Kenya: Will the costly Nairobi Expressway ease gridlock?

Information from Kenya National Highways Authority (Kenha) shows that the Expressway budget was to be fully financed by China Road and Bridge Corporation (CRBC) at an initial cost of Ksh65bn ($559m) in October 2020 – but this has surged by 33% in less than 2 years.

In 2021, the government spent Ksh15.5bn for land compensation and transferring of utilities to pave the way for the construction of the highway. This was followed by Ksh7.6bn explained as a ‘need for extra funding’ by the Transport Cabinet Secretary James Macharia.

That rapid rise in construction cost is difficult to comprehend and abnormal for a project that proper feasibility was done

An additional Ksh9bn was also injected into the project last week to rehabilitate sections of the old Mombasa Road damaged by CRBC during the construction of the new expressway, setting the total for construction at Ksh97bn.

The most expensive road in Kenya

At Ksh97bn, every km of the Nairobi Expressway costs Ksh3.6bn, dwarfing the iconic 50km Thika superhighway, which was completed in 2012 and built at a cost of Ksh32bn (Ksh640m per km). As such, the Nairobi Expressway will be the most expensive road in Kenya.

“That rapid rise in construction cost is difficult to comprehend and abnormal for a project that proper feasibility was done and undertaken by [a] first class company,” says Nashon Okowa, chairperson at the Association of Construction Managers of Kenya.

It is not clear whether the latest Ksh9bn will fund acquisition of extra land, if need be, for the expansion of narrowed sections of the lower-decker road, underscoring that the overall cost of the project might go past the Ksh97bn mark. The highway is currently under guided public trials.

Motorists stuck in traffic pile-up on Nairobi Expressway https://t.co/fc0sCajP0t

— Citizen TV Kenya (@citizentvkenya) May 24, 2022

Boasting 11 interchanges, the four-lane dual carriageway project is expected to break gridlock along Mombasa Road, the main route to the country’s national carrier Jomo Kenyatta International Airport (JKIA), and reduce time to traverse the capital from West to East to about 20 minutes compared to the previous 2-3 hours.

The government has however declined to disclose the details of the Expressway contract despite being capital intensive, denying taxpayers a right to access information as stated in the constitution.

Motorists will pay between Ksh120 and Ksh1,800 for the full Westland-Mlolongo stretch depending on the size of the car and distance covered, up from the previous rates of between Ksh100 and Ksh1,550 stated in 2020.

The increases have been triggered to cushion the Chinese firm from exchange losses in the wake of the weakening Kenya shilling, which fell by 5.9% against the dollar, from Ksh109.55 in January 2021 to Ksh116.40 currently.

“The Base Toll Rates may be adjusted as per the Consumer Price Index and Exchange Rate on and after the commercial operation date,” says the notice published by Transport Secretary James Macharia.

This implies that the toll charges will always be on the upward trajectory as the Kenya shilling weakens against the dollar, partly contributed by the declining greenback reserves which has greatly impacted Kenya’s international trade capabilities and foreign investment.

Dollar demand

Higher dollar demand from Kenya importers following the reopening of the economy gradually dipped dollar stock by 12.9% to $8.29m (Ksh961.6bn) as of May 20, from $9.52bn (Ksh1.1trn) reserve held by end September 2021.

To add to the growing list of costs associated with the use of the highway, plans are underway to fine motorists who damage the Expressway infrastructure in the event of an accident. Detailed scope of the penalties is yet to be debated in parliament and made public.

Though pricey, the use of expressway is bound to gain momentum, experts say, citing necessity to save on the currently high cost of fuel.

“The road will be used because spending two hours in traffic from Haile Selassie to Mlolongo will mean spending more in fuel than when using the expressway,” says Okowa. “But as a country, it means going deeper into paying for it for [a] longer time than expected if few[er] people onboard the toll road.”

Moja Expressway, a subsidiary of CRBC, will operate the Nairobi Expressway and collect toll charges for 27 years to recoup billions of shillings gobbled into the project, with profit estimated at Ksh107bn.

With the Expressway contract details publicly unavailable, there is little information about whether a government guarantee is in place, or whether the cost of construction will be transferred to taxpayers in the event CRBC fails to recoup the capital through toll charges within the stipulated period.

“The risk around motorists not using the Expressway is borne by the operator and not the government of Kenya, so if it’s not used the payback period will be extended as infinitum,” says Aly Khan Satchu, an economist and investment consultant at Rich Management.

Transferring the cost to the government means taxpayers will grapple with an additional debt burden, currently in excess of Ksh8.2trn, equivalent to 70% of GDP.