Kenya faces Ksh.158 billion penalty for road toll breaches
Kenya risks being slapped with Sh158.8 billion damages if it terminates contracts with private firms that have built roads and solar power plants under the new public private partnership models.
National Treasury disclosures on seven projects that are either operational or under implementation show that Kenya would pay $1.4 billion for early termination of the PPP contracts due to government default.
These projects include the Nairobi Expressway, which is owned by China Road and Bridge Corporation (CRBC), roads and power plants.
Kenya is seeking to maintain the pace of spending on new infrastructure with funding from private backers while reducing borrowing and budget deficit.
The private investors will earn from charging user fees like toll charges for between 10 and 30 years, but analysts say such financing has often stumbled over government guarantees and revenue sharing arrangements.
“The estimation of contingent liabilities for PPPs is conducted based on a worst-case scenario, i.e early termination of the PPP contract due to government default,” the Treasury said.
In the past seven years, the government has borrowed heavily to invest in infrastructure, driving up public debt more than four times from Sh1.77 trillion in February 2013 to Sh7.9 trillion at the end of last week.
This sharp growth in public debt, which is now up to 73 percent of gross domestic product (GDP) has limited the financing options for further infrastructure investment.
The Treasury says the Government has identified a series of priority sectors for development of PPPs, including ports, roads, rail, power transmission, health, housing, water and sanitation and blue economy.
Currently, the seven projects including the Nairobi Expressway, Ngong-Kiserian-Isinya annuity road, Malindi Solar, Alten Solar, Cedate Solar Power, Chania Green and Selenkei SolarPower have been approved by the PPP Committee.
A parliamentary advisory on economic affairs has warned inadequate disclosures on tolling of the Nairobi Expressway could result in public resistance, potentially jolting government plans to have the Chinese contractor recover costs from charging motorists using the road.