alliance administration.
Source: TUKO.co.ke
