Why Govt Cancelled Ksh150 Billion Project for French Contractor to Dual Nairobi-Nakuru Highway

In Summary 

• It has emerged that Kenya cancelled a Ksh150 billion Nairobi-Nakuru-Mau Summit Toll Road deal with French contractors over fiscal concerns and is now courting Chinese investors.
• The government has increased fuel prices for the first time in over a year, with super petrol, diesel, and kerosene all seeing price hikes
• Kenya is exploring a partnership with the UAE to extend the Standard Gauge Railway and signed a historic Comprehensive Economic Partnership Agreement (CEPA) while securing investment in the Ksh6.8 billion Galana-Kulalu food security project.
• Kenya's Treasury bills share in domestic debt rose to 14.28%, increasing by Ksh222.42 billion in six months, raising concerns about refinancing risks due to a shortened debt maturity period.
• NEMA has urged gas importers to apply for 2025 licenses before February 28, marking the last year to import HCFCs, which will be fully phased out by 2026 under the Montreal Protocol.
• Nairobi's financial and insurance sector contributed Ksh885.6 billion to its economic output in 2023, driving 23.2% of the city's Ksh3.811 trillion total output.
   

In 2024, the Kenyan government terminated a deal with a consortium of French contractors for the Ksh150 billion Nairobi-Nakuru-Mau Summit Toll Road project, and it has now been revealed that it was due to affordability and fiscal concerns, as reported by The Business Daily. Treasury reports revealed that the project’s service fees over 13 years would require additional borrowing, deemed unsustainable given tight public finances. The French contractors had planned to recover their investment through toll fees over 30 years. However, the inclusion of costly service payments and the government’s obligation to cover revenue shortfalls led to the cancellation. The project is now being pitched to Chinese investors. This highway is a critical part of the Northern Corridor, serving as a vital link for approximately six million Kenyans and facilitating regional trade.

The Standard reports that the government has increased the retail cost of fuel for the first time in more than a year. The Energy and Petroleum Regulatory Authority (Epra) raised the price of super petrol by 29 cents per litre, while diesel saw a rise of Ksh2 per litre, and kerosene increased by Ksh3 per litre. This hike is expected to affect transportation costs and essential goods, as industries may adjust prices in response. In Nairobi, super petrol will retail at Ksh176.58, diesel at Ksh167.06, and kerosene at Ksh151.39 for the next month. The last price increase occurred in November 2023, and the adjustment comes despite stable global oil prices and the shilling's stability against major currencies.

In a report by The Star, Kenya is exploring a partnership with the UAE to extend the Standard Gauge Railway (SGR) to connect Kenya, Uganda, and South Sudan, as part of efforts to boost regional integration and trade. President William Ruto announced a feasibility study agreement during his visit to Abu Dhabi, where he also secured the UAE’s investment in the Galana-Kulalu food security project valued at Ksh6.8 billion. Additionally, Kenya and the UAE signed a Comprehensive Economic Partnership Agreement (CEPA), the first of its kind between the UAE and a mainland African country, aimed at easing trade and enhancing economic cooperation.

In a report by The Business Daily, the share of Treasury bills in the government’s domestic debt rose to 14.28 percent as of January 7, up from 12.72 percent in September and 11.38 percent in June 2024. This increase, attributed to investor rush during October and November to lock in higher returns, saw T-bills outstanding grow by Ksh222.42 billion to Ksh838.1 billion in six months. Treasury bonds, meanwhile, rose at a slower pace, increasing by Ksh257 billion to Ksh4.88 trillion in the same period. T-bill rates, which peaked at nearly 17 percent in March 2024, declined sharply after CBK cut its base rate from 13 percent to 11.25 percent by December. The rising share of T-bills poses refinancing risks for the Treasury, with the average maturity period for Kenya’s domestic debt reducing to 7.5 years in 2024.

The National Environment Management Authority (NEMA) has called on refrigeration and air conditioning (RAC) gas importers to apply for their 2025 annual licenses before February 28, 2025. According to Capital Business, this marks Kenya's last year to import hydrochlorofluorocarbons (HCFCs) under the Montreal Protocol, with a complete phase-out set for January 1, 2026. HCFCs, known for depleting the ozone layer, are being phased out globally to combat climate change. NEMA warns that importing HCFCs without a valid license after the deadline will be an offense. Stakeholders are encouraged to adopt eco-friendly alternatives to align with Kenya's environmental goals.

Nairobi’s financial and insurance sector added Ksh885.6 billion to the city’s total economic output in 2023, marking an 18.1% rise from Ksh750.06 billion in 2022, as reported by The Business Daily. The sector contributed 23.2% of the county's Ksh3.811 trillion economic output, cementing Nairobi’s position as Kenya’s richest county. Key players like banks, insurance companies, and pension funds drove this growth, enabling investments across other sectors. Real estate and transport also recorded significant contributions at Ksh628.4 billion and Ksh581.23 billion, respectively. Nairobi, hosting the majority of Kenya’s financial institutions, accounted for three-quarters of the sector’s national output.