Fix the low absorption rate of development cash

The huge amounts of money allocated to develop infrastructure in the 2016/17 Budget indicates that President Uhuru Kenyatta and his team have taken to heart lessons on the important role roads and railways play in a country’s economic and social development.

The revival of the Sh260 billion road annuity programme last week is a further demonstration that State House and Treasury have found a way round the knotty issue of the perennial shortage of money to fund development projects.

Analysts hope that the team will also come up with a way of increasing the absorption of these development funds.
It is disappointing that the absorption rate of both the local and foreign funds borrowed from bilateral and multilateral lenders such as the World Bank stands at an averages of 30 per cent a year. Out of the Sh565 billion borrowed from the Bretton Woods institution over the past three years, for example, only Sh171.9 billion has been put to use.

Clearly, there is an urgent need to audit the structures and processes pertaining to the utilisation of these funds as the country cannot achieve the Vision 2030 goals with such a low absorption of development funds.

What is even worse, the country could find itself paying loans that were not used for the purposes for which they were intended because the low absorption rate also opens a window of opportunity for these funds to be misappropriated.

This may explain why analysts believe the revival of the road annuity programme could be a game-changer in the way development projects are funded. The major attraction of this programme is that the contractor assumes responsibility for the maintenance of the road for 10 years. This could mean the days when contractors were paid even after doing such a shoddy job are truly over.

The benefits to the country are even higher when the contractor is a foreign one and does not need to borrow money from domestic sources. The Sh17.3 billion agreement signed earlier this month between Kenya National Highways Authority (KenHA) and China Road and Bridge Corporation to carry out feasibility studies, design and construct the Western bypass is particularly welcomed.

The Nairobi Western Bypass Project will be implemented as an Engineering, Procurement and Construction Contract (EPC) and will be funded through a concessional loan from the  Chinese government.

Yet another development that demonstrates that country is entering a new phase in the building of roads is the Japanese offer to help the country come up with long-lasting and user-friendly amenities.

The hope is that the Government will accept this help and embrace the Japanese model so that the country can finally turn its back on high spend on road construction and maintenance which has been the bane of the sector since the emergence of “cow-boy contractors” in the 1980s.

According to Japan International Corporation Agency (Jica) Director for Africa Watanabe Daisuke, adoption of the Japanese construction model would see Kenya save up to 30 per cent on the maintenance of roads and other infrastructure projects.

Mr Watanabe’s revelation that the Chinese are also adopting this technology should encourage the Kenyan officials to also demand that all the current and future contracts be designed and executed in accordance with this model.

Analysts are unanimous that the Government needs to raise its sights beyond the building of roads and railways but also encourage establishment of industries along these routes.

This will ensure the new roads and railways—built at such great costs—will not only benefit importers of foreign goods into the country and the region, but held develop local industries.

The planned development of special economic zones in Naivasha and Athi River is a good beginning but it is not enough. The Government needs to step-up its efforts to ensure that these factories are owned and operated by Kenyans.—[email protected]