Kenya to start ambitious countrywide road network

Kenya plans to start construction of the 720 km of roads in February through sustainable alternative framework of financing known as annuity concessions.

Infrastructure Principal Secretary Engineer John Mosonik said the first 720 km is part of Phase One's 2,000-kilometer road network under the Annuity Financing program.

"The regulations are being worked on with the input from the exchequer with a view to finalize the document in the next 10 days before it is taken to Parliament for approval to pave way for the launch," Mosonik told journalists late Thursday.

A total of 10,000 km of roads are to be constructed over the next five years in three phases at an estimated cost of 3.3 billion U.S. dollars with phase 1 covering 2,000 km of small roads expected to be completed in 2014/15.

In the second phase, 3,000 km of roads are to be constructed while the remaining 5,000 km will be set up in the final phase, all under the public private partnership arrangement.

Mosonik said roads that have been given priority in phase one are those that do not have major design and land acquisition challenges.

He said the ministry has received bids for the first nine lots out of the 45 spread across the country in the first phase to facilitate commencement of the work.

"Today we are receiving bids for the first nine out of the 45 lots spread throughout the country covering an approximately 720 km road network and we expect to receive bids for the remaining 36 lots by Feb. 6 and shall soon launch the selection process for phase two of the program," Mosonik said.

The government also expects to finalize establishment of an Infrastructure Fund, a kitty through which proceeds will be drawn to finance the program over a period of 10 years.

Currently, a task force comprising of financial and legal experts is working on a regulatory framework required to manage the fund.

Under the annuity concessions, the contractor is remunerated through a fixed, periodical payment (annuity) by government rather than through toll proceeds.

The new arrangement makes the contractor to be responsible for both the construction of the road as well as operating and maintaining it for 10 years.

The contractors will borrow money from the banks and other financial institutions and undertake the projects with expectation of payment by government over a period of 8 to 10 years.

Mosonik noted that under the arrangement payment for the services is made against agreed fixed installments which guarantee predictability in the budget.

This arrangement is a departure from the traditional and constrained funding of road works through the exchequer.

The road construction projects are just a few of the tenders in the infrastructure and transport sectors that are now opened to the private sector through the new Public Private Partnership Act, 2013. Endi