CS Chirchir assures no new pending bills for road projects

The government plans to achieve this by tolling new highways and tapping into part of the road maintenance levy to fund construction. 

This comes as the ministry moves to pay contractors the second installment of pending bills that had stalled projects for nearly a decade.

The ministry says it is adopting new financing models for the construction and maintenance of new roads to prevent a fresh build-up of pending bills, which have long strained public finances.

“Contractor agreements on pending bills have a penalty of bank rates plus two percent, so that if the bank's cost of borrowing is 14 percent currently, they levy interest at 16 percent.

Or if the rate is 16 percent, they levy interest, in line with the contract, of 16 plus 2 percent. Which makes the pending bills very expensive,” said Transport CS Davis Chirchir.

To tackle nearly a decade of pending bills in the road construction sector, the government securitised a portion of the road maintenance levy, raising Ksh.175 billion to pay contractors.

“When we are doing securitisation we are basically taking a small portion of the RMLF. We’ve currently securitised 28 percent, so we still have 72 percent, which we have done some very careful planning to ensure that the amount available is able to maintain our roads in KeNHA, KURA and of course, KeRRA,” he added. 

The CS noted that all contractors have already received 40 percent of what they were owed. Under the settlement agreement, contractors were required to resume work after receiving this initial payment to qualify for the second instalment, which is another 40 percent of their pending bills.

“There are contractors who delayed in resuming work. There are contractors who even have not resumed today because they probably did not believe that we were going to raise the balance," he pointed out. 

"And therefore we will be more strict in how we pay the balance, the 40 percent which we are currently processing, and therefore we are currently reconciling through an addendum settlement agreement which asks questions including how many kilometres of work has been done since we last paid you."

While the government is making headway in clearing long-standing pending bills, concerns have emerged that the current surge in road projects could lead to fresh debt. The Ministry maintains this will not happen.

For the next two years, it says road works will be financed through three main streams: the Ksh.175 billion already raised from the initial securitisation, an additional Ksh.120 billion to be generated from securitising a further five shillings of the road maintenance levy, and the annual sector budget allocation of about Ksh.60 billion.