Two State documents have provided differing amounts as the compensation offered to a consortium of French contractors who were ousted from a mega highway expansion project, with the figures diverging by Sh1.1 billion.
Disclosures by the Treasury’s Public Private Partnership (PPP) Directorate shows that Kenya paid Sh7.315 billion to the firms that had been awarded the deal to build the 233-kilometre highway.
A separate parliamentary document indicates that Kenya paid the consortium, comprising Vinci Highways SAS, Meridian Infrastructure Africa Fund, and Vinci Concessions SAS, Sh6.2 billion in January.
This has raised questions on the veracity of the payments given that the Controller of Budget-who has legal mandate to authorise withdrawal of public funds – said she signed off Sh6.2 billion.
The compensation to the consortium was made under an emergency payment and required belated approval from Parliament amid fears the French firms would sue Kenya at the London Court of International Arbitration and block handing the deal to Chinese contractors.
‘I am not in possession of this information (Sh7.315 billion). However, I am aware of the Sh6.2 billion as it was paid from the Consolidated Fund,’ Margaret Nyakang’o, the Controller of Budget, said.
The Treasury must get approval from the Controller of Budget before withdrawing cash from the Consolidated Fund-the primary bank account for the national government.
The Director-General of the PPP Directorate, Kefa Seda, linked the differences to the exchange rate and tax equalisation while quoting another figure of Sh6.8 billion.
‘KeNHA (Kenya National Highways Agency) paid Sh6.8 billion which was inclusive of tax equalisation,’ Mr Seda told the Business Daily through a text message.
Tax equalisation is a policy where employers ensure employees working abroad pay the same taxes they would have paid in their home country.
The employer reimburses the excess payment if the tax in the overseas country is greater than what would have been paid in the home country.
It is not clear whether the French contractors had stationed staff in Kenya to cover the additional multi-million shilling tax burden.
The consortium led by France’s Vinci SA Highway had inked the Sh190 billion deal, but construction for the project had not yet begun.
Kenya’s exchange rate has also remained little changed against the dollar and Euro this year. The shilling oscillated between 129.23 units and 129.29 units to the dollar between January and June this year.
While the local currency traded at between Sh130 and Sh130 to euro in the period under review.
‘The number we have when converted to Ksh [Kenya shillings] as of the date of settlement is Sh6.8 billion,’ Mr Seda said.
A consortium of the National Social Security Fund (NSSF) and China Road and Bridge Corporation (CRBC) were last week awarded the deal to build the 175-kilometre highway under PPP and will recoup its investments from toll charges over 30 years.
Kenya terminated the highway expansion deal with the French consortium, citing, among other things, high toll fees.
The highway deal was one of the projects that President William Ruto sought to close in his first visit to China as president.
The termination of the project, which was to be funded from various sources like the Vinci Group, loans from the African Development Bank (AfDB), and guarantees from the World Bank, risked exposing Kenya to litigation and a diplomatic spat with France that backed its firms for the deal.
The push to have the Chinese contractor settle the multi-billion shilling compensation bill and inherit works done by the French contractor, like the feasibility fees, was dropped during President Ruto’s April visit to China. The three French firms, which won the tender procured by KeNHA in 2018, indicated they were ready to break ground on the project, having obtained the financial backing of the AfDB and the World Bank’s International Finance Corporation (IFC).
The consortium was expected to recoup its investments in 30 years by charging toll fees on the road.
The Treasury said the proposed toll fees were a put-off in the Nairobi-Nakuru-Mau Summit road project, which was aimed at decongesting the main artery from Nairobi to western Kenya and the neighbouring countries of Uganda, Rwanda and the Democratic Republic of the Congo.
The Treasury said it pursued an out-of-court settlement to avoid a costly and protracted suit at the London Court of International Arbitration.
Kenya was also fretful that the French would block attempts to transfer the Sh190 billion expansion of the Nairobi-Nakuru-Mau Summit Toll Road to Chinese contractors and mar President Ruto’s visit to Beijing on April 24.
The NSSF consortium expects to earn an operating profit of about $2.63 billion (Sh339.8 billion) over the 30-year concession by charging motorists a minimum toll of Sh8 per kilometre to use the upgraded corridor.
A project summary shows the consortium) projects total revenues of $4.88 billion (Sh630.3 billion) against total costs of $2.25 billion (Sh290.5 billion), yielding a project-level surplus before financing expenses and tax of roughly Sh11.3 billion a year.
The totals cover both the 175-kilometre Nairobi-Nakuru-Mau Summit (A8) section and the 56-kilometre Nairobi-Mai Mahiu-Naivasha (A8 South) link.