Time flies with great content! Renew in to keep enjoying all our premium content.
Prime
KeNHA hit with Sh8.2bn penalties as project disputes top Sh32bn
Auditor General Nancy Gathungu making a presentation during the 8th Public Finance Management (PFM) Conference on November 5, 2025, at the Grand Royal Swiss Hotel, Kisumu.
The Kenya National Highways Authority (KeNHA) has incurred Sh8.2 billion in penalties on delayed payments to contractors in the financial year to June 30, 2025, even as project disputes pushed its contingent liabilities to Sh31.7 billion.
A latest report by the Auditor-General says that the Sh8.2 billion penalties and interest charges, tied to delayed settlement of pending bills, would have been avoided had KeNHA planned its affairs better.
KeNHA, in response to queries from the Business Daily, attributed the penalties to funding challenges, saying the interest arises automatically when certified works are not paid within the stipulated contractual period.
The State agency cited inadequate budgetary allocations and delays in the disbursement of approved funds from the Treasury in the current and previous financial years as a key driver for the penalties.
In addition, KeNHA said that it sometimes exhausts funding from its development partners before projects are completed, further leading to the penalties.
“To curtail further accrual of interest on delayed payments, the Authority continues to liaise with the Ministry of Roads and Transport and National Treasury for additional budgets to ensure that all the pending bills are settled,” said KeNHA.
The audit report further flagged a Sh7.1 billion or 29 percent rise in contingent liabilities to Sh31.68 billion, pointing to the extent of potential obligations that could arise if it loses disputes and claims with contractors.
The report noted that KeNHA closed June 2025 with current assets of Sh41.01 billion against current liabilities of Sh82.51 billion, leaving it with a negative working capital position of Sh41.49 billion. This means KeNHA may struggle to settle its obligations as they fall due.
“Crystallisation of any of the events would impact negatively and worsen the Authority's working capital status, thus adversely affecting its operations,” the audit warned.
KeNHA told Business Daily a significant portion of the contingent liabilities stems from disputes linked to project implementation, reflecting challenges in funding, contract management and execution of road works.
The authority added that it is increasingly adopting alternative dispute resolution (ADR) mechanisms to contain the growing exposure and avoid costly litigation.
“These contingent liabilities mainly arose due to disputes in the implementation of projects which had previously been heavily constrained by low budgetary allocations. The Authority is currently implementing ADR, including amicable settlements to reduce the exposure,” said KeNHA.
KeNHA’s multi-million-shilling penalties and other potential liabilities were recorded in the year the authority was flagged for irregularly using Sh7.3 billion from a securitised fuel levy fund, to compensate a consortium of French firms that were ousted from the Nairobi—Nakuru--Mau Summit Road project.
The Auditor-General said that the payout for terminating the deal did not qualify as pending bills payable from the fuel levy, which was set aside as security for a bank loan to clear contractors’ dues.
The compensation to the consortium, comprising Vinci Highways SAS, Meridian Infrastructure Africa Fund, and Vinci Concessions SAS, was made under an emergency payment and required belated approval from Parliament.
KenHA said pending bills dropped to Sh72.8 billion at the end of June last year from Sh87.9 billion in a similar period in 2024 due to “targeted settlements” enabled by the securitisation of the Road Maintenance Levy Fund.
The project has since been divided into two sections and awarded to a consortium of China Road and Bridge Corporation Kenya and the National Social Security Fund and Shandong Hi-Speed Road & Bridge International Engineering Co. Ltd at a combined Sh192.6 billion.
