The National Treasury has defended its decision to terminate the original Nairobi–Nakuru–Mau Summit Highway agreement, saying it would have required the government to make annual payments of about Ksh23 billion under a financing model it deemed fiscally unsustainable.

🇰🇪 Breaking It Down

In a statement seen by   Kenyans.co.ke on July 9, Treasury Cabinet Secretary John Mbadi explained that the government has replaced the old arrangement with a new toll-based model that shifts financial risk away from ordinary Kenyans after an assessment by the ministry.

“These findings informed Government’s decision to engage the Project Company in a structured commercial restructuring process directed at strengthening affordability and fiscal sustainability,” stated the Ministry. This, according to the ministry, is because the restructuring process did not produce a commercial framework capable of achieving the treasury's objectives, a move that could have been a recipe for disaster for the whole project in the grand scheme of things.

In the old PPP model, the project tasked French Firms; Vinci Highways SAS in partnership with Vinci Concessions SAS and the Meridian Infrastructure Africa Fund, with an overall cost Ksh200 billion, as opposed to the new model under the China Road and Bridge Corporation (CRBC) and Shandong Hi-Speed Road and Bridge International Engineering Company Ltd, both Chinese companies, at an estimated cost of Ksh170 billion. This means that under the new PPP, the government saves roughly Ksh30 billion, an amount that could have resulted in higher tolling fees for the multibillion-shilling highway . Under the new PPP arrangement, Treasury says that the government carried all the demands, as well as revenue risks, implying that taxpayers could have been exposed to further taxation to foot the bill through high tolling charges. Treasury says that the model exposed the country to a projected funding gap of up to Ksh200 billion within just the first 15 years of the contract duration.

📌 What You Need to Know

The Mbadi-led docket blamed the sharp reversal on the models on global inflation, a weakening shilling, shrinking fiscal space, and mounting public debt service costs between 2020 and 2022. “S ustained global inflation, depreciation of the Kenya Shilling, tightening fiscal space, and rising public debt service obligations materially affected the assumptions upon which the original Project Agreement had been developed, necessitating a reassessment of its long-term affordability and fiscal sustainability,” stated the ministry.

Those macroeconomic shocks upended the assumptions behind the original deal, forcing the government into a comprehensive review of the highway's long-term affordability. The ministry further defended the move by stating that it first tried restructuring the arrangement commercially with the Project Company, hoping to make it cheaper, but those negotiations failed to deliver workable results.

Around the same time, the Kenya National Highways Authority (KeNHA) received an unsolicited proposal built around a completely different, more favourable commercial framework, and through the Private Partnership Act, eventually produced new agreements signed in May and June 2026. “During the same period, the Kenya National Highways Authority received an unsolicited proposal founded upon a revised commercial framework,” stated Treasury. “The proposal proceeded through the statutory processes prescribed under the Public Private Partnerships Act and culminated in the current Project Agreements in May and June 2026.”

Instead of the government paying annually, the new user-pay toll model means private investors recover their money directly from road users, not public coffers. This means that for motorists to use the multibillion 139-kilometre highway, they will incur a cost of up to Ksh8 per kilometre once the road becomes operational.

With the new model, the comparable investment cost has also dropped, falling from Ksh249.3 billion (USD 1.93 billion), down to  Ksh173.5 billion (USD 1.342 billion) It also positions the government to earn 60 per cent of all revenues collected above an agreed 16 per cent equity return, translating to fiscal savings of Ksh76.2 billion.

📰 Source: Kenyans.co.ke