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James Macharia, the super minister with tonnes of cash but little to show for it

By Dominic Omondi and Macharia Kamau | Oct 23rd 2019 | 8 min read
Transport Cabinet Secretary James Macharia.

When it comes to mega deals, James Wainaina Macharia, is a force to reckon with.

Kenya’s influential Transport Cabinet Secretary negotiates massive infrastructure deals and State partnerships, from the building of highways to providing affordable housing for the poor.

It is safe to say that CS Macharia plays a vital role in multi-billion-shilling deals – and the numbers under his Transport, Infrastructure, Housing and Urban Development Ministry say it all.

He commands one of the largest ministerial budgets averaging Sh310 billion annually compared to figures of between Sh20 billion and Sh100 billion a majority of the rest are allocated.

Only the Health and Education ministries control bigger budgets, although the bulk of their cash goes to recurrent spending, unlike Mr Macharia who oversees the country’s largest development budget, valued at an average of 47 per cent of the total annual development budget.

This means that from every Sh1,000 that Kenya has set aside to grow the economy in the three years to June 2018, the Transport ministry alone got an average of Sh470. The trouble with this investment, however, is that its fruits take a while to be realised.

Bigger budget

From these glittering numbers, two other figures stand out.

Out of the Sh6 trillion that Kenyan taxpayers owe various creditors, Macharia’s ministry accounts for more than Sh800 billion of these debts.

Further, of the 545 stalled State projects valued at Sh365.9 billion as of June 2018, 87 of these projects fall under his docket, according to a report by the Parliamentary Budget Office.

These projects are valued at around Sh100 billion, which is nearly a third of the value of the total stalled projects.

The projects have already gobbled up around Sh24.4 billion, cash that taxpayers will have to pay, regardless of whether they get value for it or not.

One of the biggest sticking points the ministry has to deal with is the Standard Gauge Railway (SGR) project, but Macharia does not seem to understand why Kenyans are asking questions about the viability of the rail, which recently reached Naivasha.

Yet, the concerns raised are valid, experts say. From next year, each of the 48 million Kenyans will start paying at least Sh1,485 annually in both principal and interest on the Sh327 billion loan that the country took from China for the construction of the ambitious project. And this will go on for 10 years.

Back when he was at the C-suite at NIC Bank (now NCBA), Macharia was a soft-spoken banker who was ready to respond to all questions, educated or otherwise, from journalists.

If, for whatever reason, he could not respond to queries immediately, he was courteous enough to ask for more time and more often than not, he kept his word and held amiable follow-up telephone conversations.

Finance lessons

But in 2013, a few months after President Uhuru Kenyatta tapped him from his banking job to serve Kenyans as a Cabinet Secretary, the soft-spoken, amiable demeanour was gone, and in its place arose a different man.

Today, he takes no prisoners when defending some of his decisions at the helm of the Transport, Infrastructure, Housing and Urban Development Ministry, whose budget makes him one of the most powerful CSs in Government.

Last week, for instance, he offered free basic finance lessons to the critics of the SGR who have questioned the viability of the mega project.

“Those people who talk about SGR being loss-making, those are people who need to be put in a classroom and taught about SGR. They should talk from facts. Either they can call us for breakfast or I call them for breakfast, we sit down, put up a blackboard and tell them this is what SGR means,” said the CS when questioned if the railway is self-sustaining.

Since November 2015, when President Uhuru entrusted him with the expansive ministry after moving him from the Health docket, to June 2018, Macharia’s five State departments combined have received a staggering Sh800 billion in development cash, most of which has been borrowed.

From these funds, official data shows that since 2016, the ministry has been able to stretch the length of tarmacked roads by 2,388 kilometres. However, questions linger as to whether this is all the astronomical budget could do.

These kilometres of road have come at a brutal cost. Factoring in the cost of bridges and culverts, some of the roads that have been built under Macharia’s watch have gobbled up Sh1 billion a kilometre.

The 11-kilometre Dongo Kundu Bypass in Mombasa, for instance, cost Sh11 billion.

The second and third phases of the project, an 8.9-kilometre road section between Mwache Junction and Mteza, and a 6.9-kilometre road from Mteza and Kibundani connecting the highway to the Likoni-Lunga Lunga road, will cost Sh30 billion, translating to close to Sh2 billion per kilometre.

A key contributor to the high cost is two sea bridges, with a length of 2.1 kilometres.

On the less complex roads that do not require additional features like interchanges, a look at the data shows taxpayers are spending an average of Sh181 million for every new kilometre of tarmac being laid.

This is a more than 100 per cent increase from the Sh83 million per kilometre average spend in 2013. In the Democratic Republic of Congo, the average price per kilometre of road is Sh34 million, while in Ethiopia, it is Sh83 million.

Major achievement

Aside from expanding the road network, the commissioning of the SGR to Naivasha is another major achievement of the ministry under Macharia’s watch.

But the CS has been at pains to explain how the mega projects he has been launching will benefit taxpayers.

This was the case recently when he insisted during an interview with KTN last week that the SGR is the most profitable and viable project in sub-Saharan Africa.

But Kenya Railways Corporation (KRC), which falls under his docket, has for the last five months failed to publish accounts to that effect.

Instead, the Kenya National Bureau of Statistics (KNBS) only gave SGR figures for January and February this year.

Macharia’s portfolio has been getting bigger and bigger. In addition to Transport and Infrastructure, President Uhuru heaped on him Housing and Urban Development, Public Works as well as the Shipping and Maritime Affairs dockets.

These additional responsibilities have resulted in additional controversies, stretching from stalled and delayed projects, to claims of shoddily done work, as well as State departments that cannot account for the billions of shillings allocated to them each financial year.

In his latest report on how the Government spent money, outgoing financial czar Edward Ouko found four of the five State departments under CS Macharia to have either misrepresented or misstated their financial statements, pointing to a misuse of funds that earned them adverse audit opinion.

Even the Maritime and Shipping Affairs Department, which did not get an adverse opinion, had a qualified opinion, meaning it had not offered every document that would enable Mr Ouko to give it a clean bill of health.

The Auditor-General concluded in his report that: “the financial statements exhibit significant misstatement with the underlying accounting records .... Problems are widespread, persistent and require considerable interventions by the management to rectify.”

And it is not just in accounting where the State departments have failed to live up to expectations.

Major projects under Macharia’s docket have stalled or delayed, while others are surrounded by a host of controversies.

For instance, the cost of Outering Road in Nairobi when completed is still unknown to date, despite such nagging inconveniences as not having a designated stage for matatus.

The 13km dual carriageway was to cost Sh7.4 billion, but the amount was raised to Sh9.2 billion in 2015.

But if money is power, as they say, then Macharia could easily be ranked among the most powerful Cabinet Secretaries in Uhuru’s government.

It is perhaps from this position of power that the CS has taken to dishing out harsh words to his critics, earning love and opposition in equal measure.

“Those people who are saying the SGR is making losses need to be taught the mathematics of SGR,” he said in an interview with KTN.

Job creation

However, despite numerous efforts to get this explanation, calls to Macharia’s phone went unanswered, and he had not responded to our text messages by the time of going to press.

The benefits of the SGR, according to some economists, are not to be seen in the operation of the line itself, but elsewhere in the economy. SGR’s profit, like many other public goods, is implicit. This means that it cannot be fully captured in the project’s balance sheet.

These implicit benefits include the creation of jobs along the line, with people building homes, offices and markets in strategic places at the various stations in anticipation of enhanced traffic, said Gerrishon Ikiara, an economics lecturer at the University of Nairobi.

Uhuru also captured this notion when he noted that the building of the railway would translate to development.

“Even here in Ongata Rongai where the railway is passing through there will be a lot of jobs created,” he said when he unveiled the Nairobi-Naivasha phase of the SGR last week.

Other implicit benefits include the ease of collecting taxes on cargo that is carried on the SGR, reduced costs of transportation, reduced wear and tear on Kenyan roads, enhanced freight security compared to road transport, and reduced pollution and carbon emissions.

While such explanations are plausible, especially since mega infrastructure projects take a long while before their benefits become apparent, Macharia’s message to Kenyans has been different. Even the President himself admitted that it is not all smooth sailing.

“There will be difficulties on the road, but that should never stop or deter us from moving forward,” said the President.

Even as he downplayed reports that Kenya had been denied funds to build the remaining section of the SGR to Kisumu, Macharia went ahead to announce that the Government would instead upgrade the section’s metre gauge to Kisumu. That idea has since floundered after it was found to be expensive.

The CS has also taken to talking about SGR’s explicit benefits over its implicit ones. Last year when Macharia tabled documents before the National Assembly’s Transport Committee, which revealed that the SGR was bleeding, he projected the line to make a profit of Sh5.08 billion by June this year.

“Part of the reason we made the loss last year (2016) was that it was a bit difficult to convince people that the railway was good for their cargo businesses,” said Macharia.

But what has since emerged is the fact that the Government did not convince people to use the SGR, it forced them to through an Executive order that sparked a series of protests in Mombasa.

The coastal city was the first to feel the heat of the new order, which has since been reversed but has not yet been implemented.

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