Road construction resumes as Gov’t injects Ksh.175B through fuel levy securitisation

The signs are everywhere—from Kenyatta Avenue to Waiyaki Way and even Ngong Road—it is clear that contractors are back to work.

For months, these same sites had fallen silent, contractors having pulled out because they were owed billions in unpaid government bills. That has since changed.

The government has injected about Ksh.175 billion into the road sector—not through new borrowing or taxes, but through a process called securitisation.

"It's an idea we really toyed about for some time until we got support from the highest office in this country for us to move on," said Eng. Silas Kinoti, the Director General of Kenya Urban Roads Authority (KURA).

Every litre of fuel you buy is taxed Ksh.25 for road maintenance. The government has now taken Ksh.7 out of the Ksh.25, packaged it into a financial product, and sold it to investors, who will then receive it over the next 7 years.

That transaction has generated immediate upfront cash amounting to Ksh.175 billion. The money is now being used to pay contractors their unpaid dues, in a move expected to restart more than 580 stalled road projects—many right here in Nairobi.

"Out of the Ksh.175 billion, part of it is for road works, part of it is for interest on delayed payments, and part of it is for land compensation to create avenues to put up those roads," DG Kinoti stated.

The accumulation of pending bills has occurred over the last decade, beginning in 2016. Many have questioned how these unpaid dues were allowed to grow to such a significant extent, especially under government oversight.

"Then we had COVID, which came in 2020. Around that time, so much focus was put on the health sector, and the ongoing roads did not get sufficient funds to be able to be paid," said Acting KeNHA DG Eng. Luka Kimeli.

So far, contractors have received 40 per cent of the amount owed to them. The government maintains that another 40 per cent will be disbursed in about two weeks, with the remaining balance settled shortly thereafter.

But even as they begin to receive their dues, it has come to light that contractors were compelled to forfeit about 35 per cent of the interest on these pending bills, raising concerns about potential strong-arming tactics by the government.

"It was a negotiation, a willing... in fact, initially we offered they waive 50 per cent, we negotiated until they agreed to waive 35 per cent of the interest. So now what we did is we paid 40 per cent of the 65 per cent. There was no coercion or anything; it was a negotiation," Kinoti added.

A section of Kenyans has expressed fears that the diversion of the Road Maintenance Levy to clear old debts could leave existing roads neglected, given that the fund is primarily meant for the maintenance of existing roads. This at a time when the government is looking to securitise an additional Ksh.5 from the levy.

"In terms of how it is going to affect maintenance works, we don't think... Yes, there will be some slight reduction in terms of what can be done with the remaining money, but really, it was worth doing," Kimeli noted.

Tax experts from audit firm KPMG say securitisation of public funds is not a new phenomenon around the world.

"The issues of securitising public funds became more common in the ’80s and ’90s, and of course, with Europe and all that. But now, coming to Africa, most of them started in the year 2000. It's the first time that we are trying to see this one from a Kenyan perspective—of course, driven by the struggle of trying to raise public revenue," James Kimani, Associate Director at KPMG Tax & Regulatory Department.

Kenyans should expect to see more public funds being securitised in the future.

"We are likely to see the government going that route, and particularly as we go into 2026/2027, it will become difficult to raise taxes, and therefore mobilising domestic revenue becomes more difficult. So the only option is to look at other funds that we have, like the SHIF, the affordable housing levy—particularly the ones that are ringfenced and cannot be used for other purposes—then we can be able to obtain the current cash flow," added Kimani.