The Kenyan Ministry of Transport and infrastructure has abandoned the annuity model for financing roads projects. The Cabinet Secretary in charge of transport Mr. James Macharia said contractors frustrated the programme with their huge quotes for the roads. He stated that some of the quotes reached up to 1 billion per Kilometre. The annuity financing model was lauded by the Jubilee administration; they had initially said would add an additional 10,000 kilometres of medium-grade urban and rural roads during its first term which ends on August 8.
The government has instead opted to focusing on the Engineering procurement and Construct (EPC) model which it hopes will keep the cost low at an average of 30 million per kilometers. Under the annuity model, private contractors were expected to design, build and maintain the public roads within three years using their own funds. They would then get scheduled payments yearly from the national budget. “The annuity programme was very slow because it involved many parties like financiers, legal teams and contractors who had to agree on every aspect,” Mr Macharia said last week.
The State had set unit costs for construction of roads between Sh40 million to Sh100 million per kilometre depending on scope of works.