East African governments are engaged in a delicate balancing act to encourage more private sector participation in infrastructure projects while avoiding imposing more levies on citizens.

Across the region, governments have enacted progressive public-private partnerships (PPPs) laws to encourage the private sector to pump resources in infrastructure projects to ease the burden on the exchequer and reduce external borrowing.

While road projects have in particular been identified as ideal for PPPs, the private sector has remained aloof owing to lack of clear mechanisms on how they would recoup their investments.

Kenya has announced that it requires a staggering $3.6 billion for five key road projects, including the Nairobi-Nakuru-Mau Summit highway while Uganda has the Kampala-Jinja Expressway.

The two roads are critical in boosting trade between the two countries because they form part of the northern corridor.
To encourage PPPs in road projects, the two countries have announced plans to introduce tolling programmes in which motorists will have to pay to use the roads.

Private sector experts contend that tolling is a critical success factor for the roads projects in the region.

Despite tolling remaining a controversial subject in the region, they reckon that it offers the most sustainable source of funding for road investments and maintenance.

More critically, considering that governments cannot afford to finance key road projects and, that they have also absorbed significant levels of debt, tolling revenues provide a source of comfort for private investors.

Tolling is also seen as the best strategy to tackle traffic congestion particularly on major urban highways.

“Without tolling, international investors do not achieve sufficient comfort to encourage them to competitively bid for projects. Knowing that there is ring-fenced tolling revenue gives them with that comfort,” says James Woodward. KPMG head of infrastructure Hub, Africa. He added governments in the region must move with haste to operationalise tolling policies, including establishing a tolling fund to encourage more private investor participation in road projects.

Plans to introduce tolling are, however, proving delicate and controversial. Those opposed to the move said it will add the burden on motorists who are already paying various levies. They also argue that there is no clear policy on how to set the toll levy, how to collect it, whether the levy needs a special account, among other issues. Thika highway and Southern Bypass were built using Chinese loans and due to controversy over introduction of tolling, the government is unable to raise funds from motorists to repay the loans.

According to Stanley Kamau, director of PPP unit at the National Treasury, the government is determined to roll out the tolling programme after the Cabinet approved the national tolling policy and only a few additional steps are now required before its implementation.

“One of the remaining steps is to extend the consultation to the public and convey to them the benefits of these projects,” he said.
Although two years ago Kenya introduced the Roads Annuity Fund that has since accumulated $190.4 million, Kenya is still grappling with a shortfall of $3.5 billion on roads maintenance.

The $1.2 billion Nairobi-Nakuru-Mau Summit highway, which has attracted interest from 10 international companies, will be implemented under a design, finance, construct, operate, maintain and transfer model spanning a period of 30 years.

“We want to make this project a success under the PPP arrangement and that is why we are encouraged by the strong interest from investors,” said George Kiiru, head of PPP unit at Kenya National Highways Authority.