Local private investors will be given a chance to participate in the financing of the $3.6 billion (Sh472.9 billion) expressway from Mombasa to Nairobi after the Kenya National Highway Authority (Kenha) and US-based private equity Everstrong Capital LLC signed a deal to start the construction of the toll road.
Construction of the toll road, dubbed Usahihi Expressway, is one of the deals signed during the three-day visit to the US by President William Ruto and is seen as rivalling the Chinese-built Mombasa – Nairobi standard gauge railway (SGR).
“The project anticipates attracting investments totalling $3.6 billion, sourced from international investors, development agencies, pension funds and an exceptionally large number of Kenyan private investors,” said Everstrong in a statement.
The public private partnership (PPP) project will be undertaken for a period of between three to four years, with financing being led by “American Development institutions and significant investments from Kenyan private sector investors and pension funds,” Everstrong added.
Once completed, Everstrong and its partners will charge toll fees for 30 years when they are expected to have recouped their investments.
Earlier this year, the Treasury revealed that the Public Private Partnership (PPP) Committee had granted the Mombasa-Nairobi Expressway first-stage approval.
Construction of the 475-kilometre high-speed highway had been mooted by the administration of retired President Uhuru Kenyatta and was to be done by Bechtel, a US construction company.
The construction of the expressway was to begin in 2018, as the US sought to put up a transport network to rival the SGR, one of the largest Chinese investments in Africa.
The expressway, which was to have four lanes and 19 interchanges, was expected to significantly cut travel time between the port city of Mombasa and the capital city Nairobi from 10 to four and half hours.
However, the project was cancelled after Kenya and the contractor failed to agree on the financing model to be adopted.
Bechtel would later return to the negotiating table with revised rates having teamed up with Everstrong, an American Private Equity firm.
Earlier reports indicated that Bechtel and the Kenyan government disagreed on the mode of financing the then $2 billion road leading to its delay.
Everstrong said at the recent AmCham summit that both parties have since agreed on the financing model.
Under the current financing structure, the firm said, the financing of projects would also come from local firms, including banks, insurance companies and pension funds.
The construction of the Mombasa-Nairobi Expressway was initially to be undertaken with financing from US and UK sources and was expected to significantly cut travel time between the port city of Mombasa and Nairobi.
However, the agreement did not progress following a tussle on how the project construction would be financed. The American firm rejected Kenya’s offer to have it construct the road and recover its investment by charging motorists toll fees, a 2021 report published by the Parliamentary Budget Office (PBO) shows.
Besides Bechtel, the other firm that had initially shown interest in the project is the Korean Overseas Infrastructure and Development Corporation (KIND), which had also presented a pre-feasibility study report for the development of the highway based on the PPP model.
As financiers switch to PPP in financing Africa’s infrastructural projects, China seems to have taken the pole position in this space.
Chinese investors have already built and are currently running the Nairobi Expressway.
The Chinese are also said to be angling for the expansion of the Mau Summit into a four-lane dual-carriageway.
The government recently announced that it had terminated the construction of the Nairobi-Nakuru-Mau Summit toll road, which had been awarded to a consortium of French contractors.
Besides the road, Kenya also bagged major deals during President Ruto’s visit. The US designated Kenya as a major non-NATO ally, making it the first sub-Saharan African country to receive the designation. Kenya now joins 18 other countries designated as non-NATO allies, including Israel, Brazil and the Philippines.
The US has also lined up $250 million in new investments in Kenya through the International Development Finance Corporation (DFC), including $180 million for a major affordable housing project. That will bring DFC’s portfolio in Kenya to over $1 billion.
