State's headache over stalled roads as funds dry up

The Kenya Kwanza government appears to be unsure of how to proceed with the hundreds of stalled projects by its predecessors, which have gobbled up trillions of shillings and still need billions to complete.

They include numerous roads, bridges and dams that continue to compete for limited resources with other spending areas, including the provision of essential services such as healthcare and education.

The Transport Ministry last week gave MPs a roadmap that it hopes will unlock the completion of projects.

The plan, however, does not offer any assurances that Kenyans will ever get value for money from these projects.

According to the roadmap presented by Transport Cabinet Secretary Kipchumba Murkomen, it entails suspending all new projects except those touching on critical areas such as security.

The CS also said he would negotiate with contractors to resume work despite being owed billions, with payments being staggered over a period of time.

Mr Murkomen told MPs that there are over 800 incomplete projects requiring Sh763 billion to complete.

This is in addition to the money already spent in getting them off the ground, which past reports have put at between Sh2 trillion and Sh9 trillion.

"The State Department of Roads through its three implementing Agencies (KeNHA, Kura and Kerra) has an ongoing roads portfolio of over 800 projects with an outstanding cost of approximately Sh763 billion as of February 28, 2023," said Mr Murkomen.

"Out of this outstanding amount, an amount of Sh150 billion is related to certified works not yet paid (pending bills)."

Pending bills have become a sticky issue for subsequent administrations.

The Controller of Budget put the total pending bills by the national government at Sh481 billion as of December 2022.

Slow implementation

This goes up to over Sh600 billion when the about Sh160 billion that county governments owe their supplies is factored in.

At Sh150 billion, road contractors would account for about a third or 31 per cent of pending bills by the national government. Many of the 800 projects are either on slow implementation, while others have ground to a halt.

This, the CS said, has been due to inadequate funds over the years.

"We note that some of the contracts have stalled for over five years and even 10 years," said Murkomen.

"Contractors are owed Sh145 billion in terms of pending bills, with local contractors being owed Sh50 billion and foreign contractors being owed Sh60 billion. Part of the pending bills is land acquisition amounting to Sh35 billion."

He said while the Kenya Kwanza administration had committed to finishing all ongoing projects, it would take much longer due to the lack of funds. This also means Kenyans whose land had been taken over for new road projects as well as contractors will have to wait longer before they can get their money.

"We are having negotiations with contractors. Within the last month, we were able to secure some amount," said Murkomen.

"However, given the magnitude of the pending bills, this amount was spread thin among the service providers and could not enable them to go back to site and resume work. Consequently, we have resorted to requesting the National Treasury to allow us to negotiate with contractors who are willing to resume work."

He added that the government would not commence any new projects unless they are funded by development partners, with loans offered on friendly terms.

"Cognizant of the financial situation, which has built up over the last five years, our first duty as a responsible government is to stop the situation from deteriorating further through cessation of unaffordable borrowing," said the CS.

The ministry expects to access some Sh12 billion from the Road Maintenance Levy Fund (RMLF) to settle some of the pending bills.

"Recently, we have established a process of accessing the annuity fund to enable us to borrow from the fund an amount totalling Sh12 billion, which will be repayable in three years," he said.

"This amount will enable us to pay pending bills, hence bringing some contractors back to site and a number of projects resuming soon. Apart from a willingness to return to site, fair distribution of projects will guide the ministry and agencies in the resumption plan."

Gobbled money

The National Assembly's Public Accounts Committee (PAC) recently raised concerns about the huge number of stalled projects, which in addition to gobbling up money in their formative implementation had exposed the government to litigation, and in some instances, paying for breach of contract.

"We have established that some of the projects have to incur additional cost due to breach of contractual agreements between the government and contractors," said PAC Chairman John Mbadi.

Treasury in the Budget Policy Statement (BPS) noted that the government's spending for the 2023/24 financial year reflected certain emerging realities such as stalled projects and pending bills.

"One of the criteria that guided the allocation of resources within the three arms of government and among MDAs (ministries, departments and agencies) was the extent to which the programme seeks to address viable stalled projects and verified pending bills," said Treasury in the BPS in February.

"Additionally, the National Treasury will strengthen public investment management by implementing the Public Investment Management (PIM) Regulations, 2022. This will enhance efficiency in identification and implementation of priority social and economic investment projects."

"This will further curtail runaway project costs, eliminate duplications and improve working synergy among implementation actors for timely delivery of development projects."

Treasury in December told the International Monetary Fund (IMF) that it would set up a task force to sieve through stalled and underperforming projects and decide which ones would be completed or terminated.

"A Cabinet decision to commence a thorough review of 437 stalled or underperforming projects has been made, whereby a task force is to be appointed to carry out an analysis to identify specific projects to be rationalised," Treasury told IMF.