Kenya will pay a consortium of French contractors Sh6.2 billion for the termination of the Nairobi-Nakuru-Mau Summit Toll Road, adding to the taxpayers’ burden of paying for cancelled projects.
Disclosures by the Treasury show that the termination costs for the project are to be paid before the end of the current financial year ending June, with sources telling the Business Daily that payment is likely to be made before the end of this month.
The government terminated the Sh190 billion (1.3-billion euro) highway expansion deal with the consortium made up of Vinci Highways SAS, Meridian Infrastructure Africa Fund, and Vinci Concessions SAS, citing, among other things, high toll fees.
The project is expected to go to a Chinese contractor instead in a review that looks set to upset France, which brokered the deal in Paris in 2020 during a visit by then president Uhuru Kenyatta.
The push to have the Chinese contractor settle the Sh6.2 billion compensation bill and inherit works done by the French contractor, like the feasibility fees, was dropped during President William Ruto’s visit to China at the end of last month.
The consortium led by France’s Vinci SA Highway had inked the Sh190 billion deal, but construction for the project had not yet begun.
The termination of the project, which was to be funded from various sources like the Vinci Group, loans from the African Development Bank (AfDB), and guarantees from the World Bank, risked exposing Kenya to litigation and a diplomatic spat with France that backed its firms for the deal.
The three French firms, which won the tender procured by the Kenya National Highways Authority (KeNHA) in 2018, indicated that it was ready to break ground on the project, having obtained the financial backing of the AfDB and the World Bank’s International Finance Corporation (IFC).
The consortium was expected to recoup its investments in 30 years by charging toll fees on the road.
The Treasury said the high proposed toll fees were a put-off in the road project, which was aimed at decongesting the main artery from Nairobi to western Kenya and the neighbouring countries of Uganda, Rwanda and the Democratic Republic of Congo.
The former Director-General of the Public Private Partnership (PPP) Directorate at the Treasury, Chris Kirigua, revealed that motorists were to pay $6 (Sh774.77) to drive 175km in a small car and close to $50 (Sh6,456) for a truck to go the same distance.
It has not been smooth sailing for the project, with KeNHA, the procuring agent, cancelling the tender for independent experts to supervise the construction of the road in 2021.
The cancellation followed a challenge by a Spanish firm, Technica Y Proyectos, which had also bid for the contract.
It led to further delays in the progress of the project, which was conceived in 2017 as part of the Jubilee government’s broader strategy to upgrade key transport corridors under the PPP framework.
The Rift Valley Connect Consortium, led by French firm Vinci Highway, was in 2019 selected bidder after a competitive procurement process.
The project had the blessing of then President Kenyatta’s administration, with contractors ready to break ground after they completed the feasibility study and shared it with KeNHA, the procuring agency.
By the time the Ruto administration came to power, the only pending issue was financial closure.
In September 2022, the visiting French Minister of State for Development, Francophonie and International Partnerships, Ms Chrysoula Zacharopoulou, said it was up to Dr Ruto to decide when works on the road would begin.
“We have resumed talks, obviously, but it would be something important and would be nicer for the new administration to speak with the companies,” she said after attending Dr Ruto’s inauguration and later met with him at State House to discuss priorities in their bilateral relationships.
However, the Kenya Kwanza administration put the project on hold.
The Kenyan government has faced substantial financial implications following the cancellation of several projects, resulting in termination fees and compensation, a worrying trend that points to a failure to conduct proper due diligence when drawing up contracts.
The Ruto administration has since awarded the construction of the highway to undisclosed Chinese investors following the fallout with the French partners.
The PPP project had three components, including widening of 175 kilometres of the highway between Rironi and Mau Summit to become a four-lane dual carriage and the strengthening of 57.8km of the section between Rironi and Naivasha. It also involved the operation and maintenance of 12.43 km of the highway between Gitaru and Rironi.
In 2016, the Kenya Electricity Transmission Company (Ketraco) ended a contract awarded to a Spanish contractor to link the Kenyan grid to Uganda’s, citing “non-performance” when the project was more than halfway done.
An arbitration tribunal ruled in favour of the contractor, Instalaciones Inabensa SA, awarding it about Sh5.26 billion, which includes Sh835.65 million in accrued interest and Sh102.17 million in legal and arbitration costs.
Construction of a new terminal at Jomo Kenyatta International Airport, initially awarded to a joint venture of Chinese contractors, was later cancelled due to what the government said were economic constraints, even though the contractor had mobilised nearly all the equipment and completed a third of the project design.
As part of the out-of-court settlement, the Kenya Airports Authority (KAA) made a payment of Sh9.6 billion to Anhui Civil Engineering Group and China Aero Technology Engineering International Corporation (Catic) for the termination of the contract to build a second terminal at the JKIA.
The contractor had initially sought Sh17.6 billion as termination fees.
