Why Kenya's 30 pc development budget is not delivering

In theory, there is no country that can realise meaningful economic growth and development without reasonable investments on infrastructure. In an article published on February 24, 2022, the World Bank asserts that infrastructure investments are important for structural transformation of an economy.

Economic literature has sufficient evidence that economic investments in infrastructure support long-term growth by creating jobs, improving efficiency and attracting foreign investments. The associated gains include increase in Gross Domestic Product, reduction of logistics costs, facilitation of trade and stimulation of essential services like energy and telecommunication.

This understanding probably informed the philosophical architecture of our Constitution that has reserved a mandatory 30 per cent of annual budgets at both levels of government to development vote. Conceptually, this developmental threshold is complied with at allocation stage, except for a few county governments as per the Controller of Budget annual reports. However, the government performs dismally at the absorption level.

This low absorption rate of development expenditure partly explains the low impact of government spending at the community level. In an effort to address public demands for visible developmental impacts, the Uhuru Kenyatta administration entered into a dangerously debt driven infrastructure voyage.

However, at the tail end of the Jubilee administration, they reverted into Public Private Partnerships (PPPs) models. The PPP Act of 2021 opened a new frontier not only to facilitate infrastructure investments in the country, but also a sweetener for the political class to lie that no new taxes or debts are involved. In addition, the Act introduced alternative procurement methods to shield targeted PPP projects from the rigorous competitive demands under the Public Procurement and Asset Disposal Act of 2015.

From a public interest point of view, it would sound morally wrong to critique what appears by all intents and purposes as noble public investments by the government. Take for instance the Rironi -Mau Summit road project that the PPP Committee just cleared this past week, preferring the consortium of China Road and Bridge Corporation and the National Social Security Fund Board of Trustees.

According to the 32-page summary report shared by Kenya National Highways Authority (KeNHA), the new project expands the cancelled French Vinci Consortium from about 140 km to 175 km for A8 (Nairobi -Nakuru -Mau Summit) corridor and significant improvement to A8 South (Rironi interchange – Naivasha through Maai Mahiu) 58 km stretch. The evaluation report places the total cost for the bid at $1.32 billion or Sh173 billion.

The PPP would be a 30-year concession, including two years for construction and 28 years of operation and maintenance by the private investors. Unlike earlier PPPs, the evaluation committee seems to have been careful to insist the investors assume the forex and operations and maintenance costs so as to reduce any direct fiscal exposure to the government. On the revenue risk, the evaluation committee highlights the bidders were vague and demands they become clear on subsequent negotiations as to who assumes the risk.

To mitigate revenue risks, the evaluation committee offers that in case of shortfalls on estimated traffic, the investors may be allowed tariff adjustments, term extension for the concession and Viability Gap Fund (VGF).

Other than the revenue risk allocation, the other grey area raised by the evaluation team is the question of affordability. The evaluation notes the bidders complied with the limit of Sh8 per kilometre cap under the PPP Act plus one per cent cost escalation annually.

Technically, this places the minimum costs for any motorist who joins the highway at Rironi and exits at Mau Summit at Sh1,400 in year one.

This of course will be expected to vary based on the vehicle type and capacity, with truckers expected to bear the highest pinch. The committee subjects this to further negotiations to address the affordability question. Implicitly, the evaluation committee considers the minimum Sh1,400 still unaffordable at this stage of the project.

For the average Kenyan, basic common sense will dictate that the road should be done as early as yesterday. In recent years, this corridor has proved itself a death trap, sometimes wiping entire families in a twinkling of an eye. Frequent traffic snarl-ups, especially around festive seasons and major sporting events in Naivasha are well known to each one of us. Besides, Naivasha only competes with Mombasa when it comes to conferencing tourism.

Anyone who has ever driven along this road can attest to the reckless overtaking on this highway. In addition, foggy weather conditions and peculiarly very old slow moving mini-trucks and pick-ups ferrying vegetables and livestock, even during peak hours is a common sight on this road.

From an analytical point of view, how have this human behavioural and weather factors been accounted for in the feasibility metric? There have been credible analyses on social media that have indicated traffic volumes, minus the behavioural factors, may raise serious commercial viability questions on this project as a PPP. The bidders have actually picked this limitation, with the evaluation committee arguing the investors adopted a pessimistic approach on traffic volume estimates.

However, the difficult questions arise when we consider the circumstances and events around the PPP contract. Notably, this has passed as a Privately Initiated Project (PIP) after cancelling an earlier Sh180 billion contract. Main reasons raised for cancellation were around affordability, fiscal exposure to the government and costs. Under the French Vinci contract, it would have cost Sh1.29 billion per kilometre.

Assuming the contract value does not change in subsequent negotiations or cost variations during construction stage, the evaluated cost would be about Sh742.5 million per kilometre. Does this offer value for money to Kenyans then? Does it solve the traffic volume and affordability questions that necessitated the earlier cancellation?

To answer this, it would be necessary to factor in the Sh6.2 billion penalties paid in June this year for breach of contract to Vinci in order to pave way for the new bidders. More troubling, in a meeting with delegates from Nakuru County in State House on June 11, 2025, President Ruto seems to have had all the details of the project including design and specifications. He alluded to the government having negotiated with the investors to complete the project in two years, before 2027.

The evaluation report indicates the formal PIP was initiated in May 23, final development phase submitted on September 15, and evaluation completed on October 8, 2025. The question of NSSF funding infrastructure projects was first broached around this time by the President also. Being a PIP, are these small dots mere coincidences?

This is especially considering conspiracy theories and value for money questions that remain unaddressed from the Standard Gauge Rail and Nairobi Express way contracts!