DIAGNOSTICS
On
GOVERNANCE AND POLITICAL ECONOMY CONSTRAINTS
For
Kenya Country Assistance Strategy:
INFRASTRUCTURE :UPDATED VERSION
(ROADS and PORTS)
DRAFT REPORT
July 2011
The findings, interpretations, and conclusions expressed herein are those of the
author(s) and do not necessarily reflect the views of the World Bank.
"Roads connect food, goods, markets, people, families, communities and lives. They connect
politicians, civil servants, the police and the military, the judiciary, and governments. But
roads also lead from heaven to hell, as the ugly heads of greed and envy often seize the
material opportunities for graft and corruption in the development, maintenance, and
operations of roads." Manolito Madrasto – Former Secretary General, International
Federation of Asian and Western Pacific Contractors' Association
2
Abbreviations and Acronyms
APRP
ARWPs
BOT
CDF
CEO
CFCs
CPA
CPG
DIR
DRC
ERS
FY
GBHL
GoK
GPE
ICT
IFC
IT
JBIC
KACC
KADU
KANU
KBS
Kshs
KEPHIS
KESLO
KNHA
KPA
KPTC
KRA
KRB
KRRA
KURA
KWATOS
KWS
LPG
MPs
NARC
NCA
NCTTCA
ODM
PAC
PNU
PPP
Annual Public Roads Programme
Annual Roads Work Programmes
Build Operate and Transfer
Constituency Development Fund
Chief Executive Officer
Container Freight Stations
Comprehensive Peace Agreement
Coast Parliamentary Group
Detailed Implementation Review
Democratic Republic of Congo
Economic Recovery Strategy for Wealth and Employment Creation
2003-2007
Financial Year
Grain Bulk Handling Limited
Government of Kenya
Governance and Political Economy
Information Communication Technology
International Finance Corporation
Information Technology
Japan Bank for International Cooperation
Kenya Anti Corruption Authority
Kenya African Democratic Union
Kenya African National Union
Kenya Bureau of Standards
Kenya Shillings
Kenya Plant Health Inspectorate Services
Kenya Southern Sudan Liaison Office
Kenya National Highways Authority
Kenya Ports Authority
Kenya Posts and Telecommunications Corporation
Kenya Revenue Authority
Kenya Roads Board
Kenya Rural Roads Authority
Kenya Urban Roads Authority
Kilindini Waterfront Operating System
Kenya Wildlife Services
Liquid Petroleum Gas
Members of Parliament
National Rainbow Coalition
National Construction Authority
Transit Transport Coordination Authority of the Northern Corridor
Orange Democratic Movement
Public Accounts Committee
Party of National Unity
Public Private Partnerships
3
PSP
RMF
RMFL
RMI
SSATP
TEU
TTCA
VAT
WB
Private Sector Participation
Road Maintenance and Financing
Road Maintenance Fuel Levy
Road Maintenance Initiative
Sub-Saharan Africa Transport Program
Twenty Foot Equivalent Unit
Transit Transport Coordination Authority
Value Added Tax
World Bank
4
Diagnostics on Governance and Political Economy Constraints for Kenya Country
Assistance Strategy
INFRASTRUCTURE (Roads and Ports) SECTOR
Table of Contents
Abbreviations and Acronyms............................................................................................................. 3
Table of Contents .................................................................................................................................... 5
EXECUTIVE SUMMARY .................................................................................................................................. 8
1.0
What this is about ........................................................................................................................... 12
1.1
What are Roads and Ports? .................................................................................................... 13
1.2
Investing in Transport Infrastructure ................................................................................ 14
1.3
Importance of Roads and Ports ............................................................................................ 14
1.4
Are Roads and Ports Enough? ............................................................................................... 14
1.5
What is new? ................................................................................................................................ 15
2.0
The Problem ...................................................................................................................................... 16
3.0
Governance and Political Economy Framework ................................................................. 19
4.0
Country-Level GPE Drivers ......................................................................................................... 20
4.1
History of State Formation in Kenya .................................................................................. 20
4.2
Electoral Outcomes: How Do They Affect Reforms?..................................................... 21
4.3
Business Interest and Political Capture............................................................................. 21
4.4
Geopolitical Dynamics .............................................................................................................. 21
4.5
Relevance of the Social and Political Context .................................................................. 22
4.6
The Situation Now ..................................................................................................................... 22
5.0
ROADS ................................................................................................................................................. 24
5.1
Background .................................................................................................................................. 24
5.2
Political Economy of Reforms in Kenya’s Roads Sub-Sector ..................................... 29
5.3
Resistance to Reforms .............................................................................................................. 33
5.4
Criteria for Prioritizing Maintenance ................................................................................. 34
5.5
Implementation Challenges ................................................................................................... 36
5.7
Management of Devolved Funds .......................................................................................... 39
5.8
Economic and Political Constraints Facing Roads Sub-Sector Reforms ............... 39
5.9
Efficiency versus Equitable Distribution .......................................................................... 41
5.10 Poor Supervision of Rehabilitation and Maintenance Works ................................... 41
5.11 Slow Pace in Effecting Axle Load Control ......................................................................... 42
5.12 Inadequate Railway Transport ............................................................................................. 43
5.13 Poor Environment and Lack of Proper Framework for Private Sector
Participation ............................................................................................................................................... 43
5.14 Some Final Thoughts ................................................................................................................ 45
6.0
PORTS .................................................................................................................................................. 47
6.1
Introduction ................................................................................................................................. 47
6.2
Overview of Recent Performance of Mombasa Port..................................................... 48
6.2.1
A Review of Port Operational Efficiency.................................................................. 50
6.2.2
Port Dwell Time ................................................................................................................ 51
6.2.3
Capacity and Efficiency Constraints .......................................................................... 54
6.3
Source of Pressure for Efficiency Improvements at Mombasa Port 2003-2007 55
6.4
An Assessment of Mombasa Port Reforms....................................................................... 57
5
6.4.1
Review of Mombasa Ports’ Privatization Efforts .................................................. 59
6.4.2
Resistance to Privatization Reforms ......................................................................... 60
6.4.3
Resistance and Other Constraints to Port Management Reforms ................. 62
6.4.4
Modernization of the Port Facilities and Equipment .......................................... 64
6.4.5
Proposed Lamu Port ........................................................................................................ 68
6.4.6
Demonstration of Benefits for Privatization .......................................................... 69
6.5
Factors Shaping Coastal Politics and Social-Economic and Political Perspectives
70
6.5.1
Sources of Influence of the Coastal Political Elite ................................................ 72
6.5.2
Business Interest Groups, Political Patronage and Pressure, Special
Business Elites and Political Patronage ...................................................................................... 73
7.0 Impact of the New Constitution on the Mandates of Existing Transport Institutions
74
7.1
Capacity Limitations in Devolved Units
76
8.0
Concluding Remarks ...................................................................................................................... 79
8.1
Key observations ........................................................................................................................ 80
8.2
Recommendations ................................................................................................................ 8180
REFERENCES ......................................................................................................................................... 86
Annex 1 Kenya’s Road Network ..................................................................................................... 89
Annex 2: Risk Mitigation Action Plan in Kenya’s Road Sector ........................................... 90
Annex 3: Excerpts from the Parliamentary Hansard of June 26th 2007 ........................ 93
Annex 4: Overall Funding of the KRB Fund in FY 2007/2008 in Kenya Shillings ...... 98
Annex 5: Construction of Roads ..................................................................................................... 99
Annex 6: Rehabilitation of Roads ................................................................................................ 100
Annex: 7 Reports of Parliamentary Committees on Implementation of Road Projects
................................................................................................................................................................... 101
Annex: 8 Roads Project Implementation Issues .................................................................... 105
Annex 9: Container Throughput 1980-2006 .......................................................................... 116
Acknowledgements ........................................................................................................................... 117
Figures
Figure a
Figure 1:
Figure 2:
Figure 3:
Figure 4:
Figure 5:
Tables
Table 1:
Table 2:
Table 3:
Table 4:
Table 5:
Table 6:
Kenya: Governance Indicators - Comparison with Regional Average
The GPE Framework Depicting Layers of Analyses
Share of KRB Fund by Road and Agency
Kenya, 1996-2008: Aggregate Indicators: Voice and Accountability
Kenya, 1996-2008: Aggregate Indicators: Political Stability and Absence
of Violence
National Roads Sub-Sector Organizational Framework
15
16
26
31
34
Traffic Handled at Mombasa Port 2002-2008
Gateway Container Handling and General Cargo Costs for Ports in Africa
and the World
Dwell Time in Days Per Country and Destination for Road
Port Handling Productivity at Mombasa Container Terminal
Import Container Dwell Time
Country Port Reform Index
38
40
6
38
42
42
43
47
Box
Box 1:
Definition of Road Works
26
7
Diagnostics on Governance and Political Economy Constraints for
Kenya Country Assistance Strategy
INFRASTRUCTURE (Roads and Ports) SECTOR
Updated [Revised] Draft
EXECUTIVE SUMMARY
1. This is updated version of the original report completed in March 2010 is based on a
governance and political economy analysis of reforms in Kenya’s infrastructure sector.
The study focuses on two sub-sectors, roads and ports. It is intended to contribute
toward the formulation of the next Country Assistance Strategy (CAS) for Kenya.
2. Kenya faces significant infrastructure constraints that must be urgently addressed in
order to promote the development of an effective and productive roads and ports
sector, capable of contributing to the economic growth of the country. The
governance and political economy analysis contained in this report shows that policy
reforms in Kenya’s roads and ports sub-sectors have yet to fully gain traction.
3. A number of policy reforms conceived under the Road Management and Financing
Initiative have been introduced in the roads sub-sector resulting in significant
improvement of the network during the last seven years.
4. In both ports and roads sub-sectors, after years of poor performance arising from bad
governance structures, endemic corruption, mismanagement of resources and
under- investment in critical areas, there are signs that modernization of facilities at
the port of Mombasa and road construction in various parts of the country are
bearing fruit in terms of capacity enhancement and efficient delivery of services.
5. However, a number of governance and political economy challenges still stand in the
way of deeper reforms; chief among them being the resistance by Coastal politicians
and prominent business elites to privatization of port facilities. In the roads subsector, the major policy failures include insufficient maintenance, substantial
corruption in procurement and insufficient investment. There are however, strong
signs that important measures are being taken to address some of the issues, such as
privatization and automation of weighbridges.
6. Specifically, slow progress in implementing reforms has been on account of the
following:
 The institutions and processes in which reforms are embedded have at times not
been aligned with the interests and thus preferences of key decision makers
leading to perverse incentives and opposition to reforms. In the Mombasa port
case for example, Coastal politicians exercise great influence because they are pivotal
in the battle between the larger political interests in the country. A better integration
of political economy context can reduce political risks associated with port
reforms.
 Success of reforms in the roads and ports sub-sectors is linked to the broader
governance reforms. Currently, the reality in Kenya is that there is: (1) uncertainty
about the outcome of on-going constitutional reform;(2) uncertainty about the
8
outcome of the next general elections and (3) following from 1 and 2, indecision
on the part of key actors on the next course of action. To the extent that the
governance and political economy context matters (i.e., as a constraint to
development objectives), the next CAS should pay close attention to the governance
and political economy drivers highlighted in this report.
 For example, there is evidence to show that reforms in the infrastructure sector
coincided with improvement in voice and accountability in Kenya. The vast
literature in this area suggests that the extent to which a country’s citizens are
able to participate in selecting their government, as well as freedom of
expression, freedom of association, and a free media has positive impact on
implementation of reforms. The implication here is that the Bank should advance
its support for deeper democratization by building on the momentum generated
during previous CAS; gauged for example by the role that the Kenyan civil society
continues to play in exposing sleaze and demanding accountability from
politicians and public servants.
 Limited technical and managerial capacity has also constrained the reform
process. Implementing management reforms in the form of merit appointments of
professionals has been tried and experience shows it can lead to a relatively quick
turn around in the management of state corporations. But, the evidence also
shows that success only comes if such appointments are accompanied by space to
make decisions and implement reforms professionally, unencumbered by political
interference. Changing the rules of the political game as happened after the NARC
government took over power, leading to the hiring of a competent CEO to run
Kilindini port in Mombasa, resulted in improved operational and financial
performance at the port enabling the port to finance its modernization and
expansion program directly from its revenues as well as through credit made
possible because of the improved financial position. But, as the experience again
shows, where reforms threaten local and regional interests, resistance to reforms,
if not restrained say by a public interest oversight body, can slow down
implementation and/or reverse any gains that might have been made.
 The Mombasa port case shows that regional, economic and political self interests
can hold central government initiated reforms at ransom. The coalition
government’s hold on power depends on support from regional political and
business elites. So far, various attempts have been made to increase private sector
participation (PSP) in the delivery of port services through forms of private-public
partnership (PPP) arrangements. Based on the liberal democratic model, it can be
argued that this is one way of increasing efficiency and investments. However, a
key element of port reform must be the creation of a mechanism to protect
genuine public interest and make certain the objectives of reform are met. This
requires a delicate political balancing act especially where ‘public interest’ is
narrowly defined in regional and/or nationalistic terms. It calls for coordination
among various branches of government and consultation with diverse port
interests. It certainly also calls for sensitivity to collateral consequences and
effects of port reforms on public interests in land use, job creation, and economic
stimulation.
7. Reforms in the roads sub-sector have seen revenue levels generated through fuel levy
increase from Kshs.7.8 billion in the 2001-2002 Financial Year to over Kshs.19.8
9
billion in 2008-2009. Most of these funds have been invested in improving the road
network. But with approximately 40 percent of this investment lost to corruption,
fundamental questions must be asked about the levels and quality of service enjoyed
by road users. Usually, the government sets the quality and quantity of service
required. Compliance with the quality and quantity specifications at the agreed price
should theoretically yield the value for money that the government intended to
achieve when it, for example procures the services of a contractor. However, a
number of policy failures point to multiple inefficiencies (i.e., technical and X).1
8. According to a Kenya Anti-Corruption Commission Report (2007), corruption in road
projects thrives due to weaknesses and loopholes that exist in the entire project cycle
from the planning and design, to the tendering and implementation process. Cases of
poor project planning and implementation, poor service delivery, inefficiencies,
breach of procedures, soliciting for bribes, questionable dealings, outright theft, fraud
and other corruption related activities are all too common in roads projects (various
Public Accounts Committee Reports).
9. Following previous audits by the Bank, significant reforms measures have been
instituted to try to reign in on performance, including: (i) detection of
mismanagement, (ii) participation and downward accountability and communication,
(iii) payment procedures, (iv) financial and technical audits, (v) staffing and
mainstreaming of activities, and (vi) institutional aspects. These measures
presuppose a democratically elected government that is effective and advances vital
public goods such as the rule of law. But evidence in Kenya points to the contrary.
10. Parliamentary reports in the Hansard suggest high level complicity by the executive
and the judiciary in corruption cases, which tends to breed impunity. Where the
quality of public service and the capacity of the civil service and its independence
from political pressure are called to question, as has happened in Kenya, the standard
reform menu should be diversified. Indeed, support for infrastructure reforms must
be linked to broader governance reforms. Given the current governance and political
economy context that is characterized by a number of uncertainties about
constitutional and electoral outcomes, reforms in the infrastructure sector should
focus on expanding space for change proactively by incrementally building coalitions
to combat entrenched corruption networks. This can be done while supporting the
emerging road agencies and sub-agencies to become established considering that
they will play an increasingly important role in the roads sub-sector going forward.
11. The bond market is emerging as an alternative source of financing for infrastructure
projects in Kenya. Considering the financing gap in the infrastructure sector and the
maintenance backlog due to past underinvestment, the pace of private participation
in infrastructure development is rather slow. Political economy drivers such as high
political risk, nervousness about PPP arrangements and high up-front cost of project
development have to be addressed before the full potential of PSP can be realized. In
addition, the capacity of the government in general to provide adequate services and
support is weak because of poor incentives and lack of proper coordination. In the
absence of a PPP policy framework and weak institutional capacity of the
government, transactions costs related to the development and implementation of
“Technical efficiency” relates to minimum inputs and maximum outputs while “X-efficiency” implies
preventing the wasteful use of inputs.
1
10
projects tend to be high. The lack of well performing institutions is reflected, for
example, in things such as the protracted length of negotiations between public and
private partners and the lack of flexibility in risk-sharing amongst others.
12. While it is clear that these constraints will have to be addressed over time, under the
current conditions developing a sound policy framework for PPPs in infrastructure
would be a good place to start. The imperative for a PPP policy framework arises
from the understanding that PSP in PPP projects should have a clear basis in policy. A
PPP policy should be able to define a set of principles that can help promote good
governance in PPPs. In addition, it should be able to:
a) Provide assurance that value for money has been obtained;
b) Support improvement in the delivery of public services and adequate training
for those involved in private sector participation;
c) Put in place fair incentives to all parties and fair returns for risk takers,
combined with achievement of commercial success; and
d) Guarantee sensible negotiation of disputes that assures continuation of
services and prevents collapse of projects and consequent public waste.
Attaining these proposals will require time, thought and patience. Kenyans, the ultimate
beneficiaries of successful reforms, have waited for more than four decades for this to
happen. While some aspects of it are already happening, it ought to happen faster!
13. The promulgation of Kenya’s new constitution on 27th August 2010 brings new
opportunities form major restructuring of the country’s governance structures there
are areas that need urgent clarification, in the forthcoming detailed legislation of the
allocation of functions and powers between national and county governments to
avoid damaging conflicts and confusion in the management of key infrastructural
facilities in both roads and ports sub-sector.
14. Finally, we recommend that the Bank, taking into account the political economy
dynamics discussed in this and other reviews, continues with its support for
institutional and governance reforms in infrastructure, as well as in other related
sectors, within the framework approved by the Board of Governors and currently
agreed with the Government of Kenya. This would entail, for example support for
Vision 2030 and the Integrated National Transport Policy. These blueprints
provide multiple entry points for beneficial engagement with the government of
Kenya. The specific recommendations are discussed in Section 7.2 of this report.
11
1.0
Introduction
This updated version is largely based on the original report which was completed in
March 2010. It is about 15 months since the original report was completed. This period
has witnessed major changes in Kenya’s general economic, social and political spheres as
well as in the infrastructure sector specifically. One of the major changes during the
period was the promulgation of Kenya’s new constitution on August 2010, a major
turning point in Kenya’s governance structures.
The updating of the report is aimed at capturing these changes and highlighting their
implications on governance and political economy issues relating to roads and
ports/sub-sectors of Kenya’s infrastructure Sector, with special focus on commenting on
the contribution these changes could have on on-going discussions on governance
reforms, especially in support of the new constitution.
While an attempt is made to update facts and figures wherever possible in the original
report the exercise focused much more on the following specific issues:
 Impact of the devolved system and its influence on the roads and ports subsectors in general.
 The specific impacts of the structures created by the new constitution on roads
sub-sector existing institutions especially the Kenya National Highway Authority
(KeNHA), Kenya Urban Roads Authority (KURA), the Kenya Rural Roads Authority
(KRRA) and Kenya Roads Board (KRB).
 Implications of recent events on the Road Maintenance Levy.
 Implications of the allocation of Harbours and Ports as one of the functions and
powers of county governments. As well the implications of the county
government transport mandates vis a vis national government mandates.
 A comment on the capacity of the county governments and implications on the
development and delivery of infrastructural facilities and
 Implications after the restructuring of provincial administration on governance
and political economy and national government.
 Impact of new governance structures on performance, accountability,
transparency in the management of infrastructural facilities.
To achieve the above, the consultant:
 revieweS the original report in light of the new constitution
 reviews and updates information and data contained in the original report,
 discusses implications of the new constitution to main governance issues in
the infrastructure sector and
 makes relevant recommendations.
1.1 What this is about
This report is to help the World Bank team understand the specific underlying
governance and political economy challenges that impinge on achieving development
objectives in the infrastructure (roads and ports) sector. It is also to identify options for
engagement under these conditions and provide insights to potential challenges related
12
to other transport and infrastructure sectors, which could be subsequently followed up
with specific studies during project preparation work.
The key question addressed is: why have so many reports and recommendations
into various infrastructure issues been partially implemented or not implemented
in the past? We attempt to explain Kenya’s experience with implementing reforms using
governance and political economy (GPE) analysis. We explore what role GPE factors (i.e.,
structures, institutions and actors/stakeholders ) play in shaping policies in the roads and
ports sub-sectors, paying special attention to why reforms might not have gained traction
and what could be done differently to overcome existing challenges and seize identified
opportunities. Based on this analysis, the report recommends a menu of options to
support programming, operations and strategies to inform the Country Assistance
Strategy.
The GPE framework2 used in this study entailed working through three layers: (i)
identifying the problem, opportunity or vulnerability to be addressed, in each sub-sector
(ii) mapping out the institutional and governance arrangements and weaknesses, and
(iii) drilling down to the political economy drivers, both to identify obstacles to
progressive change and to understand where ‘drives’ for positive change could emerge
from to help shape reforms.3It is intended that the analyses and recommendations from
the report will assist the infrastructure sector team better understand the country and
sector contexts in which they operate, and that they seek to foster incremental
improvements in the reform process. This revised version focuses much on the
implications of the country’s new constitution on political governance and operations of
the two sub-sectors.
What are Roads and Ports?
Roads and ports are related. Instrumentally, they are (physical) infrastructure
components. Functionally, they form part of the transport system. But in terms of
management and technology, they are quite unique and tend to be treated distinctly. Yet,
as Kenya’s experience demonstrates, they are interlinked. Many examples around the
world indicate that there are massive inefficiencies and bottlenecks created when road
and rail links are not developed at a pace adequate to handle increased port activity.
From an engineering perspective, roads may be defined as infrastructure units linking
two points. But from a social science perspective, a road is an investment (means) used
for travel and transporting goods and services from one location to another. In other
words, while engineering answers what, social science is about what for? In the case of
ports, an engineering perspective may define them as intermodal facilities at the
maritime-terrestrial interface comprising breakwaters, seawalls, channels, basins, quay
walls, jetties, etc., while from a political economy perspective, ports would be regarded as
infrastructure connecting economies to global markets and enhancing their ability to
compete for export markets and direct foreign investment by reducing costs to
international trade logistics and removing physical bottlenecks for trade.
2
3
The GPE framework used is discussed in much more details further on in the report.
Fritz et al 2009
13
Both the engineering and the social science perspectives matter. They matter because
they represent different sides of the same coin. Although this paper has the governance
and political economy pitch to it, the mechanical properties of roads and ports are no less
important for technical and financial reasons of planning asset management and
investment. While our charge is to focus on governance and institutional reforms issues
(i.e., the soft infrastructure), the report takes full cognizance of the ‘hard infrastructure’
aspects of roads and ports, including fixed capital equipment such as pavement, berths,
bulk handling facilities, etc.
1.2
Investing in Transport Infrastructure
The World Bank has been involved in roads much longer than in ports in as far as its
lending policy in Kenya in concerned and has since circa 1960 made substantial, in
relative terms, infrastructure investments in the country. As of April 2009, the World
Bank’s portfolio in Kenya consisted of 17 active operations with total commitments of
over US$1.3 billion. The largest share of commitments was in transport (US$463
million). Other project sectors include energy, water, education, health, private sector
development, public sector governance, and economic policy. In the fiscal year 2009
(June to July), the Bank’s Executive Board of Directors approved three projects, two of
which were in infrastructure (i.e., the Northern Corridor Transport Improvement Project
additional financing and the Energy Sector Recovery Project additional financing).
1.3
Importance of Roads and Ports
As part of the transport infrastructure, the main mechanism by which improvements in
road and port infrastructure impacts the economy is via reduction of the costs of moving
goods and services. It also impacts other factors such as speed, reliability and safety and
security; lowering the cost of assembling intermediate inputs for production thus
increasing profitability of firms as well as the overall output level and income in the
economy. For politicians and bureaucrats, road contracts and the port provide significant
revenue streams and, therefore, control of these resources is crucial, influencing their
preferences and decision-making for or against reforms.
1.4
Are Roads and Ports Enough?
In the Kenyan context where significant volumes of travel and transport are off roads (on
footpaths and tracks), and where the economy is partially integrated into the global
markets, roads and ports can be irrelevant to large segments of the population, which
begs the question, who are the winners and losers of road and port investments?
14
1.5
What is new?
The analysis presented here captures the dynamics between structures, institutions and
actors in the roads and ports sub-sectors, and how such interaction influences the pace
and direction of reforms. It captures historical legacies and links them with the current
situation pertaining to the two sub-sectors. This narrative is then applied to map out
feasible options that the Bank could adopt to enhance its strategies and operations in
supporting the Kenyan government to realize intended reforms and development goals
in the infrastructure sector.
The Kenyan story presented here is not much different from that of many countries. In
the ports sub-sector what emerges is a struggle between a powerful political elite at the
centre and relatively small but organized regional interests. This dual is played out in the
context of port reforms where privatization is seen by the former as a means to expand
national, regional and global opportunities for economic growth while the latter
perceives it as a political and economic asset that gives them leverage to negotiate for
better local and sometimes individual political stakes. The roads sub-sector, being the
largest by traffic volume, attracts the attention of politicians, business class, bureaucrats
and other actors as well as the imagination of the country.
If one were to randomly ask what Kenyans remember most about Moi’s presidency, they
are likely to get “destroyed our roads” for an answer. Perhaps, Kibaki will be
remembered for “building roads”. In the case of Kenyatta, a story is told of a famous
engineer-contractor in Rift Valley who was awarded a government contract to build a
road to pavement level. He carried out a small fraction of the project and
misappropriated the rest of the money. Because of his age, Kenyatta was driven on the
short section with tarmac and was advised that the rest was just the same. The President
commissioned the phantom project and the rest is history! – TRUE STORY.
What is fresh about this analysis is the conclusion that attention to the political economy
of development decisions can add value to development advice lowering the cost of
policy failures.
15
2.0
The Problem
There are significant distortions in the provision of roads and ports infrastructure in
Kenya, imposing large costs on the economy. While progress has been made in providing
a basic network of primary and secondary roads, for example, large underserved areas
beyond the existing improved road network represent a significant, but untapped source
of economic development. Spatial inequalities notwithstanding, the roads sub-sector
accounts for close to 94 percent of the movement of cargo by surface transport handled
through the port of Mombasa, placing a disproportionate strain on road infrastructure.
Due to neglect and lack of proper maintenance, a substantial part of the road network
has over time deteriorated to deplorable conditions requiring substantial investments to
rehabilitate it. Any further decline in the economic value of this strategic national asset
compromises Kenya’s medium and long-term development objectives. The current total
annual budget for the roads sub-sector of Kshs 71 billion, while an overall improvement
from the previous years, is still not nearly enough to improve on the quality of roads as
well as expand coverage and capacity of the network. The sector continues to exhibit
high level of dependence on government and donor resources without sufficiently
delivering value for money.
In the ports sub-sector, Mombasa, which serves large parts of the landlocked countries of
Uganda, Rwanda, Burundi and eastern Democratic Republic of Congo, currently operates
way over capacity. In spite of Mombasa boasting of having one of the largest dry dock
facilities along the East African coastline, the level of investment by the government, as
both owner and operator on upgrading and modernization of port facilities has not kept
pace with rising domestic and regional demand. This, coupled with a dysfunctional rail
system, introduces significant challenges in the port’s performance, affecting efficiency
and cost of transport with negative impact on both domestic and international economic
competitiveness. With nearly 90 percent of Kenya’s external trade moving through the
port of Mombasa, the cost to the national economy in terms of forgone growth and
investment is enormous. This has obvious implications. At the macroeconomic level, for
example, it means that improving Kenya’s external trade competitiveness requires
significant reduction of transport costs, particularly the cost of port services, and
improving port efficiency at the sea/land interface. At the microeconomic level, easing
the financial burden on the national budget would mean transferring part of the risk (in
terms of port investments and operating costs) to the private sector through publicprivate sector partnership arrangements.
Given the above situation, reforming the roads and ports sub-sectors seems the natural
thing to do. However, the reality has not supported this. Some reforms in the roads and
ports sub-sectors have been implemented successfully, but, in other instances, reforms
have largely failed because of their incompatibility with the interests and thus policy
preferences of political actors, among other factors. Even granting the fact that the
process of institutional reforms is complex, there is reasonable evidence indicating that
governance and political economy (GPE) factors, including the incentives and interests
they generate for different actors, have played an important role in determining
outcomes of reforms in the two sub-sectors.
16
It is evident that Kenya continues to suffer from an unsatisfactory and dysfunctional
governance system characterized by corruption, inappropriate allocation of resources,
inefficient revenue systems, and weak delivery of vital public services. For example, in
2008 Kenya had a governance score of -0.6 (standard error 0.16) in ‘government
effectiveness’, placing the country in the 32.2 percentile in world ranking. Although this
is a slight improvement from the situation in 2003 (-0.76) when President Mwai Kibaki
took office, it still does not address concerns about the quality of governance especially
when compared to sub-Saharan African countries (Figure a).
Governance and institutional threats that include: The likelihood that the government
will be destabilized by unconstitutional or violent means, including terrorism (i.e.,
political stability); the extent to which agents have confidence in and abide by the rules
of society, including the quality of contract enforcement and property rights, the police,
the courts, as well as the likelihood of crime and violence (i.e., rule of law); and the extent
to which public power is exercised for private gain including both petty and grand forms
of corruption, as well as capture of the state by elites and private interest (i.e., control of
corruption)– are indicators by which Kenya performs well below its African
comparators – these are all consistent with the bane of reforms in Kenya’s infrastructure
sector. The remainder of this report discusses the underlying incentives and interests
that undergird this pattern of governance, illustrating how they operate in the context of
decision making in the roads and ports sub-sectors. The GPE framework or approach
17
used in this study is described next before proceeding to the GPE analysis of roads and
ports sub-sectors respectively.
18
3.0
Governance and Political Economy Framework
The GPE framework used in this study borrows from the problem-driven approach to
GPE analysis4, which proposes focusing analysis on particular challenges or
opportunities to assess risks and shape reforms. The approach comprises working
through three layers to: (a) identify the problem, opportunity or vulnerability to be
addressed; (b) map out the institutional and governance arrangements and weaknesses;
and (c) drill down to the political economy drivers, both to identify obstacles to
progressive change and to understand where a drive for positive change could emerge
from. This GPE framework (Figure 1) was applied in the diagnostic of the infrastructure
(roads and ports) sector, and to some extent on the country, to be able to better
understand GPE drives at this level.
GPE analysis
Problem-driven
Figure 1: The GPE Framework depicting layers of analyses
Evidence of poor
E.g.: repeated failure to adopt sector
outcomes to
reforms. Poor sector outcomes.
What which GPE
Infrastructure indentified as constraint to
vulnerabilities/ weaknesses
growth but not effectively
challenges appear to
addressed…Corruption continues to
contribute
undermine the business climate even after
anti-corruption last
What are the
Mapping of relevant branches of
associated
government, ministries, agencies, and state
Institutional
Institutional setowned enterprises (SOEs) and their
& governance up and
interaction. Existing laws and regulations.
arrangements Governance
Policy processes (formal rules and de
& capacities
arrangements?
facto). What mechanisms intended to
ensure integrity and accountability and to
limit corruption exist?
Why are things
Analysis of stakeholders, incentives, rents/
this way? Why are rent distribution, historical legacies, and
Political
policies or
prior experiences with reforms, social
economy
institutions
trends and forces (e.g., ethnic tensions),
drivers
arrangements not and how they shape current stakeholder
being improved?
positions and actions
Source: Adopted from Fritz el al 2009
This GPE framework is useful at the country level to provide an overview of governance
and political economy drivers as a background to subsequent sector specific GPE analysis.
The macro-level country GPE assessment given below is useful in setting the stage for
subsequent analysis in the sense that, structural variables (e.g. poverty, climate and
geopolitical factors, population etc.), interact with institutional variables and actors/
stakeholders to influence political and public sector actions and policies and their
implementation.
4
Fritz et al 2009
19
4.0
COUNTRY-L EVEL GPE DRIVERS
Sundet et al (2009) provide a useful political economy analysis of Kenya that is set in a
historical context. We summarize some of the highlights of their report to reinforce the
message of this diagnostic - that politics and political economy influence whether and
how reforms have happened in Kenya. We agree with the general analysis of the report
that shows state-society relations in Kenya have been under strain since independence
due to the widening gap between the ruling elite and the population at large.
4.1
History of State Formation in Kenya
At independence, Kenya inherited a colonial model with a strongly centralized state and
a dominant executive. Kenya had been a European settler state, with plantation
agriculture as the dominant occupation of the settlers. Their dominant position emerged
through appropriation of land from indigenous populations. The African population
remained as smallholders while a large share of the rural population became labourers
for the settlers in a semi-feudal system. The unequal distribution of land, landlessness
and the legal restrictions on indigenous Kenyans in some areas to own land and engage
in commercial agriculture were among the major grievances in the independence
struggle. Thus, when power was handed over from the colonial administration to the
Kenyans in 1963, some of the key characteristics of today’s political situation were
already in place: a centralized state with a powerful executive, political conflict around
the issue of inequality, particularly with reference to land, and a tradition of violent
confrontation between the state and popular movements in opposition.
The history of the port of Mombasa, for example, goes back to a time when dhows called
at the Old Port on the north side of Mombasa Island. As trade began to boom during the
19th century work began on a railway from Mombasa to Kampala in Uganda to open up
the hinterland for trade in coffee, tea, ivory and skins. As trade expanded and the interior
of East Africa was opened up by the new railway, so demand grew for a fully fledged
seaport with a deep water harbor. A new port was created at Kilindini Harbor in 1896
with the building of a jetty on the west side of the island. Many generations of workers
and business people connect with this history and, therefore, it is not surprising
therefore that the debate around port reforms has tended to raise a lot of passionate
resistance.
Similar arguments can be made with respect to road infrastructure investment. The
pattern of human settlement and infrastructure investments that the colonial
government established have remained to date and continue to influence the geography
of development in Kenya. Since transport is a derived demand, those with vested interest
in landed property and who historically have occupied the commanding heights, tend to
influence decisions to favor their personal and class interests and thus preferences for or
against reforms. Access to power and control of state machinery has been the GPE driver
defining the pattern of land ownership and investment (particularly in road
infrastructure) throughout and the pattern has remained largely the same to date. Much
more significantly, inequalities have often led to political resentment being expressed
along tribal lines, particularly over perceived injustices over the distribution of land
ownership (ibid).
20
With much of the total road budget controlled nationally, decision-making on resource
allocation in a geographically and culturally diverse country such as Kenya can have
major regional implications for inequalities in terms of quantity and quality of public
roads, market access, transport cost, and therefore, the pace and level of development.
Studies on socio-economic inequalities in centralized presidential systems reveals a
pattern observed in Kenya with high development rates correlated with the president’s
region of origin.5 Inequalities (or even perception of inequalities), especially when they
have an ethnic undertone, engender political risk which can derail reforms, as was
witnessed during the events following the December 2007 election..
4.2
Electoral Outcomes: How Do They Affect Reforms?
Electoral competitiveness is important for political economy since the policy choices of
politicians are invariably influenced by the likelihood that those choices will lead to their
success or failure in their political careers. Electoral rules on presidential elections
requiring the winner to obtain not less than 25% of total votes in more than 25 out of 47
counties according to the new Kenya Constitution promulgated in August 2010 have
increased the contestability of presidential elections, but are also expected to have some
impact in checking the excesses of the executive by forcing political compromises. This
will be either positive or negative depending on the political entrepreneurship of the
actors.
The stalemate that followed the 2007 General Elections resulted in the present coalition
government, which our analysis shows to be highly motivated by the 2012 elections, so
much so that the key policy decisions in infrastructural facilities have been affected. Like
is common in countries such as Kenya, politicians’ motives are largely driven by electoral
outcomes. And given the imperfections in Kenya’s electoral markets, there is little or no
incentive for electoral accountability since the ability of citizens to influence political
leadership is also limited by inadequate information and low awareness of broader
issues. Under such conditions self interest and impunity thrive at the expense of integrity
and professionalism with reforms tending to suffer.
4.3
Business Interest and Political Capture
Weak governance institutions have served the interests of the ruling elite and strong
business interests in ways that have a strong bearing on policies more generally and
reforms in particular. Analysis and evidence show that interest groups with significant
interest in business have been able to exert significant influence on policy, at times even
resisting reforms. Reforms under the Road Management Initiative (RMI), for example,
stalled as they would have entailed losses for the politically influential constituency of
core political supporters. Similar evidence emerges in the case of port (privatization)
reforms where government policy has been frustrated.
4.4
Geopolitical Dynamics
Kenya’s transport infrastructure plays a pivotal role in the region as well as in the
planned TransAfrica Highway network. In addition to playing a central role in the
5
Opon, 2007
21
Northern Corridor that serves Uganda, Rwanda, Burundi, DRC, and Southern Sudan
through the Kenyan Port of Mombasa via the Kenyan road, rail and pipeline transport
systems; some sections of the country’s road network are parts of the TransAfrica
Highway linking Southern, East, Central and North Africa. Some of these countries, led by
Uganda – the most important user of the Northern Corridor after Kenya- exert heavy
political pressure on the Kenya Government, regarding costs, delays and other
inconveniences encountered by their businessmen operating along the Northern
Corridor.
4.5
Relevance of the Social and Political Context
Kenya’s post-independence development ideology favored equitable growth. However,
by increasingly acquiring a class character, the state came to be often regarded as an
instrument mainly serving the interests of the affluent and, often, urban-based
propertied class and in politically favoured parts of the country. Through the siphoning
of resources from the rural to the urban economy, a lopsided, urban biased unequal
development of infrastructure resulted.6 The problem of poor road services in rural
areas could, therefore, be to some extent explained in the ideological or class character of
the Kenyan state.7
At the level of the social structure, ethnicity has been a major mediating factor in the
allocation of state resources influencing the provision of public infrastructural facilities
and services. The pattern is generally seen to have persisted under Kenyatta8, Moi9 and
Kibaki, a factor that is associated with existing inter-regional and intra-regional
disparities in the provision of public goods and services.10 Perceptions about the nature
and extent of these inequalities strongly influence the political economy of infrastructural
reforms in Kenya as the Mombasa port case clearly demonstrates. The general neglect
(both in national discourse and in terms of prioritization for investments) of other ports
such as Kisumu, Homa Bay, Kendu Bay, Mfangano, Kotieno, Mohoru Bay, Mbita, Lamu
and Kilifi underscores the political economy embedding of infrastructure reforms in
Kenya.
4.6
The Situation Now
Consistent with the compromised circumstances that led to the formation of the
Coalition government in power since 2008, repeat opinion polls and reviews show
general dissatisfaction with its performance. The decision by the Parliamentary Select
Committee on Constitutional Review and the eventual adoption of a presidential system
(albeit one with more checks and balances) in the new constitution is widely interpreted
as a vote of no confidence in the current arrangement where the President and Prime
Minister share executive powers. The referendum vote on a new constitution
promulgated in August 2010 was essentially a quest for democracy, and is today regarded
as the most important political decision Kenyans have made on the question of
governance and is already fundamentally changing the political economy of the country as
Lipton 1988
Oyugi 1995
8 Leonard 1984
9 Barkan and Chege 1989
10 Kanyinga 1995 and Oyugi 1995
6
7
22
new laws touching on a wide range of national, social, economic and political sphere of
the Kenyan people are being enacted. The importance of governance in the new
constitution is unmistakable. For instance a draft bill expected to be submitted to the
Cabinet shortly proposes that all contestants for political offices in the new constitution
such as President, Senator, national Parliamentary as well as County Assembly Senators
and governors and others will need to be vetted, cleared and issued with a certificate of
compliance by the Kenya Anti-Corruption Commission (KACC) before they can be
registered as candidates. (See the Standard, July 18th 2011, p.1).
23
5.0 ROADS
5.1
Background
Road transport is today by far the most dominant mode of transport in Kenya in terms of
both employment and value of output of the country’s Transport and communications
sector (see Table 1). In 2010, road transport accounted for almost 56 percent of the
Sector’s total output. This is followed by communications and air transport in that order.
Table 1: The Structure of Kenya’s Transport and Communications sector, 2006-2010
2007
233,224
4,550
23,233
80,254
33,971
8,736
86,189
2008
273,047
4,449
21,868
83,010
38,823
9,222
93,466
2009
285,250
4,356
21,039
80,519
40,016
11,481
100,009
2010
331,948
2,208
21,488
80,935
49,348
6,463
101,773
Total
409,308 470,157
Source: Economic Survey Various Issues
523,884
542,670
594,162
Road Transport
Railways Transport
Water Transport
Air Transport
Services Incidental to
Transport
Pipeline Transport
Communications
2006
205,305
4,553
21,408
71,301
29,194
8,846
68,702
Kenya’s total road network is about 178,335 km long, representing the total road asset in
the country.11 Out of this, only 11,600 km (6.4 percent) is paved (Annex 1), that is the
length of all roads that are surfaced with crushed stone (macadam) and hydrocarbon
binder or bituminized agents, with concrete or with cobblestones. In 1963, Kenya had
paved road measuring 2000 km, which means that the country has only managed to add
9,600 km of paved roads (or 204 km per year) to its total road network.
This is against a backdrop of rapid increase in the number of vehicles in the country.
Between 2006 and 2010, the total number of newly registered road motor vehicles rose
almost fourfold, from 52,817 units to 196,456 units per year respectively (see Table2)
and motor cycles accounting for close to 60% newly registered units in 2010. This rapid
growth is attributed to rising real per capita income which increased from ksh 34,574 to
ksh 36,419 between 2006 and 2010 respectively. There has been particularly sharp
increase in private motor vehicles and motor cycles attributable to poor, inadequate and
unreliable public transport in addition rising per capita income and a growing pool of a
much better paid middle class working in both public and private sectors. A recent
survey indicated that Kenya is one of the leading countries in Africa in terms of the size
of the middle class. Another phenomenon is that of a rapid growth in use of auto cycles
as a means of taxi transport popularly known as “boda boda” for both rural and smaller
urban areas.
This figure has recently been revised downwards by 20,000 km following a new road classification. The
new estimate is 159,000 kilometers. The revision was prompted by the revision of the definition of what is
classified as a ‘road’ to include only those roads whose reserve measures at least nine meters width. The
previous definition included roads which have up to six meters of road reserve.
11
24
Table 2: New Registration of Road Motor Vehicles, 2006-2010
Type of Vehicle
2006
2007
2008
Saloon Cars
14,289
17,893
18,686
Station Wagons
12,631
24,115
24,747
Panel Vans, Pick-ups
6,721
9,470
8,983
Lorries/Trucks
3,610
6,329
6,691
Buses and Coaches
856
2,006
1,243
Mini Buses/Matatu
3,714
4,252
5,206
Trailers
1,706
2,193
2,100
Wheeled Tractors
920
1,213
1,262
Motor and Auto Cycles
6,250
16,293
51,412
Three Wheelers
1,075
1,072
704
Other Vehicles
505
488
797
Total Units Registered
52,817
85,324
Source: Kenya Revenue Authority (KRA)
121,831
2009
16,930
27,599
7,120
6,037
1,057
4,483
2,883
1,115
91,151
863
2,575
2010
16,165
37,553
6,975
4,924
1,264
3,600
2,379
1,161
117,266
1,521
3,648
161,813
196,456
Kenya has a relatively low road pavement ratio compared to the rest of Africa. In 1996,
24.2 percent of the total road network in Africa was paved. 12 In 2007, Egypt and
Morocco had 81 percent and 62 percent respectively of their total road network
paved.13Besides, a survey conducted by the International Roads Assessment Programme
(iRAP) in 2008 showed that only 50 percent of paved roads in Kenya are in good
condition, 30 percent in medium and 20 percent in poor conditions. In terms of
delineation (or markings) the assessment showed that 30 percent of roads are not
delineated adequately while 70 percent are poorly so. Barrier conditions are also
generally poor with at least 25 percent of the road length having high road side severity
problems.14 The situation is worse on the unpaved roads, which make up the bulk (93.5
percent) of the network, with only 14 percent in good condition. Away from urban
centres the iRAP survey found that 95 percent of the 2,559km length of the road network
surveyed was single carriageway, with one lane in each direction. In addition, 44 percent
had no shoulder and 97 percent had no pedestrian footpath. Speeds were typically
100km/h and heavy pedestrian flow was a factor on nearly all the roads surveyed.
Further, the iRAP Report (2009) shows that within the Nairobi region, the roads
inspected were larger (45 percent had two or more lanes in each direction) and speeds
were lower due to congestion. Roadside severity was worse than on rural roads with at
least 80 percent of roads having roadside hazards. Segregation of vehicles from
pedestrians in Nairobi continues to be poor. Although 95 percent of the roads recorded
high pedestrian flows, only 20 percent had pedestrian footpaths. Road conditions in
Nairobi were slightly better than in rural areas where only 10 percent was rated as poor
although delineation was worse with 90 percent rated poor.
ADB 1999
International Road Federation 2009
14 Engineering features, such as safety barriers can be used to separate fast moving traffic from people and
cushion crashes when they happen.
12
13
25
Poor road conditions in Africa has been attributed to a number of factors including: (a)
high risk inherent in road projects; (b) limited financial resources; (c) too few, too poor,
and too technically limited local investors to undertake major investments; (d)
underdeveloped capital markets; (e) over reliance on the state to provide infrastructure
despite its limited resources and the poor track record of most public enterprises; (f)
poor management, poor investments decisions and the bureaucratization of the decisionmaking process; and (g) slow economic growth, fiscal drain, poor cost recovery, and
operational inefficiencies, etc.15
Kenya’s experience fits this characterization remarkably well. For example, road funding
started dwindling in the early 1970s following the first oil crisis. 16This resulted in the
government placing emphasis on the construction of feeder and minor roads. Similarly,
labor based works were introduced during the 1970s partly to address declining foreign
currency reserves as well as to deal with the problem of growing unemployment. The
government continued with this rural-oriented road development program through the
1980s partly because it served the political interest of the Moi administration to invest
where the Kenyan vote is concentrated. The rest of the road network, however, was
largely neglected. As a consequence, primary, secondary and urban roads began to
deteriorate due to lack of maintenance.17 This led to a vicious cycle of roads collapsing
prematurely long before the end of their design life. Many of the roads built in the Rift
Valley Province in the 80s and 90s suffered this fate.
The rate of deterioration of Kenyan roads was compounded by damage done by
overloaded trucks and lack of enforcement of axle load control due to vested interest
with close links to the president. Investing in light and heavy tracking business was then
one of the fastest growing enterprises in Rift Valley, the bedrock of President Moi’s
support. A functional patronage system ensured that rules of entry were lowered
through easy access to credit and that there was constant business through government
contracts that ensured income streams. In return, owners and operators of what were
essentially small-to-medium scale transport operations served to mobilize political
support and generate rent.
“Harambee” (Swahili for let us pull together) – here used as a colloquium for public
fundraiser – a trademark of the Nyayo era,18 provided politicians a convenient roundthe-year campaign platform. The ability to bus large number of people to and fro these
fundraising cum political campaign rallies had political significance as it served to show
ones political support.
ibid
A rapidly growing population was also exerting pressure on resources and Kenya faced stark choices
from competing demands in infrastructure as well as in other sectors.
17 “Highway Development Challenges” – Presentation by Director General, Kenya National Highways
Authority at the Architectural Association of Kenya Annual Convention, November 2009.
18 Moi’s years of rule are commonly referred to as the Nyayo era following his declaration that he would
follow the footsteps of his predecessor, President Kenyatta. Harambees were banned by the NARC
governments soon after winning power from KANU in the December 2002 Elections.
15
16
26
Thus, in spite of repeated complaints by stakeholders and road users, including
neighboring countries dependent on the Northern Corridor and the port of Mombasa for
transit trade, the problem of the poor state of roads was not effectively addressed due to
bad policy choices, corruption and a weak system of checks and balances leading to high
cost of doing business. It was also not in the ruling elite’s interest to tax its political
clientele therefore, axle load control rules, for example, were circumvented to maximize
on rent extraction. In addition, the non democratic nature of the state and its institutions
served to maintain the status quo.
The Road Maintenance Initiative (RMI)20 launched in the late 1980s by the United
Nations Economic Commission for Africa and the World Bank Sub-Saharan Africa
Transport Program (SSATP) sought to address challenges in the roads sub-sector. RMI
entailed bringing roads into the market place, charging for their use on a fee-for-service
basis and managing them like any other business21without addressing some of the
underlying GPE issues identified above. Reforms envisaged under the RMI included: (1)
securing an adequate and stable flow of funds to the roads sub-sector; (2) involving all
stakeholders (government departments, representatives of transport users, chambers of
commerce, farmers’ associations and local communities) in policy making and in
management of roads; (3) securing a clear assignment of responsibilities among key
departments and agencies responsible for policy formulation and implementation; and
(4) adopting sound business practices and managerial accountability.
Kenya’s roads sub-sector could have performed better and its citizens would be enjoying
better quality roads today if this policy reform agenda had been zealously implemented
and if expenditure on infrastructure and services had been better prioritized and
targeted and more effectively managed with less corruption. However, the prevailing
GPE conditions meant implementing reforms was always going to be difficult. The Interim
Poverty Reduction Strategy Paper 2000–2003, for example, attributed the poor condition
of Kenya’s road network to lack of periodic and routine maintenance; rampant
corruption in road construction contracts; collusion between contractors and
government officials leading to approval of substandard work; increased traffic volumes;
overloading; El-Niño rains; and non-prioritization of roads in government expenditure,
among other factors.
Also, the Examination Report into the Systems, Policies, Procedures, and Practices of the
Roads Sub-Sector22 found the following systemic weaknesses and loopholes in the roads
sub-sector that allow corrupt practices to thrive in the roads sub-sector: (a) weak
regulatory framework; (b) poor project management practices; (c) inadequate designs
prior to tendering of works; (d) malpractices in the axle load control; (e) low capacity
levels of local contracting companies; (f) poor communication of policies and procedures
within the whole project cycle; (g) shortage of skilled technical staff to undertake the
assignments; and (h) breaches in the procurement procedures and stores management.
Appropriately renamed “Road Maintenance and Financing” (RMF) in the SSATP Second Development
Plan 2008-2011
21 Pinard and Kaombwe, 2001
22 Kenya Anti-Corruption Commission (KACC) 2007
20
27
The above findings have been corroborated in several analytical works, including
forensic audits and the Department of Institutional Integrity-led Detailed
Implementation Review (DIR). The DIR of selected projects (2005-2007) concluded that
investments in Kenya’s road sub-sector entail substantial risks notably:
i)
ii)
iii)
iv)
v)
vi)
vii)
viii)
ix)
x)
Collusion and bid rigging;
Fraud and corruption in the road construction industry;
Truck overloading resulting from lack of enforcement of standards , low fines and
corruption;
Delays in value added tax (VAT) refunds, causing inflated prices in construction
bids;
Weak due diligence on bidders. The integrity and past performance of contractors
is a key determinant of fraud and corruption risks;
Absence of robust cost estimates;
Weak capacity to detect and deal with fraud and corruption;
Weak complaint handling mechanisms;
Weak road management capacity; and
Overall weak transparency and social monitoring of road construction.
In order to further mitigate the risks and enhance professional integrity in the sector, the
Bank and the Government of Kenya (GoK) agreed on a Roads Sector Governance and
Integrity Improvement Action Plan. The areas of concern and proposed remedial actions
by GoK, the Bank and civil society are presented in Annex 3. For example, it was agreed
that: (1) The overall road program and business opportunities in the roads sub-sector
would be publicly disseminated; (2) a well documented system for debarment of poor
performers and contractors engaged in fraudulent and corrupt practices would be
established and consistently implemented through the National Construction Authority
(NCA); (3) appropriate measures will be taken to enforce axle load control; (4) efforts
will be increased in conducting due diligence of bidders and performance reviews will be
carried out more regularly; (5) robust cost estimates will be developed and
benchmarked with regional markets; (6) effective controls will be established on
procurement, financial management and human resource management systems; and (7)
complaints handling will be strengthened as well as planning, programming, budgeting,
execution and monitoring and evaluation.
The overall finding of this study is that the implementation of the above governance and
institutional reforms in the roads sub-sector has faced a number of challenges whose root
cause can be traced in the governance and political economy conditions in Kenya. What
follows is a GPE analysis of implementation of this policy reform agenda
28
5.2
Political Economy of Reforms in Kenya’s Roads Sub-Sector
In conditions where vehicle numbers per capita is low (Kenya has less than 1 motor
vehicles/1000 population compared to Egypt’s 81, Morocco’s 62 and Mexico’s 38.2
motor vehicles/1000 population respectively)23 and road transport dominant, access to
means of transport is a vital political and economic asset. According to the Ministry of
Roads’ estimates, the country relies on road transport for about 97 percent of all of its
transport needs (Daily Nation, December 10th, 2009)
In spite of the highlighted challenges, Kenya’s road sub-sector has benefited considerably
from a number of reforms implemented in the last six years as the government raised the
priority of infrastructural development as a means of meeting the objectives of both the
Economic Recovery Strategy for Wealth and Employment Creation 2003-2007 (ERS
in short) and those of Kenya Vision 2030. ERS, for example, provided a broad overview
of Kenya’s development and poverty challenges and presented a strategy based on four
pillars: (i) macroeconomic stability and public sector reforms, (ii) good governance, (iii)
rehabilitation and expansion of infrastructure, and (iv) human capital. These preferences
reflected the composition of the National Rainbow Coalition (NARC) government that
brought together conservative persons from the previous regime as well as more radical
pro-reform persons most of whom had spent their political careers in opposition.
Initially united in dislodging the Kenya African National Union (KANU) government from
power, they now became enjoined in charting a new government and advancing reforms.
The NARC government started with defining its policy objectives contained in the
Sessional Paper No. 5 of 2006 on the Management of the Roads Sub-Sector for
Sustainable Economic Development. The key policy objectives in the roads sub-sector
were identified as: (1) reduction of transport costs and travel time within the country
and the region as a whole, (2) increasing accessibility to an improved network, (3)
promoting of optimal utilization of available resources, (4) increasing financial resources
for the sub-sector, (5) greater attention to preservation or maintenance of the existing
road network, (6) creation of a conducive environment for increased private public
sector partnership in the roads sub-sector, (7) improved road safety and providing
facilities for non-motorized transport, (8) increased ownership through promotion of
stakeholder participation in the sector, and (9) creation of an optimal institutional
frameork for effective implementation of infrastructural development program.
Parliament ratified the Sessional Paper in 2006. This was followed by the enactment of
the Kenya Roads Act in 2007, which marked the culmination of a long process going as
far back as 1993 when the Road Maintenance Levy Fund (RMLF) was introduced. It took
another six years before the Kenya Roads Board (KRB) was established in 1999 to
manage the RMLF, and almost another decade to enact the legislation establishing the
Kenya Urban Roads Authority (KURA), the Kenya National Highways Authority (KNHA),
and the Kenya Rural Roads Authority (KRRA). Each Road Agency is should be overseen
by an independent board consisting of representatives of road users and stakeholders,
with the majority being from the private sector.a
23
IFR ibid
29
Raila Odinga was appointed the Minister for Roads and Public Works in the first NARC
government, a portfolio he held until Kibaki dissolved the Cabinet in 2005 following
major political differences after the Referendum on the proposed new constitution.
During his tenure as the Minister in-charge of roads, Raila pushed for reforms very
unpopular amongst some of the country’s powerful vested interests. His background in
opposition politics, the leading role he played in the electoral campaign that resulted in
NARC’s victory, his interest in building credibility with the electorate as a future
candidate, as well as his vocal pro-reform stance were all instrumental in shaping policy
decisions the government took to reform the roads sub-sector.
While not all these objectives have been fully realized, a wide range of measures have
been taken in the last seven years that have facilitated realization of some of the
objectives. These include: (a) on-going investment programme to rehabilitate the
Mombasa-Malaba highway serving the Northern Corridor funded by the World Bank and
other development partners, as well as the Government of Kenya the construction of
Thika Highway financed by ADB and GoK ; (b) on-going construction of the Eastern,
Northern and Southern by-passes around Nairobi with Chinese contractors and
government playing a leading role in the construction and funding of the by-passes
respectively; (c) increased budgetary allocations for the roads sub-sector; (d)
establishment and support of the RMLF, currently accounting for Kshs 20 billion out of
the Kshs 71 billion national budget allocated for the roads sub-sector during the
2009/10 Financial Year; (e) shift of emphasis to rehabilitation and maintenance of the
existing road network; (f) Parliament’s approval of the first toll road concession in
December 2009; (g) increased attention to non-motorized transport facilities; (h)
majority representation of private sector institutions in KRB, KNHA, KURA and KRRA;
and (i) the restructuring of the Ministry of Roads so that it focuses on policy and
regulatory matters with the three authorities being in charge of road construction
operations.
These and other road construction activities have had a major impact on the country’s
economic activities and have attracted considerable public attention and appreciation.
They have triggered major economic multiplier effect especially on building and
construction sectors
The establishment of KRB in July 2000 following the enactment of the Kenya Roads
Board Act (1999) and the creation of the associated RMLF are generally regarded as
major reforms in the sub-sector. KRB not only created an important source of road
financing mechanism, it also increased the participation of the private sector
professionals in the affairs of the roads sub-sector. The creation of KRB resulted from the
recommendations of the Road Sector Institutional study completed in May 1998 (see
Assessment of Selected Road Funds in Africa, p.31). The study and follow-up
discussions with senior government officials recognized the urgent need to create
structures that would promote “long-term sustainability” of the country’s road network.
The RMLF draws its financial resources principally from the Road Maintenance Levy and
other available sources. The administrative costs of running KRB are financed through a
dedicated portion of not more than three percent of the total revenue collected by the
30
Board. The establishment of KRB, in which development partners and GoK were heavily
involved, is regarded as a major reform in the country’s roads sub-sector in terms of
addressing poor governance issues, which had featured prominently in the sector. Thus,
the operational features and design of KRB were meant to strengthen transparency,
accountability and certainty in the allocation, disbursement and management of
available resources for the roads sub-sector.
In pursuit of these principles, KRB was required to inform the road agencies the amounts
of funds allocation available to them at least a year before the intended
disbursement;identify the priorities of the Board with regard to fund allocation; reveal
the criteria to be used in the allocation process; keep the public informed about its
activities through regular publications of its financial statements and other matters of
public interest; and submit the accounts of the Board to the Auditor-General at least four
months before the end of the financial year. These procedures were also meant to reduce
the level of political interference in the allocation and disbursement of resources for
greater equity.
In addition to its role of generating financial resources, the Board performs a number of
other key functions such as: the allocation of revenue raised; annual programming and
planning of work activities and monitoring and evaluation of the work of various road
agencies who are beneficiaries of the annual allocations of the road maintenance levy.b
Road agencies on their part are required to prepare and submit their Annual Roads
Programmes to the Board not less than six months before the beginning of every
financial year, to enable the Board review each agency’s programme before being
forwarded to the Ministry of Roads and Ministry of Finance for approval. Fund allocation
is to be based on the approved work programmes of various roads agencies.
Under this arrangement, the KRB funds are shared as follows: KNHA (40 percent), KRRA
(32 percent), KURA (17 percent), and Kenya Wildlife Services KWS (one percent) (Figure
2). KRB retains the difference of about 10 percent, which it allocates to road agencies on
a “case-by-case” basis. There is a risk this retainer, almost Kshs. 2 billion at current KRB
Fund estimates, could be open to executive manipulation (or lobbying by Members of
Parliament). The clearest example of such influence is the policy directive the Minister
for Finance issued during the Budget Speech for 2009/10 FY that funding for rural roads
will be channeled through the Constituency Development Fund (CDF). Such horse
trading partly explains why MPs are particularly disinterested in keeping the executive
in check.
31
Figure 2: Share of KRB Fund by Road and Agency
Disbursement Road
Agency
32%
Secondary Roads (D and below)
17%
Rural Roads
1%
National Parks/Reserve
10%
KRB Retainer
KRRA
Core network (A,B,C)
KURA
KNHA
40%
KWS
Source: Field Interview - KRB
However, it would be a mistake to interpret this as purely a case of the Minister of
Finance seeking to make political capital. He may well be since he contested for the
presidency in 2002 but lost and is expected to run again during the next election, but it
could also be a government policy. The current government is a coalition between ODM
and PNU. The two had separate manifestos to begin with but decided to marry them into
one when they entered into a coalition. IIt is known that ODM had a strong devolution
agenda, which may have been taken on board in the merged manifesto. This would thus
imply that the Minister’s directive was in line with the policy of the Grand Coalition
Government.
Whatever the true reason, the significance of the Minister’s directive cannot be
underrated due to its timing coming soon after the inauguration of the three Road
Authorities in September 2008. Staff of KRB expressed fear of the risks this policy shift
entails especially since the CDF allocations have been abused in the past. Such fears are
not unfounded. According to KRB estimates, nearly 60 percent of total disbursement is
currently being put to good use (i.e., actual road works) compared to a few years ago
when only 40 percent of committed funds was used for maintenance with the remainder
(60 percent) lost through graft. Assuming these estimates are right and that there has
been a 20 percent reduction of leakage over the last few years, 40 percent of Kshs. 20
billion which continues to be lost annually through corruption is a substantial sum that if
efficiently utilized would make significant difference in access to better quality roads at a
cost affordable to a wide range of road users.
32
Future of Road Maintenance Levy Fund
The creation of the Kenya Roads Board and the Roads Maintenance Levy Fund have been
key institutional reforms that have made a major contribution to the improvement and
expansion of national roads network in the last ten years.
Fuel Levy and the Transit toll collections are today the main sources of road maintenance
funds, with Fuel Levy accounting for almost 98% of the total in the last few years (see
Table 3).
Table 3: Roads Maintenance Funds, 2006/07-2010/11 (Ksh Millions)
2006/07
2007/08
2008/09
2009/10
Type
Fuel Levy....
14,814
17,999
19,000
22,180
Transit toll...
327
270
357
425
Total.....
15,141
18,269
19,357
22,605
Source: Republic of Kenya, Economic Survey 2011, p.246
2010/11
22,918
487
23,405
Kenya’s transport sector is an important contributor to the country’s annual gross
earnings from both domestic sales and export earnings of various transport services. As
Table 4 shows passenger traffic earnings more than doubled to ksh 167.3 billion
between 2006 and 2010 while freight traffic earnings rose from ksh 90.4 billion to ksh
164.6 billion during the same period. Passenger and freight traffic had combined
transport earnings of ksh 332 billion in 2010.
Table 4: Earnings from Road Traffic, 2006-2010 (Ksh Million)
Type
2006
2007
2008
2009
2010
Passenger Traffic......
114,880 126,814 146,072 155,909 167,320
Freight Traffic............
90,424 106,410 126,975 129,341 164,628
Total Road Traffic Earnings
205,304 233,224 273,047 285,250 331,948
Source: Republic of Kenya, Economic Survey 2011, p.246
Continued impact of the Road Maintenance Fuel levy will be influenced by a number of
factors. One of these is the allocation of the Fund resources to the 47 counties created in
the new constitution. One of the issues related to this is what is the amount of the levy
fund allocated to the individual county is enough to undertake a meaningful activity or is
it too thinly spread to have an impact in individual counties. There are also likely to be a
number of equity and political issues raised regarding the distribution of road levy
resources. For instance should counties where more levy is collected such as Nairobi,
Mombasa and other large towns receive the same share with counties where low
amounts of levy are collected due to smaller vehicle population.
The other factor that will have adverse effects on the contribution of the Road
Maintenance Fuel Levy is the recent major reduction of government taxes on petroleum
products following a concerted outcry by the people and civil society activists against
sharp increases on petroleum prices, cost of living and other economic hardships facing
the average Kenyan. As a result of rising protests and associated social and political
pressures, main option facing the government was to reduce government taxes on all
33
petroleum products. Thus, the total amount of fuel levy collected during 2010/2011 is
expected to sharply decline. This is likely to adversely affect available resources for road
maintenance and rehabilitation.
5.3
Resistance to Reforms
Addressing Parliament in 2007, Raila narrated how he found corruption rampant in the
ministry when he assumed the responsibility of Minister for Roads and Public Works
(see details in Annex 3). As a result, he decided to appoint two committees: one to
investigate the illegal allocation of government properties, and the second one was to
investigate the issue of pending bills in the Ministry. 24Although the eventual fallout of
NARC allies exposed serious political divisions within the government, surprisingly this
did not change the direction of reforms in the roads sub-sector. It only slowed them
down, which would suggest one or more of the following: 1) a degree of convergence of
preferences with respect to the reform agenda; 2) benefits of implementing reforms
outweigh the costs; or 3) constituents have credible political alternatives that could hold
politicians in check. This is evident from what has been achieved within a relatively short
period of time in terms of development, maintenance,rehabilitation and protection of the
road network.
5.4
Criteria for Prioritizing Maintenance
The KRB and Road Agencies have developed criteria for maintenance of priority roads.
These are: (i) maintaining maintainable roads; (ii) improving roads that provide security
and connecting to administrative and social centers (such as divisional headquarters,
chief’s offices, health centers and educational centers); (iii) improving roads that connect
and provide access to the higher tier of the road network (classes D and E roads); (iv)
improving roads that provide access to markets centers; and (v) providing basic access
to the rural communities (by means of spot patching and spot improvement,
construction of culverts and critical crossing points). See definition of road works in the
following Box 1.
The above socioeconomic criteria applies to secondary and rural roads (Class D and E).
For the national core road network (Class A, B and C), only economic criteria/model is
used to select and prioritize roads for regular and periodic maintenance, rehabilitation,
spot improvement, reconstruction, upgrading/expansion and development.
24
Parliamentary Hansard of June 26th 2007
34
Box 1: Definition of Road Works







Routine maintenance – This applies to the regular maintenance activities
necessary to ensure that the roads perform as designed and that the road
asset is not lost. This is given first priority for roads in good and fair
condition to prolong their life.
Periodic maintenance – These are activities undertaken at regular intervals to
improve the riding quality, pavement strength, safety and drainage capacity.
Rehabilitation – These are maintenance activities to restore and strengthen
the pavement to extend the life of the entire road which will forestall further
deterioration and expensive reconstruction
Spot improvement – Refers to improvements on the carriage way such as
gravelling as well as structures and soil conservation measures to improve
and consolidate the roads that have been partially improved or are under
routine maintenance.
Reconstruction – Involves the construction of the entire road anew in order to
restore the lost pavement among other improvements.
Upgrading/Expansion – This involves the construction of a road from
earth/gravel to bitumen standard, improving capacity, increasing capacity,
increasing number of lanes, junction improvements among other activities to
carry increased traffic and improve accessibility.
Development – Entails construction of new roads, missing links, capacity
improvement measures such as widening, dualling, interchanges, bus lanes
among others.
Source: KRB, Barabara NEWS 4, July 2009
Compliance with these rules and a transparent system of monitoring and reporting is
essential to ensure that what has been agreed gets implemented. But, the slow pace of
transitional arrangements risk derailing or even reversing reforms. This should be
avoided by setting new and workable timelines and handover-takeover mechanisms to
ensure that designated agencies and sub-agencies carry out maintenance on classes D, E
and other roads formerly undertaken by Roads Department, District Roads Committee,
KWS and Local Authorities. Nearly a quarter (24 percent) of the RMLF is allocated for
maintenance of these roads, which currently face the risk of falling in the hands of
Members of Parliament to be managed under the Constituency Development Fund.
Delay in fully establishing the rural road agency created the opportunity for Members of
Parliament to gain control of the rural roads funding. Under the equitable allocation
arrangement, the criteria used includes factors such as: district area, population served,
road kilometer length in the district, economic activities, amongst others. In the APRP of
2007/2008, a sum of Kshs. 1.161 billion was allocated equitably to the 71 districts for
maintenance of their roads. However, in the run up to the 2007/2008 elections a number
of new district were created through administrative fiat mainly to give the incumbent
electoral advantage resulting in more than 200 ‘districts’. The situation is unwieldy and
35
currently the Interim Independent Electoral Boundaries Commission is in the process of
reviewing electoral and district boundaries.
5.5
Implementation Challenges
The Kenya Roads Board however faces a number of administrative and other challenges
in the delivery of its mandates. One of the challenges facing the implementation of the
annual work plans has been the limited administrative capacity of the various road
agencies and the governance and political economy constraints emanating from the
environment in which they operate. Interviews with senior officials of KRB indicate that
in spite of efforts to shield the Board from political interference in resource allocation,
the Board continuously faces heavy political interest, pressure and criticism from
politicians who think they are not receiving their rightful share of these resources.
Some of the Road Agencies and Sub-Agencies such as the Ministry of Roads and various
municipal councils have been part of the bureaucracy, which operates under major
bottlenecks such as: poor institutional structures; red tape; low staff morale due to low
salaries; inadequate staffing and equipment; low technical capacity; andnon-existent
structures for monitoring and evaluation creating major bottlenecks in the delivery of
efficient and timely public services. Decision making in local authorities in many cases is
slow and often not based on professional inputs in which full analysis of the situation
and prioritization has been carried out, making them easy prey for political manipulation
and mismanagement of resources.
Thus, one of the challenges that KRB has faced since it was established about ten years
ago has been delays in the implementation of road maintenance work plans and effective
supervision to ensure that the contracted works are completed to the agreed standards.
There have been many reports of shoddy work done by contactors, often in collusion
with public officials entrusted with the responsibilities of overseeing the works. Audits
by the Public Accounts Committee (PAC) have identified a number of weaknesses
affecting implementation of road projects (see Annex 7 and Annex 8 for details).
The District Roads Engineer (employee of the Ministry of Roads), who is also the
Secretary to the District Road Council (DRC) implements the road maintenance projects
in constituencies. DRCs are supposed to use the following criteria to prioritize roads for
maintenance in the constituencies: (1) all maintainable roads are given first priority for
routine maintenance in order to protect investment; (2) roads connecting
administrative, market and social centers and the classified road network, including
security roads, are attended next; and (3) any remaining funds are then used to improve
accessibility through spot improvements.
There are indications that at times politicians have disputed using money to maintain
maintainable roads arguing that priority should be given to worse off roads instead.
While this position may have some merit, the overriding objective of securing assets is
paramount and the gap between these two perspectives needs to be closed. For as long
as disparities in road conditions continue to exist within constituencies, vote minded
MPs will always try to influence resource allocation in such a manner as to increase re36
electability. And since the MP is a key figure in the constituency, making them champions
of reforms may be a good idea, especially if they can be properly trained and given the
technical support to make informed decisions.
Similarly, lack of capacity of districts and local authorities in preparation of Annual
Roads Work Programs (ARWPs) and making returns was a widely shared view among
the key informants interviewed. To address this, , KRB spent Kshs.20 million in 2007/08
FY to purchase computers, accessories and printers for road agencies and sub-agencies.
In addition, KRB procured a training program to train all the agencies and sub-agencies
(excluding Nairobi, Kisumu, Mombasa and Eldoret Municipal Council and Roads
Department) on the planning and reporting requirements of KRB.
There is however, no doubt that the creation of KRB has had a major impact in increasing
resources available for the maintenance of the country’s road network. 25 Before the
establishment of the KRB and Roads Maintenance Levy Fund dedicated to road
maintenance, the annual budgetary allocations to roads maintenance through Treasury
were acutely inadequate, leading to deterioration of the road network in many parts of
the country. The gap between availed budgetary resources and the actual needs for road
maintenance and rehabilitation has remained enormous. For instance in 1993, the total
expenditure by the Ministry of Public Works and Housing which was in charge of the
roads and housing was Kshs 1.7 billion against the requirement for maintaining a
rehabilitated and rationalized road network of Kshs 4.7 billion (US$ 55million) (SSATP
Working Paper No. 51. p33).
These huge deficits in the financing of the country’s road maintenance and rehabilitation
were some of the main factors behind the establishment of the Road Maintenance Levy
Fund in 1993. The Fund, which started its operations in June 1994, has greatly improved
the availability of financial resources for maintenance and rehabilitation of Kenya’s road
network with its current annual fuel levy collections of about ksh20 billion. In a clear
departure from trend that characterized the 1980s and 1990s, there has been a
significant increase in funding to roads sub-sector. According to the Ministry of Roads
estimates, budgetary allocation for road infrastructure has increased from KShs 19
billion in 2002 to KShs 7.1 billion in 2009. Increased discipline in Public Financial
Management (PFM) has meant that the government is able to collect more tax revenue
through taxation. As part of legislative reforms, parliamentary rules and procedures have
increased the oversight role of Parliamentary Committees, which now have enhanced
powers to sermon Ministers and their Accounting Officers to account for resources
planned and expended.
KRB released close to Kshs. 100 billion for road maintenance over the period 2001/02 to 2008/09,
resulting in a large part of the road network being brought to maintainable condition.
25
37
Figure 3
Source: Governance Matters 2009
Governance indicators of voice and accountability (Figure 3) have improved since 2002
peaking in 2006.26 Civil society groups are more visible and vocal. Proceedings of
Parliament are now more accessible through the Internet, print and broadcast media,
which has the effect of raising the political cost of none accountability therefore
providing incentives to politicians to account. On the ground, increased accountability
has translated in more targeted allocations significantly expanding the number and
regional spread of road projects, with emphasis being on rehabilitation, maintenance and
construction of major trunk roads followed by secondary roads and rural roads covering
the entire network. Regional links have also received significant attention with the ongoing construction of Isiolo-Moyale Road linking Kenya and Ethiopia and Athi RiverNamanga-Arusha Road connecting Kenya and Tanzania, both part of the Cape Town –
Cairo TransAfrica Highway.
5.6
Increasing private sector participation in roads development
On 10th December 2009, the Kenyan Parliament approved the first road concession
project in the country, marking a bold economic and policy step towards involvement of
the private sector participation in financing infrastructure through public private sector
partnerships. The concession involves a 30-year concession of the Machakos Turnoff to
Rironi part of the Mombasa-Malaba highway to a private sector investor. According to
available information phase one of the concession will have four toll stations to be
erected at the Athi River Enterprise Road, James Gichuru Road and Rironi Junctions and
the Southern Bypass and Uhuru Highway Overpass through Nairobi. The debate in
Parliament on the issue attracted considerable interest and demonstrated the political
hurdles that must be overcome before road concessioning becomes an important source
of funding for infrastructure development and modernization. (This process has
contributed immensely to infrastructure programmes of many countries including India,
Malaysia, Mexico and Brazil).Parliamentarians were concerned with a wide range of
issues including:the fear of dealing with foreign private investors; possibility of scandals,
especially in view of the unresolved Anglo-Leasing scandals and others in the
26
Kaufman, Kraay and Mastruzzi 2009
38
country;other risks and vulnerability of putting public resources on the project; and the
need for acomprehensive cost-benefit analysis.
The recent launching of a Kenyan infrastructure bond as a financial instrument in the
country’s capital market marked another important milestone in the country’s efforts to
breakaway from government allocated and donor funds by involving the private sector
in financing national infrastructure. Its relatively good performance and positive
reception in the country’s capital market serve as indicators of the future potential of
such instruments.
5.7
Management of Devolved Funds
A significant proportion of road rehabilitation and maintenance funds is today
implemented at the grassroots through a wide range of devolved funds such as CDF,
Local Authority Transfer Fund (LATF), RMLF, etc. This was especially aimed at
addressing the widespread complaints of unfair distribution of infrastructural resources
in various regions/districts in the country
While the move towards devolution is generally supported, there have been widespread
concerns about the extent to which local MPs should be involved in the management of
the projects. A study by two NGOs, Public Accountability Network and Kenya Human
Rights Commission released recently, argues that some politicians have tended to
interfere with the utilization of these devolved funds leading to misuse of the resources.
The report further says that there was a tendency to create political patronage networks
in addition to causing multiplicity and duplication of projects, leading to wastage of
resources.
Another concern with the devolved funds has been the extent to which the focus on
constituency road network priorities may lead to an overall network which, is not
effectively aligned and integrated for maximum regional and national impact in terms of
road transport and inter-district connectivity.
5.8
Economic and Political Constraints Facing Roads Sub-Sector
Reforms
While there has been significant progress in the roads sub-sector in the post-Moi era, the
sub-sector continues to face a wide range of challenges that have slowed down the
reform process and achievement of set targets. These constraints include: financial,
infrastructural weaknesses and poor governance issues; poor supervision of road works
leading to mismanagement of available resources; and inadequate attention to
preventive maintenance.
One of the constraints has been the challenge of balancing between economic
justification in the determination of prioritization of road construction projects vis-a-vis
the pressure for equitable distribution of road projects across the country. Another
challenge relates to the process of identifying and selecting road projects, which is
designed to involve considerable participation by stakeholders. According to KRB
officials interviewed, the prioritization of rural and urban roads proposals are generated
39
at the grassroots and then forwarded to the Kenya Roads Board directors and technical
team for selection according to the available resources. It is argued that while some of
the projects so selected may not necessarily qualify on economic criteria basis, especially
in the short-term, once completed, such projects help to open up the areas served
releasing significant dynamic linkages in economic, social and political dimensions. The
pressure for road projects is extremely high for individual MPs and senior government
officials who stand to gain immense political benefit when such projects are adopted and
implemented.
As argued elsewhere in this report, implementation of road projects has always been a
highly charged issue politically, especially with respect to rural roads. There have been
widespread complaints in the country’s 46-year post-independence period that the
selection of road projects in various constituencies and regions was to some extent a
reflection of the political clout of politicians and sometimes other public personalities
from those areas. This has prompted increasing demands for more transparency through
dissemination of information regarding selection or identification and financing of road
projects and the regional distribution of the road network including rehabilitation,
maintenance and construction of road projects to the general public and MPs. To satisfy
these demands a number of measures have been implemented in the last six years to
enhance transparency, accountability and to promote regional equity in the distribution
infrastructure resources.
The budget for the Ministry of Roads is today closely scrutinized in Parliamentary
discussions of the Ministerial budgets. The Board of Directors of KRB introduced and
implemented the policy of publishing its approved annual road projects and allocated
resources in the local media as well as in KRB’s website with the objective of
disseminating correct information to avoid generating politically damaging rumors or
distorted information as well as giving the public, the constituents and all stakeholders
facts to enable them put pressure on their representatives and those implementing the
projects as part of the increasing public pressure and demand for accountability.
Another significant measure has been increased allocation of devolved funds at the local
or constituency, as well as at the municipal and county level for road rehabilitation and
maintenance. Most of these devolved funds are designed in largely equal amounts in an
effort to reduce complaints of unequal allocation at the grass-root levels and thereby
diffuse one of the most common sources of political tension in the country. This is an
important GPE issue given Kenya’s poor political stability track record (Figure 4).
40
Source: Democracy Indicators 2009
5.9
Efficiency versus Equitable Distribution
However, an issue of concern has been that pursuit of equitable distribution of resources
in all parts of the country leads to spreading thinly the available resources thereby
reducing efficiency goals of the national infrastructure development program. In
addition to thinly spreading available infrastructure development resources, the road
networks developed at the constituency or local levels are not nationally coordinated to
complement each other, limiting national synergies and benefits that could have resulted
from utilization of the same level of resources in a coordinated and complimentary way.
5.10 Poor Supervision of Rehabilitation and Maintenance Works
Another constraint that has bedeviled roads sub-sector projects has been poorly
implemented road projects where a significant proportion was not done according to the
agreed specifications leading to low value for money used. This is mainly due to a
combination of poor governance in the form of flawed procurement practices, poor
supervision of road works during the construction period, low levels of local contracting
capacities combined with the socio-political pressure to use local contractors. Audit
reports on implementation of local level CDF and LATF projects reveal widespread
malpractices in the procurement of contractors and other suppliers of services in the
form of favoritism, nepotism and patronage due to interference by MPs, councilors and
other influential personalities. This has made maximization of value for money spent on
roads sub-sector projects a difficult objective to achieve.
The problem has been attributed to bribery and other corrupt practices as well as low
supervisory capacity due to limited number of qualified personnel to effectively
supervise the projects. This task becomes quite daunting when it is realized that there
are about 140 local authorities to deal with. In order to curb these practices, KRB has in
the last few years introduced use of private sector supervision and auditing services in
KRB funded projects. This is undertaken through technical compliance and audit teams
formed specifically to address the problem of poor governance KRB is currently having
the third lot of consultants appointed to carry out this compliance and audit using a
framework which has been fairly well developed.
41
5.11 Slow Pace in Effecting Axle Load Control
A major challenge in the rehabilitation and maintenance of Kenya’s road network has
been relatively ineffective axle load control system leading to short lifespan of
rehabilitated roads. Although this problem is widely acknowledged by the government
and most stakeholders, effective enforcement of recommended measures has been
limited due to widespread bribery and other forms of corruption involving officials
manning weighbridges along the main international road artery, Mombasa-Malaba
highway serving the Northern Corridor member. Business cartels have persistently
fought or resisted measures aimed at enforcement of the axle load control to curb road
destruction through excessively loaded trucks plying the Northern Corridor road
network. Heavy bribe amounts paid to government officials manning the weighbridges
have served as a force against compliance to axle load limitations. These cartels have also
sometimes used the country’s judicial system to frustrate the enforcement of axle load
regulations.
For instance, the Gazettement of new rules banning trucks with 4 axle loads on Kenyan
roads was delayed for more than two years through court injunctions until a presidential
directive issued in 2008 finally facilitated enforcement. This, however, did not entirely
eradicate the extent of the road destruction through overweight trucks using the road
due to the failure of often times compromised public officials manning key strategic
enforcement points. It is hoped that introduction of mobile weighbridges, use of
information and communication technologies that are currently being introduced and
on-going privatization of the management of weighbridge points will significantly reduce
the problem of road destruction and the associated loss and wastage of public
investments on infrastructure through ineffective enforcement of axle load rules in the
country and the region.
5.12 Privatization and Automation of Weighbridges
In August 2010, an important step was taken towards reducing corruption in the
management of weighbridges, when two weighbridges along the Mombasa-Malaba road,
Athi river and Mariakani near Mombasa were for the first time privatized.
The Director-General of KeNHA said recently that all the 13 weighbridges which are
under his organization were in the process of being computerized in order to reduce
corruption further. Each weighbridge will be fitted with public display boards
automatically displaying the weight of the passing vehicles. Other measures to
strengthen the management of weighbridges include reshuffle of personnel deployed at
various points and appointing a manager to be in charge of each weighbridge.
Another initiative has been installation of cameras in some strategic points of the
highway to facilitate monitoring corruption activities. For offending motorists have been
also raised sharply to act as a disincentive for overloading trucks along the highways.
According to Eng. Mishack Kidenda, the Director-General KeNHA, there has been a
decline in the level of corruption relating to management of weighbridge. According to
the Director-General fewer cases of corruption have been reported to KeNHA’s Ethics
and Integrity offices which are now managed in close collaboration with the Kenya Anti-
42
Corruption Commission (KACC) and KeNHA are partnering in the country’s efforts to
eliminate corruption at weighbridges (Standard, June 30, 2011, p.33).
5.13 Inadequate Railway Transport
As a result of systematic underinvestment and mismanagement of the Kenya Railway
Corporation in the 1980s and 1990s, the share of railway in the carriage of cargo from
Mombasa Port to the country’s and region’s hinterland had become insignificant at less
than 10 percent of the total cargo. This led to the shift of transportation of bulky cargo
which is normally handled through railway transport to road transport. This shift,
coupled with the failure to enforce axle load control, led to heavy destruction of the road
network with newly rehabilitated sections of the Northern Corridor road network failing
within periods of 2-3 years according to information from the Ministry of Roads, thereby
raising the financial requirements for rehabilitation and maintenance beyond the
available resources.
5.14 New Impetus in Modernization of Railway Transport
Recent growing national and regional attention to modernization of railway transport to
address increasing social, economic and political problems associated with poor
transport and infrastructure, show that past neglect and low investment in railway
transport is coming to an end and some concrete measures and decisions have been
taken to address the issue.
At the national level, the government of Kenya has finally taken decisions to develop the
Nairobi Railway Commuter transport a mass transport system to solve the current
nightmare of traffic jams in the country’s capital city. The government has allocated
about ksh 3 billion in the financial years 2010/2011 and 2011/2012 to develop a
commuter railway transport linking Jomo Kenyatta International Airport (JKIA) with the
city centre and a number of surrounding townships such as Athi River, Kitengela,
Syokimau. Mlolongo, Githurai, Ruiru, Thika and others. Construction work on the new
stations and rehabilitation of the existing railway line has started and it is estimated that
the first phase of the project will be operational by December 2011.
The project has received strong business and political support and is listed as one of the
Vision 2030 flagship projects. The urgency for the project has increased in the last one
year as cost of commuter transport become a socially and politically volatile issue
following the recent huge increases in petroleum fuel prices, especially after political
turmoil in North Africa and Middle-East.
At the regional level, the governments of Uganda and Kenya have accepted to embark on
efforts to construct a modern standard gauge railway linking Mombasa and Kampala.
Procurement of consultants to carry out feasibility studies on the project has been
underway.
Meanwhile, the concessionaire of Kenya/Uganda Railways, the Rift Valley Railways is
embarking on a major rehabilitation of the current railway infrastructure to enable it
play a much bigger role in the carriage of bulky cargo in the region.
43
The rehabilitation programme received a major boost in July 2011 when the Board of
Directors of Africa development Bank agreed to lend ksh 3.6 billion (US$ 40 million) to
RVR. This is part of a five-year US$ 246 million investment programme to finance the
rehabilitation of RVR infrastructure between Mombasa and Kampala in Uganda. The
project is expected to make the railway transport along the northern corridor more
efficient, reduce costs of transport in the region and help shift cargo from the road to the
railway. According to the ADB, the project is expected to double the cargo transported
through the railway to about 3.3 million tonnes per year by 2015 and reduce the
marginal transport cost by 30 percent. Other expected benefits of the project include
increased revenue for both governments of Kenya and Uganda, increased environmental
impact and reduced maintenance and rehabilitation of the road network along the
Northern Corridor.
The railway transport in the region will be further expanded through the proposed new
transport corridor linking Lamu port in Kenya to Juba in Southern Sudan with a branch
to Ethiopia. The recently concluded feasibility study by the Japanese Port Consultants
identified a modern railway line as one of the infrastructure projects which include a
Port, highway, fibre optic cable, pipeline and resort cities.
5.15 Poor Environment and Lack of Proper Framework for Private
Sector Participation
Due to the prevalent fear and mistrust of involving the private sector in the financing and
management of key public transport and other forms of infrastructural facilities, the
country has not been able to tap growing source of infrastructure financing resources
through public private sector partnerships, such as design-build-finance-maintain,
concessioning, etc. This led to overreliance on limited budgetary resources, the fuel levy
and donor funding, all of which were not adequate in meeting the financing gap in the
rapidly growing sector.
As a Northern Corridor Report notes in relation to promotion of PPPs in the region
“while the countries of the Sub-region still rely heavily on official development aid, it is in
their ability to create the necessary environment to promote private sector investments
that will ultimately make the difference” (Northern Corridor, p11).
Fearing public reaction to toll road charges, the country’s political class has been at best,
lukewarm in its support for road concessioning which have been successfully used in
many developing and developed countries.
However, for the country to reap full benefits of private sector participation and PPPs in
the national infrastructure development there is need for a clear policy framework that
will allocate authority and responsibility within the parts of government, for example,
between central ministries and road agencies, to ensure the proper management of
tension between parties. The policy framework would also define the process for
proposing, identifying and structuring PPP projects to facilitate the generation and
implementation of viable projects that are integrated with the national planning process.
It is also important that those who will be affected by road projects participate in their
44
planning, implementation and evaluation. The PPP policy framework should also provide
for evaluation and revision in light of experiences and lessons learned.
5.16 Some Final Thoughts
Success of reforms in the roads sub-sector depends on broader governance reforms.
Independent management and involving road users and civil society stakeholders in the
management of roads (ownership), for example, putting limits to executive authority.
This is feasible where decision-making is more evenly distributed (with adequate checks
and balances), where citizens have information about how bureaucratic decisions
influence their welfare (and can act to punish politicians for performance failures or
reward them for success), and where there is restraint on the undue influence of
powerful groups outside the public sector to influence the shaping of policies, laws, and
regulations of the roads sub-sector.
In the Kenyan case, both conditions have been absent and the institutional arrangement
has traditionally concentrated executive power narrowly. This has bred a patronage
system that allows rent-seeking behavior in which elites have a vested interest in the
status quo and little incentive for reforms. We find that the degree of resistance to a
particular reform package is directly proportional to its costs. Reforms, especially if they
promote the business interest of the elite, have a better chance of success. It is relatively
difficult to obtain detailed information on businesses where influential politicians have
stakes, which partly explains why this area is not well researched. However,
understanding politics-business linkages in Kenya is critical to unravel policy dilemmas
and for better design and implementation of reforms.
The implications of the foregoing GPE analysis are straightforward: To address Kenya’s
roads sub-sector challenges sustainably, requires appropriate political institutions that
can guarantee sustainability and effectiveness of decision making by independent
agencies. Therefore, the design and implementation of reforms must pay greater
attention to incentives structures, entrenchment of professionalism in decision making,
and the relative power and ability of different interest groups to influence key decisionmakers. A political economy lens can help in the design and implementation of such a
robust policy reform processes.
45
Figure 5
National Roads Sub- Sector Organizational Framework
MINISTRY OF ROADS (MOR)
ROAD POLICY, PROGRAMME COORDINATION, MONITORING & EVALUATION
ROAD DEVELOPMENT FUNDING
KENYA ROADS BOARD
Road maintenance, funding,
coordination and evaluation
KENYA NATIONAL HIGHWAYS AUTHORITY
(KENHA)
Development, maintenance works execution on
CLASS A, B AND C ROADS
KENYA WILDLIFE SERVICE
(KWS)
Development, maintenance works
execution on National parks,
National reserves road delegated
by Ministry of Public Works
KENYA URBAN ROADS AUTHORITY (KURA)
Development and maintenance works execution
on city and municipal roads
KENYA RURAL ROADS AUTHORITY KERRA)
Development and maintenance works execution
on class D and below, small town roads and
special purpose roads
District Roads Committee
Prioritization, funding,
monitoring and evaluation
6 Regions
Maintenance Funds Flow from KRB
Administrative/Jurisdiction flow
Development Funds Flow from MoR
Park Roads
5 City councils, municipal/ town
roads
Road maintenance funding (RMF)
46
71
Districts
6.0 PORTS
6.1
Introduction
Mombasa port remains the most important port connecting Eastern Africa through
the Northern corridor, with the region’s key markets of Western Europe, Asia, North
and South America and other parts of Africa. Kenya Uganda, Rwanda, Burundi and
parts of Tanzania, Democratic Republic of Congo (DRC) and Sudan depend heavily
on the port for their export and import trade. The port links these countries via road
and rail transport as well as an oil pipeline. The port provides important feeder
services that link the port with other regional ports such as Dar-es-salaam,
Mogadishu, Djibouti, Salalah, Dubai and Durban. The port records show that the
Mombasa port regularly serves about 22 international shipping lines.
The main facilities of the Mombasa port include 16 deep water berths, one container
terminal designed to handle 250,000 Twenty Foot Equivalent Units (TEUs) per
annum (with construction of a second container terminal in the preparatory stages),
a bulk grain handling terminal, one cement and flourspar handling terminal, two oil
terminals with an annual throughput capacity of about 20 million tonnes. The cargo
handled through the port has registered fairly high annual growth rates for most of
the last decade with transshipment cargo registering the highest annual growth rate
during the period followed by transit cargo and domestic cargo.
The last decade of Moi’s 24 year reign, saw the performance of Mombasa port
deteriorate drastically as a result of centralized government control in the port
sector, endemic corruption and mismanagement of the port resources and under
investment in critical areas that were needed to modernize the port and enhance its
capacity for efficient delivery of services.
By the time the NARC government under President Kibaki took over at the
beginning of 2003, the port was saddled with huge overdraft and large amounts of
unpaid bills to various suppliers of goods and services, some of whom were
phantom suppliers. The port operated with old or obsolete equipment which
seriously undermined its efficiency. Efforts to improve the port operations by
contracting private sector management weretaken by the so-called- Dream Team of
some Kenyan well known professionals led by Dr. Richard Leakey. This failed when
the foreign private company contracted to manage the container terminal
operations pulled out after a short stint with the port. The company cited lack of
cooperation from the Kenya Ports Authority especially with regard to purchase of
new equipment to improve port operations.
Following changes in key personnel at the port and some reforms taken by the then
new NARC regime, the performance improved significantly from a heavily debtridden corporation at the end of 2001/2002 financial year to a financially healthy
corporation with an annual turnover of close to Kshs. 15 billion and a profit of
between Kshs. 3 to 5 billion during the period 2004-07.
47
However, the reforms and restructuring needed were not fully implemented,
seriously limiting the impact of the reform program. This was largely due to lack of a
shared vision as well as limited political support and ownership of reforms needed
at the port which were often seen as externally imposed. While there were factions
within the Ministries of Finance and Transport that favored greater focus on
reforms, there were also elements especially within the political class at the Coast
Province as well as within senior management staff at the port who regarded such
reforms as threats to both regional political interests as well as self-interests for
both political and business elites. There were general and long standing fears that
the Coastal region would lose control of the port generally regarded as a key
regional asset. The port was seen as a cash-cow by some of the leaders in terms of
employment, tenders, patronage and maintenance of a large network of economic
rent seekers. The fact that some of the people opposed to reform were to be found in
various top echelons of private sector, parliament and top levels of government
meant that only limited success was achieved in the overall reform agenda of the
Kibaki government by the end of its first five years.
This resistance to reforms continued even after the formation of the country’s
power-sharing coalition government in which the cabinet was highly divided and
indisciplined as well as polarized along ODM-PNU political parties’ regional and
ethnic lines. This in turn allowed growth of political horse-trading especially by
loosely defined regional political point men who often ignored the broader public
interest in pursuit of narrow and parochial personal, group and regional interests.
These regional spokesmen and prominent political figures have tended to hold
government at ransom because the two Principals in the coalition government have
not been willing to take certain public decisions for fear of losing political support
from these powerful regional political leaders, especially given the thinly balanced
parliament.
To overcome this tendency to blackmail the reform agenda through vested interests
of powerful political actors will require further progress in accountability, contrary
to the prevailing situation in the coalition government; as well as stronger political
parties which are issue based and able to discipline their members. As
demonstrated in the Zambian case,27 stronger accountability arrangements enhance
the incentives - to focus on public purposes - of those political actors who might
otherwise prefer to focus more on private ends.
6.2
Overview of Recent Performance of Mombasa Port
Despite a wide range of operational and capacity constraints facing the Mombasa port,
cargo traffic has continued to grow at fairly high annual rates. Cargo traffic handled at
Mombasa Port rose by 55 percent from 10.6 million tonnes to 16.4 million tonnes
between 2002 and to 18.98 million tonnes by 2010, an average growth rate of about 9.2
per annum (see Table 5). During the period, containerized cargo more than doubled from
305,427 TEUs to 615,733 TEUs (Republic of Kenya, 2009, p.234). Typically, about 25
27
Levy et al. 2007
48
percent of the cargo passing through Mombasa Port is destined to the neighboring
countries, with the Kenyan domestic cargo accounting for the remaining 75 percent. For
instance, of the 12.9 million metric tonnes traffic throughput handled at the port in 2004,
9.6 million tones was domestic cargo.
Table 5: Traffic Handled at Mombasa Port 2006-2010
Containers Traffic
Ships Docking
Imports
Dry General
Dry Bulk
Bulk Liquids
Total Imports
Of which Transit In
Motor Vehicles landed
Exports
Dry General
Dry Bulk
Bulk Liquids
Total Exports
Of which Transit Out
Total Imports and Exports
Transhipment
Grand Total
Unit
TEUs
No.
000’DWT
“
“
“
“
“
No.
000’DWT
“
“
“
“
“
“
“
“
2006
479,355
1,857
2007
585,367
1,811
2008
615,733
1,686
2009
618,816
1,748
2010
695,600
1,579
4,099
2,344
5,403
11,839
3,473
65,348
4,866
2,722
5,474
13,062
4,042
73,818
4,979
2,891
5,441
13,311
4,471
87,284
5,435
4,641
6,432
16,508
4,612
95,798
5,987
3,871
6,386
16,244
5,004
95,604
1,810
313
132
2,244
335
14,083
318
14,402
2,102
205
167
2,474
381
15,536
426
15,962
2,295
200
190
2,685
404
15,996
419
16,415
2,220
62
167
2,449
368
18,957
105
19,062
2,410
70
95
2,575
377
18,819
158
18,977
Source: Republic of Kenya, Economic Survey, 2011, p.249
DWT- Dead Weight Tonnes
The negative influence of non-conducive governance and political economy
environment was dramatically demonstrated by the aftermath of the disputed
elections of 2007. There is general agreement from those interviewed that the postelection violence that erupted in Mombasa and other parts of the country after the
announcement of the 2007 general elections, had strong negative impact on the port
performance. A recent port document points out that “the challenges that prevailed
in 2008 adversely affected shipping and economic performance in the country and
the region’s competiveness”. The report, however, shows that in spite of those
negative effects the port was able to record improvements in a number of areas
including operations and the volume of cargo handled. The ability of the port to
control the negative impact of the post-election violence and record some level of
improvement in various parameters was seen as a reflection of the positive impact
of some of the improvements implemented at the port in the post-Moi period.
There was some increase of 2.8 percent in the port throughput between 2007 and
2010, from 15.96 million tonnes to 18.98 million tonnes respectively. The Kenya
Ports Authority officials attribute this growth to moderate growth in the port’s
throughput to “efficiency gains arising from the modernization of equipment and
business process re-engineering”. Between 2006 and 2010 the port also recorded a
5.2 percent growth in containerized cargo from 479,355 to 695,600 TEUs
respectively. This growth was, however, just smaller than the growth rate of 22.1
49
percent in containerized cargo traffic of the preceding period 2006/2007 (p.2), an
indication of the magnitude of the negative impact arising from the widespread
national violence which followed the announcement of the 2007 disputed general
elections. The KPA report attributes the lower growth rate in container traffic in
2008 to the post-election violence and the global economic meltdown which started
in the USA economy and spread quickly to virtually the whole global economy.
The period saw the port’s transit cargo rise from 3.8 million tonnes to 5.4 million
tonnes between 2006 and 2010 respectively. Another activity that felt the impact of
the post-election violence was the port’s transshipment activity which declined
from 318 million tonnes to 105 million tonnes in 2009 and 158 million tonnes in
2010. The post-election violence is said to have created “unprecedented congestion
at the port necessitating a temporary freeze in handling transshipment”, (p.3). The
impact of the post-election violence, also affected the Northern Corridor member
states, forcing many of them to start thinking of ways and means of reducing their
dependence on the Mombasa port. These impacts and reactions clearly show the
importance of political economy factors in current and future performance of both
the port in particular and the Kenya and regional economies in general.
A 20-year Master Plan for the Kenya Ports Authority prepared in 2002/3 projects
that the port’s traffic cargo by 2025 will reach around 25 million tones. In order to
cope with the expanded growth in port cargo traffic during the Master Plan period,
the port needed to invest in key facilities including improvement in the facilities of
the current container terminal, construction of a second container terminal which
would raise annual capacity of the port to about 1.8 million TEUs, construction of
other import facilities such as bulk cargo, petroleum products (LPG) and motor
vehicle handling sections as well as a free trade area. It was estimated that these
projects would require investments of about US$ 500 million (TTCA Secretariat,
2004, p.18).
6.2.1 A Review of Port Operational Efficiency
This section examines a number of indicators usually used in measuring port
performance, to comment on the performance of the Mombasa Port. They include
service indicators which reflect factors such as the time a ship or cargo may spend at
the port; output indicators capturing traffic and throughput of the port; utilization
indicators in the form of berth occupancy for instance; and productivity indicators
measuring aspects such as ship productivity in port or at berth and equipment
productivity such as crane productivity.
The performance of ports with regard to handling of containerized cargo varies
considerably depending on the type of equipment available for use and the level of
efficiency prevailing in terminal operations in a particular port. Available data
shows that ports with ship-to-shore gantry-equipped container terminals are able to
achieve about 30 moves per hour on average for ports with state of the art
equipment. The average performance of ports in Sub-Saharan Africa is much lower
50
than this, and it is estimated to vary between7 to 20 moves per hour for ports in the
region. Ports with container gantries achieve a performance of about 14 moves per
hour, while ports relying on ships’ cargo handling equipment achieve only half of
that, that is, 7 moves per hour (Ocean Shipping Consultants Ltd, June 2008, p.6).
6.2.2 Port Dwell Time
A look at available data on dwell time shows that the operational efficiencies of
regional ports is still way behind international standards. Dwell time, a measure of
the average time that containers stay at a container terminal, for instance after
being offloaded from the ship or before they are loaded is widely used as a port’s
efficiency indicator.
While the international standard dwell time is generally recognized at 7 days or less,
African ports have much longer dwell times, sometimes as much as 14 days in West
and East African ports (Ocean Shipping Consultants Ltd, p.7). These high levels of
dwell time are some of the main causes of congestion and inefficiencies in these
ports, translating into high container handling and general cargo costs (Table 6). The
table shows that while the container handling costs from the ship to gate in East
Africa ranges between US$ 135-275, the equivalent costs for ports in the rest of the
world was US$ 80-154. The data indicates that East Africa have the highest average
ship to gate costs of handling containers compared with Southern and West African
ports as well as ports from the rest of the world.
Table 6: Gateway Container Handling and General Cargo Costs for Ports in
Africa and the World
Region
Container handling (ship- General cargo (over-theto-gate), $
quay per metric ton), $
East Africa
135-275
6-15
Southern Africa
110-243
11-15
West Africa
Rest of the World
100-320
8-15
80-154
7-9
Source: Ocean Shipping consultants, Ltd, Jun 2008, p.7
The relatively high inefficiency in handling container cargo at the port of Mombasa
is attributed to a variety of factors including: frequent interruptions of crane
operations due to equipment breakdown and lunch-breaks; and poor management
of the containers in the container yards arising from poor communication system
between various sections or actors such as container yard managers, those
receiving containers, transporting companies, railway officials, customs, port health
and other service and government quality inspectors. It is thus common for a
container to remain in the port for weeks before it is cleared and leaves the port, a
process which according to clearing and forwarding agents could be undertaken in
two days with better logistical arrangements (James Caron, et al, 2000, p.4).
51
The high port dwell time is also sometimes caused, amongst other factors, by the
delays arising from either poor state of the main northern-corridor highway linking
the port and various inland destinations; to other causes of delay such as police
barriers and checkpoints, requirements to move in convoys of trucks, weighbridges,
and other delays created for rent seeking purposes.The decline in railway
transportation over the last two decades, especially for bulk cargo, led to the shift of
over more than 80 percent of the railway cargo to the road which caused major
destruction of the road network. This increased the turn-around period for trucks,
thereby increasing the port dwell time for cargo that needed to be transported
upcountry.
It is evident therefore, that, necessary investments and operational practices have
not been implemented to enhance or maximize synergies arising from road-port
linkages. It was reported that movements of bulk grains and other bulk cargo were
often delayed unnecessarily by disagreements between government health and
quality inspection officials with the owners of cargo or their agents. Establishment
of the 30,000 tonne Grain Bulk Handling facility enabled the port to largely move
away from manual offloading of bulk grains, resulting into significant cost-reduction
in handling grains at the port. It was estimated that the establishment of the facility
led to a saving of about US$ 12 per ton in terms of ocean freight costs, (ibid)
demonstrating the huge benefits that arise from introduction of modern appropriate
technologies in various port operations.
For sensitive cargo such as food imports, the process is made more complex because
of the requirements of services of specialized institutions - especially Kenya Bureau
of Standards (KBS), Kenya Revenue Authority (KRA) and the Kenya Plant Health
Inspectorate Services (KEPHIS) - before the cargo is cleared. These kinds of
inspection services have been blamed not only for raising the dwell time of cargo at
the port but also for creating an enabling environment for bribery and other forms
of corruption as port users try to negotiate how to remove the barriers in order to
move the cargo through the port.
A study by the Transit Transport Coordination Authority of the Northern Corridor
(NCTTCA) shows that the performance of Mombasa Port was below par in terms of
the dwell time of cargo coming through the port. While the dwell time varied from
month to month and country of destination of the cargo, the average dwell time was
high by international standards, and ranged from 11.2 days for DRC-bound cargo to
30.1 days for Burundi-bound cargo (Table 6).
KPA latest data on import container dwell time shows significant improvement for
the Jan-Sep 2009 and 2010 periods compared to 2008. The average container dwell
time for the first 9 months of 2009 was reduced to 6.4 days compared to the 2008
monthly average of 13.1 days, a 51.1 percent reduction. The same improvement was
recorded with regard to ship turnaround time, as the average port time per ship was
reduced to 3.7 days compared to 4.5 days during the corresponding period in 2008
(Table 9). The improving trend is generally maintained in the year 2010.
52
The improvements recorded in terms of reducing port dwell time, has been partly
the result of investment on more cargo handling equipment in the last few years as
well as investment in ICT that have helped to reduce manual operations and
improve communications and coordination between various units and departments.
There have also been administrative changes aimed at improving port operations,
including the implementation of 24-hour operations in many sections of the port.
Table 7: Dwell Time in Days per Country of Destination for Road
Traffic
Country
July
August
September October
Average
Local
Kenya
13.2
14.0
14.3
13.3
13.7
Burundi
36.5
47.3
15.1
21.5
30.1
Congo
11.6
11.8
10.2
11.1
11.2
Malawi
18.0
20.0
19.0
19.0
Rwanda
12.4
13.9
14.5
13.5
13.6
Transit
Somalia
12.3
12.6
11.7
11.5
12.0
Sudan
15.3
12.8
16.0
18.0
15.5
Tanzania
10.9
15.4
10.2
12.7
12.3
Uganda
14.3
14.1
14.2
14.3
14.2
Zambia
20.0
20.0
Source: Transit Transport Coordination Authority of the Northern Corridor
(NCTTCA) (Nov 2008, p.30)
Port handling productivity data for Mombasa container terminal is shown in Table 8
for the year 2005. It shows that the port registered 9.04 moves (gross) or 10.78
moves (net) per hour.
Table 8: Port Handling Productivity at Mombasa Container Terminal
Month (for the
year 2005)
Number
of ships
January
February
March
April
May
June
July
August
September
October
November
December
Total/Average
43
36
41
44
38
37
38
42
38
39
43
40
479
Effective
Total
Port
Time
3,311
2,320
3,017
3,381
2,488
2,453
2,450
2,487
2,507
2,388
3,139
2,639
32,579
Effective
Total
Berth
Time
2,814
2,081
2,721
3,067
2,282
2,075
2,061
2,181
1,896
2,168
2,018
1,958
27,322
Moves
Performance
per 24h
Gross
Net
Performance
per hour
Gross
Net
24,404
20,911
27,036
27,351
24,117
25,997
25,735
22,869
22,530
23,662
25,325
24,528
294,465
176.9
216.3
215.1
194.2
232.7
254.4
252.1
220.7
215.7
237.8
193.6
223.0
216.9
7.37
9.01
8.96
8.09
9.69
10.60
10.50
9.20
8.99
9.91
8.07
9.29
9.04
208.2
241.2
238.5
214.0
253.6
300.7
299.7
251.6
285.2
261.9
301.2
300.7
258.7
8.67
10.07
9.94
8.92
10.57
12.53
12.49
10.48
11.88
10.91
12.55
12.53
10.78
Source: Source: Transit Transport Coordination Authority of the Northern Corridor
(NCTTCA) (Nov 2008, p.35)
53
Table 9: Import Container Dwell Time, 2008-2010
MONTH
JAN
FEB
MAR
APR
MAY
JUN
JUL
AUG
SEP
AVG.
2009
10.1
8.6
6.5
7.0
5.6
5.2
4.5
4.3
5.2
6.4
2008
17.1
14.4
12.7
10.5
11.9
11.9
18.9
15.9
8.5
13.1
2010
6.2
6.9
5.8
5.8
4.9
6.5
6.6
5.2
5.8
6.0
2008-2009
Days
%
-7.0
-5.8
-6.2
-3.5
-6.3
-6.7
-14.4
-11.6
-3.3
-6.7
-40.9
-40.3
-48.8
-33.3
-52.9
-56.3
-76.2
-73.0
-38.8
-51.1
2009-2010
Days
%
-3.9
-62.9
-1.7
-24.6
-0.7
-12.1
-1.2
-20.7
-0.7
-14.3
-1.3
-20
-2.1
-31.8
-0.9
-17.3
-0.6
-10.3
-1.5
-23.7
Source: Kenya Ports Authority, 2011
6.2.3 Capacity and Efficiency Constraints
Transport costs for cargo from Mombasa to various destinations along the Northern
Corridor continue to be a major source of concern for the countries using the port
and Northern Corridor transport services. A recent inspection tour conducted
between 3rd and 12th November 2008 by the Seamless Transport committee made
up of personnel in transport and related Ministries/Departments from Kenya,
Uganda and Rwanda concluded that the prevailing transport costs of cargo through
the corridor was still too high as a result of numerous tariff and non-tariff barriers.
The survey listed a wide range of impediments to cargo transportation from
Mombasa to various destinations within the various Northern Corridor Authority
member states.
At the port of Mombasa, the inspection team found numerous bottlenecks in the
flow of cargo which caused delays, raised costs and encouraged bribery. One of the
main bottlenecks was the congestion at the port. The port designed to handle
250,000 TEUs, was handling about 600,000 TEUs. This was aggravated by the
limited capacity of the various key equipments.
Other bottlenecks highlighted by the inspection team were long delays in the
clearance process as a result of technical problems of the newly installed ICT
equipment; bureaucratic red tape; bribery, inefficient and lengthy uncoordinated
payment processes at the port and various border points; poor logistical
arrangements; inadequate facilities and amenities; widespread unethical practices
such as bribery/corruption at weighbridges; existence of many roadblocks; and
police checkpoints which also served as rent seeking points.
For more than two decades, the port of Mombasa has faced perennial capacity
constraints in its provision of services due to technical, logistical, administrative and
governance constraints. First, it is currently one of the ports operating substantially
54
above the generally accepted 80 percent level of its installed capacity, leading to
major efficiency bottlenecks in its operations. According to a recent study by the
Ocean Shipping Consultants (June 2008), the Mombasa Port faces major constraints
in handling both the general cargo traffic and container traffic. Operating at about
90 percent of its installed general cargo capacity, the Port is amongst the most
constrained ports in the region in handling this category of cargo (Northern
Corridor: Programme for Improving Transport Infrastructure and Facilities; March
2006).
Other African ports experiencing more or less similar level of capacity constraints
are Dar-es-Salaam, Douala, Port Sudan and Luanda all operating at between 75
percent and 95 percent of their respective capacity. Only Cotonou and Cape Town
were operating below 55 percent of their capacity. The port operated at more or less
the same level of containerized cargo capacity in this category. The Report identifies
the worst affected African ports as Tema, Dar-es-Salaam and Durban, all operating
between 100 percent and 150 percent of their container traffic capacity (Ocean
Shipping Consultants, 2005 p.5).
In order to address this constraint, a new container terminal is underway, financed
by the Japanese government at a cost of Kshs. 26 billion. The selection of this project
was done through collaboration between the Kenya Ports Authority, Ministry of
Finance, Foreign Affairs and Office of the President. A number of other projects are
also underway to help decongest the port and raise its overall capacity. They
include: improvement of the road network within and around the port; purchase of
new equipment computers; IT management and new information systems. As the
report notes, in both South Africa and Kenya, both the public and private sectors had
invested heavily in modern handling systems and equipment, contributing greatly to
improved performance (ibid, p.6).
The study by Ocean Shipping Consultants Ltd, however, observes that without
effective implementation of institutional and regulatory reforms in Mombasa and
other ports in Africa it will not be easy to raise the port’s efficiencies to the levels
that ports in some parts of the world have achieved, and points out that without
these reforms, “technical improvements can yield only a fraction of their potential”
(ibid, p.8).
Institutional and regulatory reforms will thus continue to be priority issues as the
Mombasa Port makes efforts to enhance its efficiency through modernization of
equipment and operational systems.
6.3
Source of Pressure for Efficiency Improvements at Mombasa
Port 2003-2007
The relative increase in efficiency at the Port of Mombasa during the NARC
government can be attributed to a number of factors First, the new government
which replaced Moi’s 24-year regime in which the Kenyan economy stagnated had
55
campaigned and made promises to the public strongly focused on rapid national
economic recovery. Quick economic recovery, rehabilitation and expansion of
infrastructural facilities, were thus generally regarded as some of the key pillars of
fulfilling the promises made to the electorate in the 2002 campaign. This was clear
from the then new government’s economic growth and development strategy
blueprint, the Economic Recovery Strategy (ERS). In the strategy, the crucial
national and regional roles of the Mombasa Port, Jomo Kenyatta International
airport and the Northern Corridor linking Mombasa to the Eastern African region
were explicitly recognized and prioritized in terms of reforms and budgetary
support to facilitate necessary rehabilitation and institutional reforms.
Secondly, the government recognized that the starting point in the desired economic
recovery process was in the area of management reforms of key economic
institutions and facilities. Thus, the appointments made for CEO positions and to a
lesser extent membership of the boards were more carefully selected in many of
these institutions. The CEO of KPA had been for instance head-hunted by the World
Bank supported “Dream Team” of Richard Leakey in the last few years of the Moi
regime. He was recruited from his senior management position of an international
shipping line. Recognizing his professionalism and contribution, the new
government retained him in the same position. As mentioned earlier in this report,
he played a pivotal role in turning around the port from a debt-ridden to a highly
profitable corporation within a relatively short period. The impact of professional
management at the port, as well as a number of other state corporations, showed
the potential positive impact in creating self sustainable, professionally managed
public institutions.
By closing loopholes through which public resources had been siphoned out
previously by corrupt politically appointed CEOs and board chairpersons and
members, substantial resources were generated, retained and used to expand and
modernize various infrastructural facilities leading to higher efficiencies and
performance. Internally generated resources thus played a key role in the
investment and modernization programmes of KPA, Kenya Airports Authority and
indeed many other state corporations during the period 2003-2007.
Thirdly, a review of the performance of a wide range of public enterprises in Kenya
during the period 2003-2007 indicates major improvements in many of them, both
in terms of operational efficiencies and revenue generation, demonstrating that the
new government gave more than lip service to reforms that promoted efficiency to
fuel economic recovery, the centre piece of the new government. It can also be
argued that economic recovery was both a personal and professional challenge to
President Kibaki, a respected economist who was a long-serving Minister for
Finance in the 1970s when Kenya had one of the best economic performance
records in Africa.
There is strong evidence to show that during the 2003-2007 period, efforts were
made to implement reforms that allowed parastatal enterprises to gain greater
56
autonomy in their operations, recruit professionals in key positions and generate
and invest financial resources in key areas. As a result many parastatals which had
become dependent on government subsidies were within a relatively short time,
transformed into profitable self-sustaining entities financing a large proportion of
their current and development budgets with internally generated resources.
Examples include the Kenya Ports Authority, the Kenya Airports Authority,
KENGEN, Postal Corporation, Telkom, Mumias Sugar Corporation, and many others.
It can thus be argued that improved port efficiency was taken much more seriously
by the new government than was the case in Moi’s regime. This explains to a
considerable extent, the gains made at the Mombasa Port in terms of efficiency
improvements during the period. The new administration saw the port as a key
enabler in the push for rapid economic recovery, raising the country’s regional
competitiveness in international trade, and making Kenya a premier transport hub
through creation of a more efficient seaport at Mombasa, an airport at the Jomo
Kenyatta International Airport as well as a rehabilitated Northern Corridor for landbased transport.
These objectives were, however, only partially achieved due to political-related and
other impediments discussed in this report.
6.4
An Assessment of Mombasa Port Reforms
While some efforts have been made in the last fifteen years to introduce reforms at
Kenya’ premier port, the country’s reform efforts continue to lag behind port reform
leaders in Africa. Port reform efforts at the port of Mombasa are largely focused on
three areas:
a) Privatization of some parts of port facilities and operations
b) Management reforms including recruitment, right-sizing and procurement
systems
c) Modernization of equipment and other facilities to enhance the operational
and technical capacity of the port.
Using a port reform score of how African countries have implemented important
reforms to modernize port operations, the port of Mombasa scores poorly in the
Ocean Shipping Consultants’ Study. The index provides an overall score of progress
on four key aspects of ports sub-sector reforms, i.e., 1) Legislation, 2) Restructuring,
3) Policy oversight and 4) Private sector involvement.
57
Table 10: Country Port Reform Index (%)
Tanzania
:
90%
Benin
:
78%
Ghana
:
72%
Sudan
:
69%
South Africa :
56%
Mozambique :
42%
Nigeria
:
38%
Senegal
:
30%
Cape Verde :
29%
Kenya
:
28%
Madagascar :
24%
Namibia
:
14%
Chad
:
10%
Cote d’ivoire :
6%
Source: Ocean Consultants Ltd, 2005, a Report Prepared for the World Bank and
SSATP
According to port reform score data prepared by Ocean Consultants Ltd in 2005,
Tanzania emerged as one of the top reformers, with a score more than 90 percent,
with Cote d’Ivore having the lowest score of about 6 percent among 15 ports
studied. Kenya’s port occupied 11th position with about 28 percent, while Tanzania
had registered reforms in all the four areas above i.e. legislation, restructuring,
creation of policy oversight institutions and improved facilitation of private sector
participation.
Participation of private sector in the operations of port facilities has gained
worldwide momentum since 1990s. Between 1990 and 1998 alone, about 112 port
projects deals were concluded, involving private sector participation in 28
developing countries with an investment of US$ 9 billion (Private Sector, Note No.
193, p.1).
There has been a significant shift from the traditional service port model to landlord port model. In the service port model, a public port agency or authority
provides most of the commercial services in addition to playing a regulatory role.
Under the landlord port model, the public port authority acts mainly as a regulator,
owns the land and basic infrastructural assets but allows private sector operators to
commercially operate container terminals, berths etc. Most of the participation of
the private sector operators has been in the form of concession contracts for varying
periods, with the ownership of the land remaining under the public port agency or
authority.
Available data shows that through such concessions, the private sector operators
have played significant roles in the expansion and modernization of port facilities,
58
equipment etc. However, this process has been more pronounced in Latin American
and Asian ports compared to African where the process has been slow. From the
World Bank data covering the period 1990-1998, Malaysia was the leading country
of top 10 developing countries in-terms of investment in port projects, with private
sector investments estimated at US$ 2 billion. Malaysia was followed by China,
Indonesia, Brazil, Argentina and then India.
6.4.1 Review of Mombasa Ports’ Privatization Efforts
While the Kenya Ports Authority identified ‘land-lord’ port as the preferred model of
running the Mombasa port in 2002, resistance from politicians from the Coast,
workers union and lukewarm support from some of the senior management officers
of the Authority have led to limited progress in the implementation of this policy.
The land-lord port policy preferred by the KPA was expected to have the
government and KPA largely withdraw from direct cargo handling operations at the
port by allowing private sector operators play this role through concessioning or
leasing arrangements. At the same time, the Kenya Ports Authority was expected to
be corporatized and operate more autonomously as a land-lord port with minimal
interference from the government through the Ministry of Transport which
continues to exercise oversight authority through the Minister of Transport.
Although a number of services are today provided by the private sector, such as
handling of imported cars as well as a wide range of containerized cargo which are
now mainly handled through privately developed and managed Container Freight
Stations (CFCs), the Mombasa port continues to be run according to the Service Port
Model where the Kenya Ports Authority is the main operator of the cargo-handling
and other key services such as tug-boat, navigation, stevedoring, etc.
Despite the benefits that ports in various parts of the world have realized from
privatization of container terminal operations, these operations are today carried
out more or less solely by the Kenya Ports Authority. Discussions with people
familiar with the Mombasa port indicate that privatization of the container terminal
has been resisted by both management staff as well as the general staff. The
resistance has been largely due to fears of loss of employment, as the container
terminal has become a nerve center of the port.
The construction of the proposed Japanese-supported second container terminal is
expected to help introduce private sector operations to compete with the KPAmanaged terminal. This proposal is generally not popular with the staff, for the same
fear of loss of employment for the current employees. For most of them, retention of
their positions has higher premium charges than the benefits that would arise from
increased efficiencies associated with privatized container terminal.
While private sector participation in port management has been quite popular in
Africa in recent years, the process has been slow in Kenya. The failure to privatize
the container terminal reduced the country’s ability to attract foreign investors. The
report by (Ocean Shipping Consultants) again shows that privatization of port
59
activities in various African countries had generated private investments worth US$
1.3 billion, over and above US$ 1.7 billion paid to the governments in the form of
royalties; investments in container terminal facilities accounting for approximately
62 percent of the recorded investments. The second most important component of
these investment resources involved privatization of multi-purpose terminals, at
around 32 percent while investment in bulk facilities at the ports was a much less
important component attracting less than 10 percent of recorded investment
resources from the private sector (ibid, p.4).
Nigeria emerged as the most successful among Sub-Saharan Africa countries with
regard to concessioning of container terminals, with the country accounting for
more than 50 percent of total private investments in the regional ports (op. cit.,p.4).
Other successful concessions of container terminals among Sub-Saharan African
countries include Abidjan, Dakar, Dar-es-Salaam, Maputo, Luanda, Tema, Takoradi,
Djibouti and Douala, with Mombasa container terminal earning the dubious
distinction of being “ so far the only one reported instance of a cancelled concession
contract” (ibid, p.4).
Kenya’s first serious effort to have a management concession of the Mombasa
container terminal survived only for a short period before collapsing due to
disagreements and dissatisfaction between the various parties which led to poor
performance and cancellation of the management service contract awarded to
Felixingtowe Port Consultants.
6.4.2 Resistance to Privatization Reforms
The greatest resistance to port reforms has been against measures aimed at
enhancing the participation of private sector operations through various strategies
such as concessioning, leasing port facilities to private sector operators, allowing
private investors to establish facilities in the form of build-operate-transfer or buildown-operate - transfer, etc.
Thus, while the government and the KPA board of directors approved the policy to
make Mombasa Port a ‘land-lord’ port in 2002; where KPA would continue to own
the port facilities while the operations are carried out by the private sector through
various forms of leasing arrangements, very little has been actually implemented,
eight years since the approval of the policy.
The resistance to privatization of port activities is directly linked to the fear that the
process will allow one of the major assets of the Coast region to get into the private
hands of an ‘outsider’ from within the country or, out of the country. This fear is
based on the arguments that the privatization process would most probably make it
difficult for a coastal investor emerge as the winner of a bid in a competitive
process, due to the perception of the region as one of the marginalized parts of the
country in terms of education and wealth distribution. The fear associated with the
port being taken over by an ‘outsider’ is that a large proportion of employment
would go to non-residents of the region. This fear is demonstrated by the fact that
60
one of the questions regularly asked by Members of Parliament from the Coast to
the Minister of Transport is to give a break-down of the people employed at the Port
by district of origin. There have been regular complaints by Members of Parliament
from the Coast that the port management is employing up-country people thereby
denying opportunities for the coastal region workers.
As far as some of the Coastal political leaders are concerned, this fear of take-over of
the port by outsiders seems to overshadow the obvious socio-economic benefits that
would accrue from increased private investments and participation in the
management of port facilities; in the form of higher levels of employment incomes
and a wide range of backward and forward linkages in the coastal region, the
country and the whole of the greater Eastern Africa region.
The continuing special interests of the Coastal region political elites on the
Mombasa Port are graphically captured in the latest demands by the Coast
Parliamentary Group in an article published by the Daily Nation (January 5, 2010,
p.29) titled “Let’s Run Port”, where the vice-chairman of the Coast Parliamentary
Group (CPG) which brings together all the current Members of Parliament from
Coast Province, Hon Gideon Mung’aro and his colleague, Hon Kazungu Kambi, are
quoted to have demanded that the government should allow Coastal region
residents to run the Port of Mombasa arguing that “only Coastal natives should
manage the facility”, and that the port was their ‘coffee’ and ‘tea’ in reference to the
main cash crops of some of the upcountry regions.
They said that the parliamentary group will not allow “multinationals or people
from outside the region to run the Mombasa Port” and that “Coast leaders would
only support the port’s privatization if people from the region were given a greater
say in the running of the vital institution”. They further said “the privatization of the
port should only be according to the various districts in the region so that each of
the districts at the Coast gets one or more berths to privately own and manage”.
They argued that they are opposed to multinationals because they would “bring in
their technology and workers, denying local people employment opportunities”.
Also complaining that “although the port generated billions of shillings in
government revenue, only a trickle went back to develop the region” (Daily Nation,
5th January 2010, p.29).
The above demands demonstrate the views or perceptions that a large proportion of
Coastal political leaders have continued to hold for most of the post-independence
period. This has considerably slowed down the governments’ privatization
programme of some of the port facilities and services given. The fact is that it was
not politically prudent to ignore these perceptions although the perceptions were
generally regarded as myopic in most of the government circles/port’s. These
perceptions have however underminedthe country’s direct and indirect socioeconomic benefits from a well executed privatization programme.
61
Discussions with senior management staff at the port indicate that one of the main
sources of pressure from the regional politicians arises from requests to provide
jobs to the politicians relatives, friends and political supporters. A large proportion
of about 2000 reserve casual workers who are occasionally employed on casual
basis by the port have historically come through the Members of Parliament and
other leaders from the region and their socio-economic and political networks. To
continue to enjoy this privilege, such leaders are keen to ensure that the port is
managed by people easily accessible to them, and these are generally seen to be
people from the Coast. This explains the strong insistence by politicians that the
CEOs and other top managers of the port come from the region.
Another reason that explains the political leaders’ interests in the port is the desire
to be able to influence the award of contracts and benefits from provision of
contracting services. The Kenya Ports Authority is a source of a large number of big
and small supply and contracting services that are regularly advertised in the media.
Both political and business elites at the Coast would prefer to have many of these
undertaken by Coastal suppliers/contractors. It is generally assumed by these elites
that their desires would be more easily achieved with management recruited from
the region.
Inadequate reforms at the Mombasa port are demonstrated also by the fact that the
country has not yet enacted independent port regulation mechanisms. The
government, through the Ministry of Transport continues to perform the regulatory
role of the port activities with the Port Authority acting as the enforcement arm. One
of the weaknesses of this regulatory system is that it is highly prone to conflict of
interest when issues and disputes with the private sector operators are involved
because in some cases some of the key players in the public regulatory body may be
interested parties. This has huge potential to undermine the integrity of decisions
made. Thus, in order to enhance efficiency in Sub-Saharan Africa ports, one of the
key reforms required in Sub-Saharan Africa is the need to give adequate attention to
institutional reforms, both with regard to regulatory structures and other
institutional parameters that inject efficiency and good governance in port
management operations and decision-making.
6.4.3 Resistance and Other Constraints to Port Management Reforms
One of the contributing factors to Kenya’s poor port-operations has been the caliber
and autonomy enjoyed by key management staff who were often hand picked from
political supporters or financiers of political regimes. This is especially the case
when appointments of Chief Executives and Senior Management staff may depend
upon the whims of the Executive arm of the government, without a clear
competitive framework. This changed considerably in 2004 under the NARC
government when all senior staff members including the CEOs were expected to go
through competitive interviews under the Board of Directors, following the
advertisement of the vacant posts in the press. This, together with a reformed
Procurement Act which, became effective in 2005 helped to bring under some
control the wastage which the port, like many other parastatals, had suffered. It is
62
worth noting that while these measures helped to control mismanagement and
other excesses, they were not able to eliminate corruption and other weaknesses in
the administrative and governance structures of the port partly because they could
not effectively shield the management from regular political interference from
powerful political and business elites pursuing self-interest. However, the new
personnel and management style and tighter procurement procedures helped the
Kenya Ports Authority to improve governance considerably as the Authority came
out of the Transparency International list of the most corrupt public institutions in
which the corporation had been featuring prominently for several years. It also
helped to strengthen the Authority’s revenue base which made it possible for the
port to undertake major expansion and modernization of equipment largely
financial with internally generated resources.
Next to reforms aimed at privatization of some of the facilities of the Mombasa Port,
management reforms have faced the second most serious political resistance. The
appointments and retention of the CEO of the port has for a long time been heavily
influenced by political considerations both during KANU, NARC and the PNU–ODM
Grand Coalition regimes. This has often overlooked the performance or
qualifications of the people involved. For instance in 2006, one of the CEOs who had
played a key role in turning the port from a debt-ridden parastatal into one of the
few profit- making parastatals, remitting a substantial annual dividend to the
Treasury; was relieved of his position following sustained pressure from Coastal
politicians that the port should be managed by a person from the region. Sources
indicate that the pressure on the government to replace the CEO was particularly
high during the 2005 national referendum debate and campaign on a new
constitution.
Appointments of subsequent CEOs have elicited considerable media and political
interest again with Coastal politicians pushing for a person from the region. Like the
case of privatization reforms, management reforms are resisted because of the fear
that appointments based purely on meritocracy of the candidates would take away
control of a key regional political and business asset from regional political and
business elites whose parochial and personal interests would be jeopardized by
promotion of professional and transparent recruitment and procurement processes.
Recent events indicate that even CEOs from the region are not safe when they do not
meet vested personal interests of key political/business elites. Discussions with
people well acquainted with port affairs show that the last two CEOs at the Port
were appointed and fired through direct or indirect actions of the Minister of
Transport, a politician from the Coast, without strictly following the laid down
procedures.
The latest case took place in February 2010 when the CEO was fired by the Minister
without the knowledge of the KPA Board of Directors or the Permanent Secretary.
The legality of this latest sacking of KPA CEO was raised in subsequent media
stories, because the Minister took the action after a Court of Law had nullified his
63
election in his constituency in the December 2007 elections, following a court
petition against the results. Apart from the question whether he had powers to
perform his ministerial duties after the court had nullified his election as a Member
of Parliament, there were issues raised about reasons behind sacking of the CEO
under whose one-year stay at the helm of the port, the institution had recorded one
of the highest profit in the last few years; as well as whether the minister had
powers to fire the CEO without the knowledge of the Board.
The latest episode of the firing of the port’s CEO by a Minister whose election had
already been nullified, attracted high media and political interest and coverage, a
demonstration of growing freedom of press and expression as a result of greatly
increased democratic space in the post-Moi era. Commenting on the issues, a leading
business writer in the country’s newspaper wrote, “Ministers treat parastatals as if
they are their personal property-firing managing directors at their whim and fancy,
replacing them arbitrarily and appointing replacements on the basis of their ethnic
and political affiliations” (Jaindi Kisero, “End Culture of Ministers Meddling in
Parastatals,” Daily Nation, March 3, 2010, p.12).
A well planned retrenchment programme to cut down the level of employment from
its current number of about 4,500 people to about 2,500 has not taken off more than
seven years since the plan was prepared and discussed by technocrats from the
relevant ministries and the Kenya Ports Authority Board of Directors. The resistance
to the programme has been spear headed by the politicians from the region and
trade union leaders who have on several occasions threatened to organize labor
strikes, to oppose the planned right-sizing programme aimed at improving
efficiency at the port. The arguments against the programmes have been largely
hinged on the perceived adverse effects of the reform on the workers in a country
suffering from high levels of unemployment, poverty and inequality.
The main interest of politicians has been preservation of their careers, with less
weight accorded to the wider national and regional benefits of a more efficient port.
This is made possible by limited knowledge and awareness of the majority of the
region’s population with regard to the wider benefits of efficiently managed port
facility. The country has thus lost heavily in terms of failure to implement a rightsizing exercise for more than six years, as well as in terms of the efficiency gains that
would have accrued to the users of the port if unnecessary costs had been
eliminated through the right-sizing programme.
6.4.4 Modernization of the Port Facilities and Equipment
Modernization of the port facilities and equipment has been another key plunk in
the reform agenda. By end of 1990s, a significant number of the key facilities of the
Mombasa port were either, poorly maintained, obsolete and inadequate to deal with
the rapidly growing volume of cargo traffic through the port or modern larger
shipping vessels and new technological requirements and challenges. Gross
mismanagement of the port revenue and port operations had transformed the port
64
into a debt-ridden parastatal with overdrafts in excess of Kshs 21 billion by year
2000.
As the port performance improved with new management during Dr Leakey’s led
Dream Team and under the first Kibaki Government from 2003, significant priority
was given to port reforms and modernization of its key facilities and equipment.
With tighter controls over port revenues in the last eight years, a large proportion of
resources used in expansion and modernization projects was raised through
internally generated resources and loan facilities serviced through port revenues.
Japan Bank for International Cooperation (JBIC) loan facility is expected to be
serviced by revenue generated from port operations like most of the other projects
which have been undertaken at the port in the last seven years, underlining the
economic gains from relative improvement in operations and management in the
post-Moi era. This is a major contrast from Moi’s era when the port’s equipment
were seriously ran down due to gross mismanagement, corruption and prolonged
under-investment in essential port equipment and other facilities which,
characterized the last decade of Moi’s regime.
By 2007, an estimated Kshs15 billion had been spent to acquire new tug boats, shipto-shore gantry cranes and a wide range of other equipment in addition to
undertaking works on the container terminal.
A number of projects are underway at the port aimed at improving the port’s
efficiency and capacity considerably and help reduce governance problems through
use of ICT. These include:
 Construction of a second container terminal jointly funded by the JBIC and
the government of Kenya through the Kenya Ports Authority. The agreement
between the two countries was signed towards the end of 2007, with Japan
providing a soft loan facility of Kshs26 billion. The project was selected and
given priority as part of essential measures needed in the country’s
preparation for the anticipated growth in container cargo traffic. The project
is designed to have four new berths of between 11-15 meters each, capable
of handling an additional 1.2 million TEUs. The project is currently in the
design phase, with the Japan Port Consultants having won the consultancy
contract to design and supervise the project implementation. Whose first
phase is expected to be ready by 2013. The signing of contract with the Toyo
Company Japan as the contractor of the project was signed at the beginning
of July 2011 and the construction is expected to commence in the coming few
months.
 A related project is the dredging of the port channel to a depth of 15 meters
and widening of the channel’s turning basins to help the Port of Mombasa
handle new generation larger ships which, currently cannot be
accommodated at the port. The inability to handle large modern shipping
liners has adversely affected the port’s competiveness and loss of business.
The project has been one of the top priorities of the KPA for more than a
65




decade and its selection and prioritization was largely based on the need to
remove clear bottlenecks in port operations.
The dredging of the Kilindini Channel access of the Mombasa Port and the
expansion of the container terminal through construction of berth no. 19 of
the Port were simultaneously launched on 5th July 2011, by the new Minister
for Transport, Amos Kimunya. The two are part of key ministry’s flagship
projects of the country’s Vision 2030. The dredging project is designed to
increase the depth of the access channel to the port from a minimum of 13.4
metres to a minimum of 15 meters, and increase the width of the channel to
300 meters at the narrowest point, to allow the Port to handle postpanamax
vessels. The construction of berth 19 will cost an estimated ksh 56 billion and
will increase the length of the current container terminal by 160 meters
enabling it for the quay to handle a minimum of three large vessels of a
length of 235 meters each. The construction of the berth funded by KPA is
estimated to be completed in 2 years time.
The dredging project funded by the Government of Kenya at a cost of US$ 66
million is being undertaken by a Dutch firm m/s Van OOrd Dredging and
Marine Contractors. The implementation of the dredging project is being
implemented in three phases in addition to the consultancy study carried out
by the Japan Port Consultants firm in 2007. The first phase of the project
launched launched on 5th July 2011 involves dredging of the outer and inner
channels while the next two phases will respectively cover the main channel
and panama berths 12-14 as well as a new container terminal, berths 20-23.
When completed the dredging is expected to meet both current and future
national, regional trade and shipping needs, create capacity to handle postpanamax vessels of 300 meters, improved and safer navigation within the
Port, increased higher returns on the Port’s capital investments, transform
the Mombasa port into a hub port serving feeder ports in the region and help
promote national and regional trade as a result of increased Port’s capacity,
efficiency and competiveness. (KPA website)
The latest development regarding the Launch project is that the Japan Port
Consultants working with an inter-ministerial team of relevant Kenya
Ministries and departments completed a feasibility study financed through
budgetary allocation by Kenya government in June 2011 has been presented
at a meeting of Permanent Secretaries before it is forwarded to the Cabinet.
The inter-ministerial team recommends implementation of the project in
stages, starting with the Port and the newly independent republic of
Southern Sudan. The project has received widespread government support,
which has recently been boosted by the remarks by the President of the
newly independent republic of Southern Sudan to the effect that his
government is eager to see Lamu-Juba corridor operational as soon as is
possible to improve transport and trade relations between Southern Sudan
and Kenya and the rest of the world.
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
The Kilindini Waterfront Operating System (KWATOS) is another important
project recently completed at the port of Mombasa. Officially launched on 1st
July 2008, the project was aimed at computerizing the waterfront operations
and to link them with the Kenya Revenue Authority Simba System to enhance
the port’s operational efficiency in key areas and to increase the port’s
capacity. The impact of the project is expected to be further enhanced, when
the Port’s Community Based System is completed, as this is in the final phase
of the implementation of the Port’s ICT strategy which is aimed at turning the
port into an e-port by 2010.
The implementation of the project was expected to achieve positive results in
improving the port’s governance, operational and business dimensions. The
potential benefits of transforming the Mombasa port into an e-port include reduced
corruption and general rent-seeking behavior through minimization of human to
human contacts by automating most operations at the port; efficiency gains in the
operations of the port due to reduced bureaucracy and other bottlenecks which
arise or are associated with heavy reliance on manual operations; reduced
congestion which is in turn expected to raise the port’s capacity to handle cargo,
leading to higher rates of return; increasing the role of private sector in the
provision of port services.
Unlike the political resistance to privatization, management, regulatory and
institutional reforms, there was limited resistance to the expansion and
modernization programme of the port’s facilities and equipment from political and
business elites. Indeed in stakeholder forums held at the port every Friday morning,
there was strong pressure from both local and foreign stakeholders for KPA to raise
its service level through appropriate investments on facilities and equipment. The
Board of Directors has also generally supported the modernization programme by
providing budgetary resources as much as possible with available resources.
However, while there was none or only limited opposition to the port’s
modernization and expansion programme from the politicians and other
stakeholders, implementation of accepted capital investment projects took too long
to implement. There are projects which have taken several years without
implementation after board approval. This has sometimes been as a result of
procurement processes which, are challenged through the procurement dispute
tribunal, and can sometimes delay the process by as much as a year or more.
Projects like the construction of the Dongo Kundu Bypass, dredging the channel to
allow the port to handle new generation larger ships, construction of a second
container terminal and many others have been on the drawing board for several
years.
This process of enhancing private sector participation has been on-going for a
number of years but is generally slow due to the opposition from self-interested
groups.
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6.4.5 Proposed Lamu Port
The proposed second national port at Lamu provides an example of how long it can
take to start implementation of a project andthe adverse effects of bureaucratic
delays due to differences within different arms of the government and external
interference in the implementation of projects in the country.
Lamu Port was identified as the most suitable location for Kenya’s second
international port in 1975 when a study on the subject was completed; no serious
efforts were made to start preparations for implementation of the project. It was in
2005, following the conclusion of the negotiations on the Comprehensive Peace
Agreement (CPA) for Southern Sudan which was hosted by Kenya, that the
government revived the idea of establishing the Lamu Port to open up a new
transport corridor linking Kenyan Coastal ports with Southern Sudan and Ethiopia.
Kenya’s Ministry of Transport working closely with the Kenya Southern Sudan
Liaison Office (KESLO), developed a new concept paper of the new corridor and
attempted to market to various donors to undertake the various components in
terms of concessions for the port, railway line, highway and pipeline to Link Lamu
and Southern Sudan. Hardly any serious investor showed interest on the proposed
projects until a Kuwait investor indicated his interest on undertaking all the
components on a 30-year build-operate and transfer (BOT) arrangement through a
special purpose vehicle company.
The negotiated draft agreement between the Ministry of Transport and the Kuwait
Investment Company in 2006 was not approved by the government largely because
the Ministry of Transport and Ministry of Finance differed on key aspects of the
project. At the same time some of the country’s development partners, notably the
International Finance Corporation (IFC) - which had been approached to provide
professional advice on the project - proposed major changes in the project which the
Ministry of Transport thought would adversely affect the realization of the project.
The proposal by IFC and the Ministry of Finance was that instead of undertaking the
project under one umbrella company as proposed by the Kuwait Investment
Company, the components should be separated and advertised separately. It was
the view of the Ministry of Transport that this was unlikely to succeed because the
various components may not be economically feasible on their own, and that the
offer by the Kuwait company was probably the best under the circumstances. These
differences between the two Ministries and the attitude taken by IFC led to a
stalemate which stifled progress on the Lamu port project and associated
infrastructural facilities.
Apart from the differences between the two Ministries and the negative stand taken
by IFC, there were other political undertones; with some of the politicians against
the project arguing that the country should not allow a foreign private sector
investor to control such important infrastructural facilities and that the proposed
concession could lead to unfair exploitation of the country’s resources.
Lack of a clear policy framework for concessioning in the country also adversely
affected the project. Many Kenyan politicians and the general public were not
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adequately familiar on how concessions are generally conducted in various parts of
the world, making them rather suspicious of the proposed concession.
It is clear that for Kenya to reduce its dependence on limited government revenue
for modernizing and expanding her infrastructural facilities in transport and other
sectors, there is need to develop a clear national policy framework on involvement
of private sector in infrastructure development through various concessioning
arrangements and increase general awareness of benefits that can be derived from
such arrangements. Such awareness is needed by both the general public, political
leaders and other stakeholders.
In Kenya, like many other developing countries, imperfections and distortions in
political markets have made it difficult to create positive pressure for results. The
major aspects of political market imperfections include lack of/or inadequate voter
information, social polarization and weak political credibility with respect to the
country’s main political parties. As Philip Keefer and Stuti Khemani point out, these
imperfections have tended to “undermine the role that elections can play in
guaranteeing accountable and responsive governments” (Keefer and Khemani, p.7).
The authors point out that information constraints make it difficult for the poor to
hold the politicians accountable and encouraging politicians to focus on the
priorities of broad national development.
6.4.6 Demonstration of Benefits for Privatization
There is growing evidence of the huge benefits that the Port of Mombasa would
enjoy if bold reforms were implemented in the form of key facilities and operations
at the port.
It is generally acknowledged that the establishment of the Grain Bulk Handling
Limited (GBHL) was an important milestone in increasing the capacity of the port to
handle bulk grain imports into Kenya and the region. The efficiency of the firm in
handling grain imports is rated highly in Africa. Without GBHL, the congestion at the
port could have reached unmanageable levels. This is today recognized and
appreciated by the port management. The facility is also an important source of
employment in the coastal region showing that the fears of loss of employment as a
result of privatization are often exaggerated. It is also interesting to note that the
facility is largely an initiative from Coast based investors, allaying the politically held
views that privatization would mainly benefit outsiders.
Another success story in this regard is the decision by KPA to appoint private sector
owners/operators of Container Freight Stations to handle containerized cargo. The
policy allows CFSs to handle cargo right from the ships to their customers. Some of
the CFSs are well equipped to handle various types of cargo. The net impact of this
has been the reduction of constraints in the port’s cargo handling equipment,
lowering of cargo dwell time at the port, reduction of congestion and improvement
of the container terminal yard planning which has facilitated convenience and
efficiency in the management of containerized cargo.
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The ability of KPA to finance most of projects undertaken at the port as well as the
impressive re-equipment programme undertaken principally through internally
generated revenues, in the post-Moi period is a vivid indicator of the economic
potential that can accrue from improved governance structures, tighter
procurement procedures and professionalization and de-politicization of senior
staff appointments and increased transparency and accountability in the
management of public institutions in the country.
It is however, important to recognize that the above benefits constitute a relatively
small proportion of the potential benefits from more widespread reforms, if
effectively implemented. For instance, more effective participation of the private
sector in investment and management of the port operations could have most likely
injected much larger amounts of resources at the port and the economy at large,
leading to much faster modernization and expansion of port facilities.
It is important to note that privatization of other parastatals in Kenya in the last two
decades or so have yielded dramatic benefits not only to the corporations, but to the
whole economy. Prominent examples include privatization of Kenya Airways which
has made it one of the best performing airlines in Africa in the last ten years. The
airline is today one of the leading players in the Kenyan economy with an annual
turnover of about Kshs60 billion, and an enterprise with huge direct and indirect
linkages with tourism, agriculture, trade and many other sectors of the economy
both in Kenya and the region as a whole.
Another example demonstrating dramatic effects of well implemented reforms is
illustrated by the benefits that have accompanied restructuring and reforms
undertaken in Kenya’s Posts and Telecommunication sector. These reforms have
transformed the debt-ridden Kenya Posts and Telecommunications Corporation
(KPTC) into dynamic privatized corporations such as Safaricom, Zain and others
that have become major and better employers and leading tax payers in the country.
There is thus growing evidence of major positive benefits from well executed
reforms, indicating that the Port of Mombasa would benefit from such reforms if
political resistance is overcome.
6.5
Factors Shaping Coastal Politics and Social-Economic and
Political Perspectives
Some of the political perspectives today influence the way the Coastal political and
business elites view the role of Mombasa Port and recommended reforms can be
traced back to the pre-independence days especially the period just before
independence in 1963. During the Lancaster House Constitutional talks which led to
Kenya’s independence, the Coastal region, led by one of its most powerful sons, Hon
Ronald Ngala, favored a federal system of government, popularly known as
“Majimbo” in the Kiswahili language. Ngala and most of other Coastal politicians saw
the Majimbo system as the best way of protecting economic, social and political
interests of the Coastal region. With a smaller population, fewer well educated
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people, and generally low level of literacy the Coastal politicians regarded the region
as highly vulnerable to domination by the more populous peoples from upcountry,
especially the large tribes of Kikuyu, Luo and to some extent Luhya.
The Kenya African Democratic Union (KADU) political party was created to
spearhead the interests of the minority tribes. The party, the main competitor to the
Kenya African National Union (KANU) was led by Daniel Arap Moi, Ronald Ngala and
Masinde Muliro from Western Kenya and was generally supported by the white
settlers who saw it as a way of reducing the power of KANU and the large tribes. The
white settlers as a minority group in the country saw KADU as a political vehicle
that could also serve their political and economic interests.
The push for a Majimbo system of government was one of the party’s main
distinguishing factors and also one of the issues in which the party differed strongly
from KANU which, was in favor of a unitary system of government. During the
Lancaster House Constitutional negotiations held in London, and political rallies in
the country, the need to protect or ring-fence economic interests of the Coastal
people and other minority groups was highly emphasized. It was argued that unless
a federal or ‘Majimbo’ government was created, the resources would be grabbed or
plundered for the benefits of the large tribes. Politicians from the minority groups
argued that indeed the main reason why the large tribes were against the Majimbo
system was their desire to exploit economic resources of minority groups.
With KANU emerging the victor in the general elections leading to independence,
the Majimbo debate weakened after the country adopted a unitary system of
government, with strong presidential powers. The idea was further pushed to the
background when KADU merged with the ruling party KANU as the key KADU
leaders joined KANU and the government at high positions in the cabinet and the
ruling party. While these events reduced the debate on Majimbo system of
government, strong fears of domination of minority groups by large tribes
economically, politically and socially remained quite strong among some Kenyan
communities; especially within the Coastal region and parts of Rift Valley.
After 46 years of independence, the Coastal region is still strongly associated with
the federal Majimbo system of government. This featured strongly during the 2007
general elections with ODM embracing it and PNU against the concept. The political
perception of the Coastal leaders that the region is weak and needs special attention
against the upcountry tribes continues to influence socio-economic and political
view and positions taken, largely leaving a regional protectionism stance.
A large proportion of the Coastal politicians in the post-independence period have
remained vocal or silent supporters of the Majimbo system and have frequently
spoken out against exploitation of resources from the region by outsiders either
from within or outside the country. Examples include complaints against the
ownership of tourist hotels and other facilities at the Coast; with many arguing that
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the region has not significantly benefitted from the thriving tourist industry in the
region.
Another recent example has been the attempt to mine the titanium resources at
Kwale. More than 10 years after the discovery of large titanium deposits in Kwale
which could significantly influence the economic fortunes of both Kwale and the
Coastal region in general, efforts by a Canadian firm, Tiomin International Company,
to establish an industry to extract the mineral have not taken off due to lack of
political support from local leaders, as well as unrealistic demands for land
compensation from land owners who were supposed to vacate the land for mining
and processing activities to commence. Thus, an industry which would have had
major positive impacts on the region has not taken off because of what one would
call traditional hostility towards investors from outside the region, depriving the
region anticipated employment and income opportunities from the mineral
deposits.
The above discussion provides a background through which reforms at the port have
been opposed or supported by both Coastal politicians and business elites.
6.5.1 Sources of Influence of the Coastal Political Elite
There has been considerable debate on how a small group of political and business
class has been able to significantly block reforms of a key national and regional
infrastructural facility like the Mombasa Port. Discussions with well informed
Kenyans in and out of Government and academic researchers indicate that the
power of this group is derived from the nature of Kenyan politics in most of the
post-independence period. The Coastal politicians have used the situation often to
pursue narrow or parochial regional interests whose economic rationale cannot
always be justified at the national and regional levels.
During Kenyatta’s and Moi’s regimes the leadership continued to be sensitive to the
region’s continuing fears of marginalization, by not ignoring their economic and
political views as much as possible in order to facilitate harmony and unity in the
country.
During the post-Moi era when opposition politics dominated, the Coast Province
acquired additional significance for the main political parties. First, for a leader of a
political party to win the top seat in the country he or she must garner at least 25
percent of the cast votes in five out of the country’s eight provinces. In the last three
general elections, the Coast Province was seen as a key area to win votes. In the
nature of Kenyan politics, it forces the leaders of political parties to lean backwards
to woo and appease key regional political and business leaders for their support. In
what some leaders call ‘horse-trading’, leaders of political parties have made all
kinds of promises, both at the personal and group levels, ranging from distribution
of cabinet posts, public appointments and regional issues. Above all, national leaders
have to avoid taking decisions which, may create a fall-out between them and ‘tribal
or regional’ spokesmen.
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The need to appease regional leaders has continued in the current Grand Coalition
government as the main political parties seek their support in a hang-parliament,
where no party has a comfortable majority for crucial debates in a highly sensitive
period in the country’s political history. This has been aggravated by the
expectations of the 2012 general elections, which means that often neither of the
principal political parties are willing to implement decisions which are unpopular
with certain regions for fear of alienating them politically. The on-going Mau
Complex saga is a case in point.
The political situation in the country has thus promoted considerable impunity from
some of the political leaders in both the Coastal region and other parts of the
country. This, to a large extent, explains the source of powers that certain political
leaders hold on certain national issues; irrespective of whether the positions taken
are good or bad for the country as a whole.
6.5.2 Business Interest Groups, Political Patronage and Pressure, Special
Business Elites and Political Patronage
In addition to the fears of political domination and marginalization of the Coastal
region by outsiders, investments in port facilities have encountered considerable
constraints emanating from business elites whose interests are threatened by new
investors or entrants whether from the region or outside the region; with both the
existing and new investors seeking support from the region and outside the region.
The examples of the Grain Bulk Handling Ltd and the proposed second Port at Lamu
are good current examples.
The prevalence and impact of governance and political economy issues in the
operations at the Mombasa Port are illustrated by the intensity and frequency of
confrontations between Parliamentary Committees, the Port Authority and its
management and the executive arm of the government through the Ministry of
Transport and more recently the Prime Minister’s Office. For instance, there is an
on-going tussle between the Prime Minister’s office and the Parliamentary
Committee on Agriculture regarding the proposed establishment of a second grain
handling facility at either the port of Mombasa or the proposed Lamu port.
The issue of whether another grain bulk handling facility should be established and
allowed to compete with GBHL, which had enjoyed eight years exclusive rights to
handle bulk grain imports, has generated a lot of accusations and counter
accusations between GBHL management and a group of investors fighting to be
permitted to establish a second bulk grain handling facility at the Port of Mombasa.
This has spilled into the political arena as both sides of the debate seek support
from key political figures. Following the expiry of the exclusive rights granted to
GBHL in February 2008, a group of grain handlers who had all along been pushing
for the cancellation of the monopoly enjoyed by GBHL applied to the Kenya Ports
Authority to be permitted to establish a second bulk grain handling facility at the
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Port of Mombasa. KPA Board of Directors was reluctant to grant this permission
arguing that there was no need for a second facility since GBHL had excess capacity.
Following complaints by the new group of local investors that there were
underhand maneuvers to protect GBHL’s exclusive rights which had expired, the
Permanent Secretary, Ministry of Transport intervened and published a public
advertisement for interested investors in a second grain handling facility to express
their interests. On the last day of submitting expressions of interest, the Prime
Minister’s Office ordered cancellation of the advertisement. These actions
intensified accusations and counter accusations with GBHL and the new group of
investors each alleging that their opponents were using political patronage to
pursue their interests. As a result of these complaints, the Parliamentary Committee
on Agriculture decided to investigate the matter leading to a confrontation between
the committee and the Prime Minister’s Office which accused the committee of
interference in the executive decision-making process.
The on-going confrontation between the Prime Minister’s Office, the Parliamentary
Committee, and private sector millers is a reflection of the strength of political
economy conflicts revolving around business interests related to the port operations.
It has been common for vested business interest groups to work with selected
Members of Parliament or Parliamentary Committees to pursue their agenda.
The Office of the Prime Minister has accused the Parliamentary Committee of
launching investigations on the issues surrounding the establishment of the
country’s second grain handling facility without taking into account the fact that the
Prime Minister’s Office had already ordered the Inspectorate of State Corporations,
under his office, to carry out an assessment of the Grain Bulk Handling Facility and
that the Inspectorate had already prepared a report on the issue. The Parliamentary
Committee was thus accused of ignoring the report as well as an earlier Cabinet
decision on the GBHL and the decision taken to locate a second grain bulk handling
facility in the proposed second national port at Lamu. The decision to locate a new
grain handling facility in the proposed second port of Lamu was seen as an indirect
way of extending the monopoly powers of GBHL indefinitely. The Lamu Port is in its
early stages of conception and planning and could take more than a decade before it
is operational.
The committee was also accused of conducting investigations into the GBHL as a
result of pressure from private sector “traders with vested interests” and that the
investigations were carried out “with ulterior motives to intimidate public officials”
(the Sunday Standard, Nov. 29, 2009, p.11). The Prime Minister and a number of
ministers further criticized the Parliamentary Committees for interfering with the
powers of the Executive arm of government in its decision making process. (The
Sunday Standard, Nov. 29, 2009, p.11).
On the issue of collusion between some Members of Parliament and businessmen,
the Prime Minister complained that some of the Members of Parliament had been
74
hired by various parties with vested interests to ask various questions in
Parliament, pointing out that some “people go to committees to pursue vendettas of
failed contractors” (ibid, p.11).
The tendency for vested interests to work closely with political leaders is a
reflection of fairly common behavior described by Philip Keefer and Stuti Khemani
(World Bank, 2003), that in societies where there is information distortion, there is
a tendency to form special interest groups to “purchase narrowly targeted policies
by providing campaign funds” (Keefer et al, p.10). A number of stakeholders
interviewed for this study said that it was common in Kenya for special interest
groups to acquire political support from influential politicians through favors such
as providing campaign funds in exchange for being able to influence certain policies,
programmes or interventions in their favor, often blocking out or frustrating
projects, programmes and reforms that would have benefitted the larger society. As
Keefer and Khemani point out in their study, in situations with low levels of literacy
and poor information flow to the public, space is created “for organized and
informed special interests to purchase narrowly targeted policies at the expense of
broad services” (Keefer and Khemani, p.8). Provision of jobs for unemployed youth
has been one of the activities politicians in Kenya seek to get credit in exchange for
political support.
7.0
Impact of the New Constitution on the Mandates of Existing Transport
Institutions
The three authorities have today been in effective operation for less than two
financial years. While their establishment has been generally welcome as an effort
to improve the efficiency in the management of the road sub-sector especially in
terms of separating the policy-formulation functions of the ministry of Roads from
the operational functions of the three Road Authorities, the devolution exercise
enshrined in the new constitution has created both operational and legal grey areas
regarding the mandate of development and maintenance of road infrastructure in
the country.
While the mandate of the Kenya National Highways Authority (KNHA) seems
straight forward regarding its responsibility of development and maintenance of all
the national highways, the mandates of the Kenya Urban Roads Authority (KURA) as
well as that of Kenya Rural Roads Authority (KRRA) are less clear in the context of
the newly established 47 counties which are charged with responsibilities of
managing devolved resources for infrastructure development and maintenance and
other sectors of the economy. The exact roles of the counties have not been spelt
out. At the moment work is going through a Task Force established to spell out
details of the country’s devolved system to help formulation of appropriate
legislation for the devolved units. The Task Force on Devolved Government
submitted its Interim Report, “A Report on the Implementation of Devolved
Government in Kenya” on 20th April 2011. This report will form the basis for
75
developing a detailed legislative framework that will clearly delineate the sharing of
various functions between the two levels of government created by the constitution
i.e the national government and the county governments.
Distribution of various functions between the national and county governments is
spelt out in Article 186 and the Fourth schedule of the new constitution. The article
points out that “except as otherwise provided for by this constitution, the functions
and powers of the national and county governments respectively, are set out in the
Fourth Schedule”. However, despite this, a closer look at the Fourth Schedule shows
areas of possible overlap and conflict between the national and county powers and
functions relating to infrastructure and related activities. According to the Fourth
Schedule of the Constitution, functions and powers of the County with regard to
County transport are:
 County roads
 Street lighting
 Traffic and parking
 Public transport and
 Ferries and harbours, excluding the regulation of international and
national shipping matters related thereto.
With regard to functions and powers of the national government on transport and
communications, the following are some of the listed powers and functions in the
Fourth Schedule:
 Road traffic
 The construction and operation of national trunk roads
 Standards for the construction and maintenance of other roads
 Railways
 Pipelines
 Marine navigation
 Civil aviation
 Space travel
 Postal services
 Telecommunications
 Radio and television
 National public works
 Public investments
Areas where overlaps and conflicts between exercising of authority and powers
between the national and county governments include the following unless the
legislation being developed is clearly spelt out:
76



National Government
‘Road traffic’
Kenya Urban Roads Authority
Marine navigation

Public investments

Standards for the construction
and maintenance of other roads







County Government
‘Traffic and Parking’
‘Country roads’
Ferries and harbours, excluding
regulation of international
shipping and matters relate
thereof.
Ferries and harbours
Public transport
Street lighting
County Roads
Thus,
i)
There could be confusion in the functions of KURA and various
municipalities/town
within various counties.
ii)
There could also be misunderstanding regarding ‘road traffic’ mandates
under the national government and ‘traffic and parking’ under the county
government.
iii)
There has been considerable concern regarding the function of marine
navigation under the national government functions and that of ferries and
harbours’ under the county government. For instance ferries and harbours
are largely sustained through public investment by the national government,
yet they are listed as part of the functions of the county governments. It is
therefore not clear whether harbours and ferries largely funded by the
national government as public investments should be functions of county
government as listed in the constitution’s Fourth Schedule.
iv)
It will be important to clarify the role of KURA and KRAA in view of the fact
that county roads are under county governments.
From interviews with senior government officials, there was a school of thought
that felt KURA and KRRA could provide advisory services to the county
governments in the areas of developing standards and supervising road
construction and maintenance in rural and urban areas. It was also argued by some
of the officials interviewed that if a port or ferry activity or facility has been
developed through national public investments, its functions should come under
national governments.
7.1
Capacity Limitations in Devolved Units
While a devolved government system is one of the highly popular provisions of the
new constitution, it is widely recognized that the capacity of the counties is
significantly limited to efficiently utilize resources allocated to them from the
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centre as well as raise additional resources within the county and effectively
managed key institutions under their mandates.
This limited capacity in personnel could also become a fertile ground for bad
governance in the management of county affairs for the majority of 47 counties. The
capacity challenge that will face the counties in managing their affairs becomes clear
when the capacity within the current central government is taken as an example.
The results of a recent national audit of public service carried out by the Ministry of
Public service and released to the public on 29th June 2011, highlight the serious
Capacity limitations of the country’s public service even before the devolution takes
place. The survey shows that out of a total of 500,000 less than 20 have ph.Ds, only
50,000 have university degrees; 170,000 of the teachers are high school
graduates, 7,000 of the teachers have diploma certificates. There was a large
number of public servants without any certificate.
Decentralization will undoubtedly aggravate the shortage of qualified, specialized
and experienced staff in virtually all the counties. Apart from the shortage of some
specialized skills needed in various counties, there is the additional problem of
raising adequate financial resources to pay for such skills when available. A related
constraint could arise regarding ethnicity of people to be employed if county leaders
push for employment of people from their counties.
Thus, the capacity of counties to manage large infrastructural projects will be
strongly tested. This partly explains the proposal being forwarded that one of the
functions of KURA and KRRA could also be to advise counties on road infrastructure
issues.
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8.0
Concluding Remarks
The last decade of Moi’s regime witnessed a major deterioration in all aspects of the
country’s transport infrastructure, as seen in the poor state of the road network, the
Port of Mombasa, declining rail haulage capacity and poorly maintained airports and
airstrips. This was the result of a wide range of factors that adversely affected the
transport sector in particular and the Kenya economy at large. They included
amongst others economic stagnation, with GDP growth rates falling below 1
percent. By the end of 2002, there was a major decline in the flow of external
resources from development partners and foreign investors due to the unfavorable
political and economic environment and failure to control corruption in the
management of public enterprises. These and other challenges contributed to
massive under-investment in either maintenance of existing or expansion of the
country’s transport infrastructure facilities.
Recognizing the poor state of transport infrastructure facilities as a major
bottleneck in the country’s Economic Recovery Strategy for the period (2003-2007),
the then new NARC government gave huge priority to the transport sub-sector in
terms of budgetary allocations and reforms. The reforms included changes in board
and management staff, greater participation of the private sector in the financing
and management of transport infrastructure, reforms in financial and procurement
systems to strengthen governance structures, introduction of the performance
contracts in all public institutions, restructuring of transport institutions and
creation and strengthening of new institutions and systems aimed at enhancing
financial management and efficient delivery capacities in the road, port and other
transport sub-sectors.
These reforms have had significant positive impact in the transport sector as well as
the whole economy in the last six years, as seen in the growth rates of the total
transport output; major recovery of the national economy with gross domestic
product growth rates rising from 0.6 percent in 2002 to 7.1 percent in 2007, before
declining to 1.7 percent following the post-election violence experienced in 2008;
rising revenue and profits of key transport institutions such as the Kenya Ports
Authority, Kenya Airports Authority, the Kenya Civil Aviation Authority, Kenya
Airways etc.
It is however, important to note that while significant benefits have been achieved
through the reforms implemented in the post Moi period, the country was neither
able to implement the reforms fully nor was it able to utilize the full potential of the
reforms implemented. This was largely due to continued challenges arising from
poor governance and an unfavorable political environment brought about by
ethnically charged political elite and unstable political parties.
Political disagreements between the two main factions of the NARC government
created deep divisions, mistrust and tensions which led to the break-up of the loose
coalition especially after the 2005 referendum on the draft constitution. This, not
only adversely affected the ability of the government to fully implement reforms on
79
transport and other economic sectors, it also created an unstable economic
environment for investments and planted seeds of the disputed elections of 2007
and the subsequent post-election violence witnessed in 2008 which cancelled a
large proportion of the economic gains made under the ERS programme.
While the Grand coalition government between ODM and PNU helped to stop the
violence, it has been riddled with mistrust, rivalry and lack of cohesion and a shared
vision in the management of national affairs.
The structure of the cabinet appointed from the two major political parties forming
the coalition; with each of the two principals holding powers over those appointed
from their parties, has adversely affected the ability to instill discipline in the
Cabinet because of the restrictions imposed on the president by the National Accord
with regard to giving and reshuffling cabinet ministers. These restrictions have
affected the extent to which governance issues can be handled within particular
ministries. A review of the operations of the Kenya cabinet in the last two years
reveals failure to observe common rules of collective responsibility, pursuit of
individual or partisan party interests in the management of public institutions and
inability or unwillingness of the two principals to take necessary actions, mainly as a
result of the restrictions imposed by the National Accord as well as fear of losing
support from their political parties and supporters. The situation has been
complicated by the intense political strategizing for the 2012 general elections.
These trends impose considerable impediments to the ability of the government in
taking measures that are necessary to promote good governance structures and
practices. There are growing concerns that appointments and retention in certain
key ministries may not always be determined by the ability, performance and track
record of the appointees, but by their political clout and ability to negotiate for
specific dockets as compensation for their political support. The specific dockets
pursued may be those that may promote their political careers.
Thus, the country’s political environment continues to be a key determinant of the
extent to which economic reforms can be instituted and implemented. The ability to
de-politicize appointments of key personnel to manage public institutions will be an
important step towards strengthening good governance and better performance and
more efficient delivery of services.
8.1
Key observations
This study of governance and political economy of the Mombasa Port brings out a
number of interesting observations:’
1. Implementation of management reforms especially in form of merit
appointments of professional can lead to relatively quick turn-around in the
performance of state corporations.
80
2. Improved operational and financial performance of the port has enabled the port
to finance its main modernization and expansion programmes, either directly
from its revenues or through credit facilitated and serviced through internally
generated revenues.
3. Narrow regional, economic and political self interests can hold central
government initiated reforms at ransom. The ruling party’s hold on power
depends on support from regional political and business elites. Privatization of
key public facilities through various forms of private-public partnership
arrangements and other forms of private sector participation is an important
way of reducing political interference in the management of such facilities.
Putting management of such facilities like international ports under political or
business elites with personal, political or business interests has a high probability of
undermining performance due to conflict of interest.
8.2
Recommendations
Overall, the context, power, institutions, actors and processes captured in this
diagnostic represent opportunities to implement reforms in the infrastructure
sector. However, as the analysis shows the Bank’s strategic and operational work
needs to take explicit account the political economy context of reforms. Accordingly,
the following options should be considered:
8.2.1
Option 1: Stay the course
This option means that the Bank, taking into account the political economy
dynamics discussed in this and other reviews, continues with its support for
institutional and governance reforms in infra the structure, as well as in other
related sectors, within the framework approved by the Board of Governors and
currently agreed with the Government of Kenya. This would entail, for example
support for Vision 2030 and the Integrated National Transport Policy. For example,
Vision 2030 is the current policy framework pursued by the Kenyan government to
guide the country’s socio-economic development. This is important from an
ownership perspective in the sense that it implies the existence of political will to
pursue the Vision, and an undertaking that public resources will be made available
to support Vision 2030 projects and programs. This, in our view is the first best
option and offers Kenya a realistic chance of achieving its development objectives.
8.2.2 Option 2: Cautious or ‘wait and see’
Under this option the World Bank would adopt a ‘minimalist’ engagement in Kenya
operating only in selected sectors whilst waiting for the outcome of on-going
constitutional and other governance reforms. The rationale for this approach is that
a carrot-and-stick approach would exert pressure on the government to undertake
key reforms or risk losing the Bank’s support altogether. But this could send the
wrong signal and elicit a negative response especially if the carrot is perceived as
81
shorter than the stick. Considering that the Bank, in addition to financing also plays
a moderating and advisory role in the development process, adopting a wait-andsee approach at this time would in our view be counterproductive in Kenya’s reform
process. Hence, we do not recommend this strategy.
8.2.3 Option 3: Disengagement
The third alternative is for the Bank to disengage from further supporting
infrastructure reforms in Kenya. This, in our view is a NO option for the simple
reason that, while Kenya has many positive aspects such as a sophisticated and
enterprising private sector, an educated labor force an emerging democratic culture,
etc., the country is not yet at a stage where the reforms are self sustaining. Moreover,
experience the world over shows that once you disengage, re-engaging tends to be a
costly exercise. Hence, for this among other reasons (e.g. geopolitical and strategic)
there is need for the World Bank Group and other partners to remain engaged.
8.2.4 Specific Recommendations
Recommendation 1: Actively champion the core values underlying Kenya’s
development blueprints. Vision 2030’s aim of thrusting Kenya to a middle income
economy is based on three key ‘pillars’ – economic, social, and political – anchored
on the following core values and principles: (1) macroeconomic stability; (2)
continuity in governance reforms; (3) enhanced equity and wealth creation
opportunities for the poor; (4) science, technology and innovation; (4) land reform;
(5) human resources development; and (6) security and public sector reforms. This
clear statement of objectives is all the more reason why the Bank should support the
Vision 2030 by promoting such value through media campaign, public debates, etc.,
to inform the public, raise the level of awareness, help fight impunity, and bring the
political class to account.
Recommendation 2: Assist government to develop a clear PPP framework and
promote its adoption in order to help the country benefit from private resources for
infrastructure development similar to what counties like India, South Korea, Spain
and Portugal have successfully done. The 2030 Vision aspires for a country firmly
interconnected through a network of roads, railways, ports, airports, waterways, and
telecommunications, and a country where water and modern sanitation facilities are
available to all. To ensure that the main projects under the economic pillar are
implemented, investment in the nation's infrastructure will be given the highest
priority.
Recommendation 3: The World Bank should use its wide knowledge and global
experience to help widen infrastructure financing instruments to complement the
recently launched infrastructure bond. The Integrated National Transport Policy
approved by Cabinet in 2009 recognizes that an effective and efficient transport
system is an important prerequisite in facilitating national and regional integration,
promoting trade, economic growth, poverty reduction and wealth creation. The
policy outlines that the transport sector in Kenya consists of the following modes,
82
namely: road transport; rail transport; maritime and inland waterways transport;
pipeline transport; air transport; and non-motorized and intermediate means of
transport.
Recommendation 4: Continue support for on-going efforts to make the
concessioned Kenya-Uganda Railway work effectively. This includes giving technical
support to overhaul the current railway system and replace it with standard gauge
modernize system to serve the region. Many examples exist around the world of the
inefficiencies and bottlenecks created when road and rail links are not developed at
a pace adequate to handle increased port activity especially with regard to bulk
cargo.
Recommendation 5: Provide technical and financial support for the strategic
planning, implementing and maintenance of a cost-effective transport system. Port
reforms, for example should encompass other land transport reforms to ensure
complementary development of interconnected links in the transport infrastructure.
Further, this planning effort will have to take into account various stakeholders’
interests in the long-term development of the coastal areas within the framework of
Vision 2030. This includes working with government, private sector and civil society
to push for more governance reforms that help to reduce the risks of narrow and
regional political self interest holding the overall national reforms at ransom.
Recommendation 6: The Bank and other development partners continue
supporting measures aimed at improving governance in various activities in the
roads and ports infrastructure development especially with respect to identification
of projects to be funded, procurement, maintenance and supervision of works being
implemented. The Integrated National Transport Policy covers issues related to
transport infrastructure planning, development and management, legal,
institutional and regulatory frameworks, safety and security, funding, gender
mainstreaming, utilization of Information and Communication Technologies, and
environmental considerations, among others.
Recommendation 7: In the context of transport infrastructure planning, support
work on developing better integration between different forms of transport to
provide a more efficient transport system, i.e., one that ensures freight can be easily
transferred from road to rail to shipping thereby delivering value for money at
minimum cost. For people, integrated transport planning enables easier end-to-end
journeys and greater choice of modes.
Recommendation 8: In terms of road infrastructure development and management,
provide further assistance to support institutional capacity building in terms of (a)
planning and implementation of road maintenance, administration and monitoring
of the RMLF, targeting road agencies and sub-agencies, (b) maintenance planning
and procurement management, (c) traffic management and coordination, and (d)
training and staff development.
83
Recommendation 9: Work closely with the client government (Ministry of Roads,
Kenya Roads Board, and the recently created road authorities) to develop a
nationally agreed system of sharing resources that addresses equity and efficiency
issues to the satisfaction of all stakeholders. Related to this, facilitate a study of the
capacity and efficiency of decentralized entities to handle road maintenance levy
and other fiscal resources, and assist the government to fully and urgently
operationalize viable road agencies and sub-agencies.
Recommendation 10: Scrutinize allocation of public resources for signs of ethnic
and/or regional bias and promote more equitable resource allocation. As a
corollary, support capacity building within the public sector, in particular in relation
to policy research and budgetary oversight.
Recommendation 11: Assist the government to undertake further management
reforms in public sector institutions and provide support to elements of Kenya’s
society that are able and willing to sustain pressure on the government for
improved performance.
Recommendation 12: Following this update study and Kenya’s new constitution,
the following recommendations are made:
i)
The functions of the county government on road infrastructure facilities are
likely to conflict with those of existing bodies, especially Kenya Urban Roads
Authority and the Kenya Rural Roads Authority. It is important for relevant
commissions and other stakeholders ensure that grey areas which may cause
confusion and conflict are streamlined at this time when detailed legislation
of operations and structure of devolved units is under discussion,
ii)
In the same spirit, functions and powers allocated, to county governments on
‘ferries and harbours’ and those of national government on ‘marine
navigation’ will need urgent clarification to avoid conflict on how to manage
key essential ports which serve not only Kenya but the region at large.
Ferries and Harbours currently require heavy public investments which may
be difficult for a country to undertake.
iii)
Other functions relating to transport infrastructure that need to be clearly
clarified in the expected detailed legislation include ‘public road transport’
“traffic and parking” as a responsibility of the county governments.
iv)
The need for and pace of devolution and restructuring of provincial
administration require careful balancing given the limited human and
resource capacities of the counties.
v)
In view of the positive results found privatization and automation of the
weighbridges along Mombasa-Malaba Highway, more resources should be
availed to cover most of the weighbridges in the country.
vi)
If the rising cost of living continues partly due to sharp increases in
petroleum fuels, making road maintenance fuel levy unsustainable, it will be
important to think of alternative ways of having a viable road maintenance
fund. Increase public awareness of the benefits of port reforms to both
84
2)
3)
4)
4)
5)
political leaders, business elites and the general public to reduce resistance
to the reforms.
Facilitate implementation of the reform programme at the port by ensuring
that those in charge are not people with individual or regional narrow selfinterests related to the port.
Central government should take deliberate measures to de-politicize
appointments and management of the port.
Invest in modernization and upgrading of facilities at the port, road and rail
networks to maximize on synergies for efficient port-road and port-rail
linkages.
Develop and popularize a clear public-private sector partnership framework
that is publicly well understood and owned to quicken the rate of
improvement and modernization of various port and road infrastructure to
reduce dependence on government and donor resources.
Enhance investments in ICT facilities to reduce human contacts and manual
operations as a means of reducing rent seeking and raising port efficiency.
85
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88
Annex 1 Kenya’s Road Network
Network
Responsibility
Classified A,
B and C roads
(Ministry of Roads)
Kenya National
Highways
Authority
9 Provincial
Departments and
71 Districts (part
only)
A
Sub-total A B, and C
DRCs (planning)
and MoR [KURA,
KRRA] (execution)
71 DRCs and
DREs
D
Classified D
and E roads
Designation
B
C
Total all classified roads
Urban roads
Municipalities (for
all adopted streets)
MoR/KURA (for
classified roads in
urban areas) and
County Councils for
roads in townships
Unclassified
County Councils
rural roads
and DRCs
Roads in
National
Parks and
Game
Reserves
Forest roads
Unpaved
km
869
Total
km
4,114
1,432
2,487
6,805
1,366
5,180
7,415
2,695
8,021
14,830
1,918
214
35,846
11,090
37,723
11,252
8,937
2,490
54,351
12,040
63,805
14,530
100,000
(est.)
100,000
(est.)
4,409
4,409
2,736
2,736
7,145
6,800
7,145
6,800
180,336
166,391
192,280
178,335
E
Sub-total D and E
Classified
‘Special’
roads
Paved
km
2,886
71 DRCs and
County Councils,
71 Municipalities
and Nairobi City
G, L, R, S, T, W
75
Municipalities,
Nairobi City, 58
Town Councils
and 71 County
Councils
Adopted and
Unadopted
streets
71 County
Councils and
DRCs
Mostly tracks
and footpaths
(extent largely
unknown)
Game trails and
administrative
roads
Kenya Wildlife
25 National
Services and MoR
Parks
(for Classified
roads in parks)
County Councils
34 Game
Game trails and
and MoR (for
Reserves some
administrative
classified roads in
run by several
roads
Game Reserves)
County Councils
Total network in National Parks and Game Reserves
Forest Department
Forest Reserves
Access, Feeder
and Plantation
roads
Total Network
Total ‘Public’ Road Network
11,427
11,427
Source: Adopted from the KRB (2007) Annual Public Roads Program
Note: Class A roads (international trunk roads linking centers of international importance and
crossing international boundaries or terminating at international ports); Class B roads
(national trunk roads linking nationally important centers); Class C roads (primary roads
linking provincially important centers to each other or two higher class roads; Class D roads
(secondary roads); Special Purpose roads (Government-, Settlement-, Rural Access-, Sugar,
Tea-, and Unspecified-roads); and Unclassified Roads (Park and Reserve roads and Forest
roads).
89
Annex 2: Risk Mitigation Action Plan in Kenya’s Road Sector
Risk
Control/Action
1. Use post-qualification instead of prequalification to avoid advance knowledge of
the firms invited to bid.
2. Public dissemination of the overall roads
program and business opportunities in the
roads sub-sector, reinforce government’s and
Banks commitment to fight corruption. This
will also include publication of the project’s
detailed and updated procurement plan on the
website
1. Engage an independent procurement
Collusion and
specialist charged with reviewing bid
bid rigging
specifications and bids for Bank-funded
contracts, and reporting directly to Ministry of
Finance, Ministry of Roads and the Bank.
2. Include the Bank’s audit rights in the work
contracts.
3. Ensure works contracts are large enough to
attract international and larger domestic
firms.
4. Ensure that contracts are not deliberately split
to circumvent the Banks prior review
threshold or to limit competition.
1. Establish a transparent, well documented and
consistently implemented system for
debarment of poor performers and
contractors engaged in fraudulent and corrupt
practices through National Construction
Authority (NCA)
2. Strengthen the Recipient’s capacity to design
and supervise the construction of roads, with
Fraud and
particular emphasis on quality and contract
corruption in
management.
the road
3. Review on-going or recently completed
construction
contract(s) to check for fraud such as
industry
imbalanced bid, use of substandard materials,
lower quantities used than paid for, and other
non-compliance with specifications.
4. Determine through an independent survey
why some bidders who buy bid documents
chose not to submit bids.
1. A technical audit to be conducted
independently of the implementing agency on
Actor
GoK
WB
GoK
WB
90
Risk
Control/Action
Actor
all contracts.
2.
1.
Track
overloading –
lack of
enforcement
and corruption
2.
3.
4.
Delays in Value
Added Tax
(VAT) refunds,
causing inflated
prices in road
construction
Weak due
diligence on
bidders. The
integrity and
past
performance of
contractors is a
key
determinant of
fraud and
corruption
risks.
Absence of
robust cost
estimates
1.
2.
1.
2.
Strengthen use of contractual remedies, such
as performance bonds, in case of project
delays and poor performance
Review current efforts to address corruption
in control o f axle loads, recommend
appropriate measures to mitigate such risks,
and examine need for additional weight
control infrastructure, preferably automated.
Ensure that road designs are commensurate
with the prevailing traffic and axle load
projections.
Institute a fine that is commensurate with
damages to the roads plus additional
deterrent measures to ensure compliance.
Establish quarterly and random independent
reviews o f the weigh stations’ activities
including fines imposed and collected.
Assess the amount o f VAT outstanding for
reimbursement to contractors and liaise with
Ministry of Finance and Kenya Revenue
Authority to put in place a system to minimize
delays.
Provide guidance notes and instructions to the
contractors on VAT procedures and timeline.
Recipient must increase its efforts in
conducting due diligence o f bidders,
particularly with regard to past performance,
financial and technical capacity, equipment
holding, and compliance with tax laws and site
safety regulations.
Undertaking performance reviews to ensure
poor performers are identified.
1. Cost estimates should be developed from first
principles and adjusted for prevailing market
conditions and, if possible, also comparable to
markets in the region (i-e., East Africa).
2. Hire a consultant to develop new, robust costestimates and regularly update the cost
GoK
GoK
GoK
GoK
91
Risk
Weak capacity
to detect and
deal with
corruption
Weak complaint
handling
mechanisms
Weak roads
management
capacity
Overall
transparency
and social
monitoring of
road
construction
Control/Action
methodology and estimates as necessary to
reflect prevailing market conditions.
3. Exercise the audit rights under the contract to
review true cost structure of recently
completed project.
Facilitate training workshops focused on
identifying red flags and establishing controls in
procurement, financial management, and human
resource management particularly in the road
sector, including prevention of fraud in works
contracts.
1. Strengthen systems to handle and effectively
respond to complaints in a timely manner.
2. Establish and implement a communications
strategy to build awareness of fraud and
corruption and provide the means for all
parties to register their complaints.
3. Encourage the appropriate authority to
institute strong whistleblower protection
regulations.
Strengthen planning, programming, budgeting,
execution, monitoring and evaluation capacity of
the road agency.
Ensure the key positions for the three roads
authorities are selected through a competitive
process based on their qualifications against the
established Terms of Reference.
1. Take additional practical steps to foster a
culture of transparency and probity in the
road subsector.
2. Establish a communications strategy through
radio programs and talk shows where the
issues facing the road sector are discussed and
the general public is asked to participate
through expressing their views and comments
Actor
WB
GoK
GoK
GoK
WB
Civil
Society
Source: World Bank 2009
92
Annex 3: Excerpts from the Parliamentary Hansard of June 26th 2007
Acknowledging the PAC effort- that of a watchdog
Thank you, Mr. Temporary Deputy Speaker, Sir, for the opportunity. First of all, I want to thank the
Chairman of the Public Accounts Committee (PAC) and his team for doing a very good job. In this
Report, Parliament is exercising its function as a watchdog. Outside there, there are a lot of
misconceptions about the role of Parliament and a number of people take advantage of this. We find
that Members of Parliament are blamed outside there, for responsibilities that are not theirs.
The role of the Executive, the Judiciary and the Legislature
Mr. Temporary Deputy Speaker, Sir, for example, we find that when roads are poor, no medicine in
hospitals, problems with the buildings in schools and so on, people outside there, blame the
respective Member of Parliament. What is our Member of Parliament doing? He has done nothing for
the last four years because of our poor roads. People do not appreciate that the Government consists
of three arms which are the Executive, the Judiciary and the Legislature. The role of Parliament is so
clear and known and it is there also in the Constitution; it is to make laws and to act as a watchdog of
public funds. So, if roads are poor, it is the Ministry of Roads and Public Works to take the
responsibility. If there is a problem with hospitals and dispensaries, we have got a whole Ministry of
Health headed by a Minister, a Permanent Secretary and officers at the provincial, district and even
divisional level. It is never the role of a Member of Parliament to see that the medical system is
working properly.
Public officers continue to operate with impunity
Mr. Temporary Deputy Speaker, Sir, these hon. Members of Parliament have done what has been
done by this Parliament year in, year out. The PAC of this House has been doing its work very
effectively as it should be done. We have reports that have been written exposing misappropriation
of public funds and several financial scandals and even going to the extent of recommending that
certain individuals be excluded from holding public offices. What has been lacking is the will on the
part of the Government to take action as per recommendations of the PAC. This Report is not
different from reports which have been produced and discussed in this House in the past and
approved. There has been very little implementation and that is the reason why public officers
continue to operate with impunity. I am saying this as somebody who has been an insider and who
knows exactly what is happening.
Corruption Index: Pending Bills & Illegal allocation of Government properties
When I took over the responsibility of heading the Ministry of Roads and Public Works, I found that
the Ministry was very high up in terms of the corruption index in the Government. I appointed two
committees. One was to investigate the illegal allocation of Government properties. The second one
was to investigate the issue of pending bills in the Ministry.
Government resisted the Kiptoon Committee
At that time, the pending bills in the Ministry of Roads and Public Works amounted to Kshs7.5 billion.
So, I set up a committee headed by Eng. Andrew Kiptoon, who is a very eminent engineer, and with
very prominent personalities in our country. I wanted to put an end to this phenomenon of pending
bills. I wanted to get down to the root cause of this. Mr. Temporary Deputy Speaker, Sir, once I did
this, I found a lot of resistance within the Government system. I found letters coming from the
Treasury trying to restrain my hands by telling me that I should not appoint another committee since
there is another committee in the Treasury dealing with pending bills. I told them that the committee
in the Treasury was merely dealing with figures. It was a committee of laymen in as far engineering
was concerned. The committee that I appointed was a committee that was going to do a technical
audit of the projects in respect of which pending bills had been raised.
DFID funded the committee
It required engineers going down to the field to carry out inspections to satisfy themselves that, in
fact, work that had been done was commensurate with the amount of money that was being
demanded by the contractors. There was a lot of resistance and I do not want to go into details
because I know it will be very embarrassing to the Government. Mr. Temporary Deputy Speaker, Sir, I
93
was told that I did not have the powers to appoint committees to carry out investigations. I even
went on to quote my letter of appointment which gave me powers to appoint people to advise me. I
was told that there were no funds for these kinds of committees. In the end, I ended up requesting
assistance from the Department for International Development (DFID). It was the British
Government which eventually gave money to fund that committee. That was the only way that
committee was able to do its work. In other words, the system within the Government was resisting
the work of that committee. However, the work was being carried out. This committee went round
the country, carrying out a technical audit.
The report was shocking
The report itself was very shocking. Out of the Kshs7.5 billion which was being demanded, it
established that only Kshs250 million was actually due and payable. However, on the contrary, the
contractors did owe the Government another Kshs2.5 billion in terms of wrongful payments. Those
are the facts; that whereas the contractors were demanding Kshs7.5 billion, it was the Government
which was owed Kshs2.5 billion in terms of wrongful payments, and that only Kshs250 was owed
genuinely to some of those contractors. That was what led me to term some of them as “cowboy
contractors”.
Pending bills are used to fleece this Government.
Mr. Temporary Deputy Speaker, Sir, pending bills are used to fleece this Government. There is
collusion. It begins first with the officers of the Ministry and then it goes onto the political class, we
have the Attorney-General’s office and then the Judiciary. That is how the system works.
First, around that time, it became much more lucrative for a contractor not to do the job. These
contractors had organized themselves in a kind of a cartel where they were actually awarding the
contracts to themselves. When a tender is done, there is collusion. First, they begin with prequalification of contractors. Serious competition is eliminated at that level. Once that has been left
now, they remain those of that cartel. They agree that there are so many contracts to be awarded. So,
they agree that contractor “A” will be the lowest in this contract.
The next one, they say it will go to contractor “B”. So, all the other contractors will be put above the
other contractors and so on and so forth. It does not matter that they are the lowest in this particular
contract because the figures are immaterial. Once they have been awarded the contract, then the real
serious business begins. That is when the variation orders come. This is done in a very crafty way.
First, the engineers and quantity surveyors leave loopholes within the contract documents, to be
used by these contractors to inflate the prices, through variation orders. So, there will be variation
orders that will inflate the prices. Once that is done, somewhere along the line, the contractor
declares a dispute with the Government. Once this has happened, after a certain period of time, the
contractor stops the work, because he is not being paid.
Collusion with the Government officers
There is collusion also with the Government officers. After 90 days he begins now to apply pending
bills and interest begins to accumulate. Within that time, he will have removed his equipment from
the site and taken them somewhere else, and replaced them with some dilapidated equipment. So, he
continues now to charge the Government for idle equipment, yet, the machinery he has put on site is
unserviceable. So, the pending bills will continue to pile up and in the meantime, he is again doing
some other jobs elsewhere.
More lucrative for a contractor to abandon a project, rather than complete it
So, in the end, you will find that this contractor is demanding three times the original contract sum,
for having done only ten or 20 per cent of the work that he was required to do. That is why we had so
many projects which were started and unfinished. It was much more lucrative for a contractor to
abandon a project, rather than complete it. That is how all these pending bills accumulated.
The Attorney-General now comes into play AG part of the scheme
Once the pending bills have accumulated, the contractor will go to court, despite the fact that the
contract provides for arbitration. Once he goes go court, the Attorney-General now comes into play.
He is supposed to go and defend the Ministry. The Ministry officials will come up with evidence to
show that, in fact, this money is not owed, but the Attorney-General will do two things. One, he will
94
either advise the Ministry that this contractor has got a water-tight case against it and, therefore, it
should pay him, or he fails to appear in court. If he fails to appear in court, then there will be an ex
parte judgment delivered against the Ministry. This is being done deliberately, because the AttorneyGeneral’s Chambers is also part of the scheme.
The other one is the courts themselves. If the Attorney-General is not party to the scheme, then it is
the courts; the Judges or magistrates. So, you will find a situation where a lawyer from the AttorneyGeneral’s Office goes to court and says:
“Your Honor, this matter is not properly before the court, because the contract provides for arbitration
and the contractor has actually jumped arbitration and come straight to the court. Therefore, we urge,
your Honor, to order that this matter be referred back to court.”
The Judge or magistrate will rule that the matter is properly before the court, because he has already
been offered his cut in the whole deal. So, you will find that there is collusion here between the
Attorney-General and the courts. So, we need to take a holistic approach when we are dealing with
this particular issue. We should not just blame the Government officers.
Office of the Attorney-General is one of the most corrupt offices in this country
Mr. Temporary Deputy Speaker, Sir, Justice Chunga once called me, when I talked about this
collusion, and said: “Bwana Waziri, you are blaming us - not that I am defending corruption in the
Judiciary - but I want you to know that in a number of cases, the hands of the Judiciary are tied. This
is because most of the times, either the officers from the Office of the Attorney-General have failed to
appear in court, in which case, we enter ex parte ruling, or they come and tell us that the matter has
been resolved between the parties. So, we just enter a consent judgment.” I asked him to give me a
list of the cases. When I looked at the list, it was shocking. There were about ten cases where the
Government had been fleeced over Kshs2.5 billion. I brought this particular matter to the attention of
the Attorney-General. So, the point I am raising is that we know exactly what is wrong. The AttorneyGeneral - and I wish he was present in this House - knows exactly what is wrong. Instead of him
smiling and laughing all the time, he needs to do something about his own officers.
The Office of the Attorney-General is one of the most corrupt offices in this country.
Even after the so-called surgery of the Judiciary, it continues to remain one of the most corrupt
judiciaries in Africa.
When the members of the Judiciary come here, we all give them respect. Mr. Speaker asks us to stand
for them. But even after the so-called surgery of the Judiciary, it continues to remain one of the most
corrupt judiciaries in Africa.
It continues to remain very corrupt, despite the fact that we have continued to increase the salaries
of its members. So, something serious needs to be done about the Judiciary and the Office of the
Attorney-General, if we want to seriously deal with this issue of corruption.
Ministry of Finance is corrupt
Mr. Temporary Deputy Speaker, Sir, the Ministry of Finance is another one. In this Report, there is a
special case about the Customs offices in Loitokitok. Only two weeks ago, I was in Loitokitok—I was
talking about the issue of the contract for the construction of customs houses at Loitokitok which was
awarded at a tender sum of Kshs44 million. By the time they were over, the contractor was
demanding more than Kshs1.4 billion. I was just saying that this is one of those cases where there is
collusion and the tender sum is completely immaterial. Eventually, the intention is to use those
projects to fleece the Government. The Government needs to take a thorough audit of particularly
two departments:
The Attorney- General to desist from just laughing and smiling all the time, and take serious
action
Mr. Temporary Deputy Speaker, Sir, unless the Government tells the AttorneyGeneral to desist from just laughing and smiling all the time, and take serious action
95
about offending officers in his Ministry, this issue of corruption within the Government is going to
continue. Mr. Temporary Deputy Speaker, Sir, His Excellency the Vice- President and Minister for
Home Affairs, of course, knows this because he is a neighbor of the Attorney-General and he always
smiles with him. But I am saying that— Mr. Temporary Deputy Speaker, Sir, I want to tell His
Excellency the Vice-President and Minister for Home Affairs to tell the Attorney-General that, like the
Bible says: “There is a time for everything”, there is a time to laugh and a time to weep; there is a time
to give birth and a time to bury, and so on. So, the Attorney-General must know that there is a time
for him to roll up his sleeves and be serious. I am saying so because the problem is right inside his
Ministry. I have evidence of an incident which I drew his attention to, where there is a clear case of
collusion.
AG directing ministries to pay for contracts where nothing has been delivered
Mr. Temporary Deputy Speaker, Sir, there was a case of somebody who tendered to
supply the Government with stationery at a cost of Kshs35 million. When his company was unable to
supply the stationery, the contract was cancelled. The Government then re-advertised the tender and
this company participated again in the tendering process. But this time, it lost the tender and it went
to court challenging the cancellation of the original tender. The company was awarded some
damages to the tune of Kshs75 million. That money was not paid and kept on piling as pending bills
and interest. By the time I came into the picture, this company was demanding Kshs250 million. This
figure increased to more than Kshs500 million. This is despite the fact that these people were not
able to supply anything after they tendered for Kshs35 million and the Government cancelled the
contract. They are now demanding more than Kshs500 million. To my surprise, a letter had come
from the Attorney-General’s office directing the Ministry to pay them, arguing that the money was
due and payable, despite the fact that the company did not supply a single item to the Government!
So, I am saying that the problem lies within the Attorney-General’s office.
Those pending bills have been paid quietly
Mr. Temporary Deputy Speaker, Sir, in conclusion, I want to say this. I mentioned earlier that I
appointed a Committee to investigate pending bills and I laid that Report on the Table of the Cabinet.
As a result, a Committee headed by the former Controller and Auditor-General, Mr. D.G. Njoroge, was
appointed. That was in 2003. It took my first committee four months to carry out investigations and
submit the report. But as I am speaking today, the Committee of Mr. D.G. Njoroge has not finalized its
work. The issue of pending bills has not been finalized to date, and I am sure that there is no
intention to complete it soon, because all those pending bills have been paid quietly! So, there is
collusion with officers in the Treasury to pay some of the pending bills. Even if the respective
Ministry stopped payment, the Treasury will proceed to pay.
The biggest failure of this Government is to fight corruption. There is no will to fight corruption!
Mr. Temporary Deputy Speaker, Sir, I am saying here that one of the biggest failures
of this Government is to fight corruption. There is no will to fight corruption! Corruption is
happening on a daily basis and this Government is losing millions of shillings. It is estimated that out
of the total Government revenue every year, 30 per cent goes down the drain; it is fleeced! That is a
lot of money, particularly for a Government that came into power on the platform of zero tolerance to
corruption! I, myself, became the first victim. I exchanged very bitter correspondence with my
colleague when he was protecting some of these people.
Cowboy contractors benefactors of the Government
Mr. Temporary Deputy Speaker, Sir, when I talked about these pending bills, before the report was
released, the Chairman of the Pending Bills Committee was summoned to the Treasury in the office of
the Minister, where he was confronted by two contractors whose names were adversely mentioned
in the report which had not been released. He was told that these were benefactors of the
Government; they funded the NARC Government and, therefore, the Government wanted their names
to be removed from the report. The Chairman of the Committee left that place a very terrified person.
He rang me and told me: “I had been summoned to the Treasury and I was confronted by some of
these contractors. I was told to remove their names from the report. What do I do?” I told him to do
96
nothing of the sort. I told him to produce the report the way he had written it and I will then know
what to do with it.
Mr. Temporary Deputy Speaker, Sir, the report was presented to me and I invited Mr. John Githongo,
who was then the Permanent Secretary in charge of Ethics and Governance. I also invited the Press to
be present when the report was being handed over to me. To my surprise, phone calls were made as
to why I should allow the Press to be present when a document which was supposed to be a secret
Government document was being presented to me. I said that there was nothing secret about it
because I had appointed this Committee to work on behalf of the members of the public. I said that
our Government wanted to do things differently from KANU. We wanted to be transparent in
everything that we were doing. This created a lot of anxiety and animosity within the Government
system.
This Government lives and thrives on corruption. It cannot correct itself.
When I presented this report to the Cabinet, this Committee was appointed, which was never
intended to complete any work, but to cover up. The report of this Committee has not been produced,
just like the report of the Committee which was inquiring into the Artur brothers or
the mamluki saga. You heard yesterday that, that report cannot be released for security reasons. I
know that the report on these pending bills cannot also be released for security reasons.
My charges are that this Government lives and thrives on corruption. It cannot correct itself. The only
way that Kenyans can deal with this Government properly is to vote it out and vote into power, a
Government of the Orange Democratic Movement. With those few remarks, I beg to support.
Source: MARS GROUP BLOG, accessed on November 1, 2009
97
Annex 4: Overall Funding of the KRB Fund in FY 2007/2008 in Kenya Shillings
Broad Items
Funded
2%
1% - City
Council of
Nairobi
16%
57%
Roads Dept
130,764,260
128,800,000
Administration
487,462,000
Office/Dept/Unit 163,017,140
Operations
130,005,000
Road Works
Materials
10,063,000
95,425,000
Training
107,000,000
Outstanding
Payments
4,875,682,726
554,880,000
On-going
Contracts
1,042,173,624
On-going Force
Account Works
18,000,000
2,520,000,000 946,476,150
225,000,000
Routine
Maintenance
6,135,600
259,825,500
Equipment
50,000,000
360,000,000
116,150,000
40,120,000
Emergency
Works
2,340,000,000
380,000,000
New Proposed
Works
360,000,000 180,000,000 2,880,000,000 10,530,000,000 1,200,000,000
Total
Source: Annual Public Roads Programme for Financial Year 2007/2008, KRB
24% Portion of the KRBF
UDD & LAs
DRCEquitable
36,000,000
26,347,516
72,551,636
Total
Funding
%
323,922,076
723,030,776
1.77
3.94
130,005,000
0.71
111,733,600
107,000,000
0.61
0.58
5,974,645,386
32.59
1,042,173,624
5.68
5,448,737,088
29.72
12,955,100
222,566,250
278,916,200
788,836,250
1.52
4.30
107,740,206
578,259,794
3,406,000,000
18.58
1,147,433,550
1,872,566,450
8,335,000,000
100.00
KWS
Agricultural
Cess
1,990,300
5,245,600
455,082,660
470,813,448
89,000,000
943,437,790
98,009,700
100,000,000
65,000,000
65,000,000
98
Annex 5: Construction of Roads
No.
Name of Project
1
2
3
4
5
Processional Way
Thogoto-Gikambura-Mutarakwa Rd 0458
Kirigiti-Rioki-Ngewa
Rukenya Forest Rangers Post
St. Mary’s-Nyakahura-Kiamara-Muringato-IrimaGitugu Rd 0462
Dundori-Olkalou
Kirima-Kiandu-Nyeri-Nyeri/Konyu- Othaya
Miiri-Itundu
Mukurweini-Gakonya&Rutune-Mahuaini
Kabati-Kagunduini Rd
Witu-Lamu-Kiunga
Mariakani -Kilifi
Wote-Makindu
Isiolo-Merille River
Makutano-Kikima-Tawa
Ena-Ishiara-Meru
Embu-Mutunduri-Kianjokoma
Kitui-Kangonde
Ruiri-Isiolo
Farm-Kawiru-Mutuati-Kachilu
Garissa-Modogashe
Keroka-Nyangusu
Daraja-Mbili-Nyatieko-Eronge-Kegogi-Miruka
Ndori-Owimbi
Owimbi-Luanda-Kotieno
Nyamira-Kadongo
Email- Loitoktok
Kipsagak-Serem
Gambogi-Serem-Jebrok
Junct.C51-Iten-Kapsowar-Chesoi
Bumala-Rumbwa
Kakamega-Ingotse-Nzoia
Mihuti-Kayu
Kagio Baricho Kerugoya-Kibirigwi(D455/D454)
Meru- Mukinduri-Maua(D482)
Othaya-Konyu(D433)Junc70 Kariki-Kairu/GachamiDhudi Primary School
Ndumberi –Limuru(D409)/Nduota-Kigwaru
Kamukuywa-Kaptama-Kapsokwony
Ebuyango-Ekero
Stand Khisa-Khunusalaba
Bugoma-Bokoli-Kimilili
Construction Of: Runda Whispers
Flats –Kiambu
Total Cost
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
Contractor
Contract Sum
Length
In Km
Contract Period
(Months)
Begin Date
End Date
Nyoro
Kundan
S.S.Mehta
G.Issaias
Kay Cons.
128,957,803.20
1,042,884,600.00
688,548,102.00
743,924,800.00
889,936,236.16
2
32
22
16
30
6
18
15
18
24
December 2004
3rd July 2006
27th June 2007
20th March 2007
3rd July2006
11th May 2005
3rd January 2008
28th September 2008
20th September 2008
3rd July 2008
China Wuyi
Under Tender
Lee Construction
Tm-Am
Put
Not Yet Awarded
Dhanjal Brothers
China Road
China Wuyi
Victory
Intex
Aegis
Victory
Crescent
Intex
Aegis
Kay
H.Young
Put
Put
Put
Synohydro
China Wuyi
3,485,554,917.83
519,839,616.00
1,100,784,383.51
1,113,073,375.52
1,034,427,709.87
100.3
20
13.7
31
47
24
15
24
24
24
15th March 2007
27th February 2008
8th April 2008
04th July 2007
3rd July 2006
15th March 2009
30 September 2009
8th April 2010
04th July 2009
3rd July 2008
2,510,000,000.00
1,838,688,406.65
4,875,409,271
1,895,094,559.84
2,798,526,782.82
502,026,888.00
1,019,817,184.90,
1,449,831,592.62
1,388,857,282.82
748,214,113.58
997,796,870.08
1,803,695,791.40
693,022,483.90
1,049,472,915.39
350,000,000.00
4,236,198,771.59
1,365,000,000.00
604 ,841,354.88
904,993,488.00
159,673,954.00
56
66
136
47
60
17.5
45
52
38.5
20
40
50
23
25
16
100
53.5
20
70
48
43
24
24
30
24
30
15
30
30
18
18
30
24
18
18
24
30
26
12
30
24
18
27th November 2007
19th August 2005
th
7 November 2007
12th September 2007
1st April 2007
8th April 2007
12th May 2005
29th Sep 2005
1st July 2007
4th April 2007
16th April 2004
21st Sep 2007
1st May 2005
4th April 2007
15th Feb 2005
6th Nov 2007
19th Nov 2004
3rd Jan 2007
2nd Nov 2005
3rd May 2005
29th Dec 2006
27th November 2009
19th August 2007
7th May 2010
12th August 2009
1st October 2009
8th July 2007
11th November 2007
29th March 2008
1st Jan 2009
th
4 October 2008
15th Jan 2008
20th Sep 2009
31st Oct 2006
4th April 2008
17th Feb 2007
6th Jan 2010
19th July 2007
2nd Jan 2008
31st August 2008
3rd May 2007
30th June 2007
Intex
H. Young
Elite
1,371,968,882.82
1,843,023,145.98
967,801,279.68
25
52
52
24
24
15
1st April 2008
25th May 2007
28th July 2008
1st April 2010
1st Sep 2009
30th March 2010
S.S Mehta
Kundan Singh
Associated
Bridgestone
Westbuild
Associated
1,848,172,193
2,699,623,837.35
1,034,412,217.20
743,717,065.45
750,080,299.10
227,546,392
33.4
67
31
25
30
2.5
24
30
18
24
12
12
1st April 2008
22nd June 2007
20th April 2007
2nd October 2007
16th April 2007
June 2007
1st April 2010
22nd Dec 2009
20th October 2008
1st October 2009
16th July 2008
May 2008
Intex
Hayer Bishan
Bridgestone
th
53.425,438,568.14
Source: Road Sector Investment Plan 2008-2012, GoK
99
Annex 6: Rehabilitation of Roads
No.
Name Of Project
Contractor
1.
2.
3.
4.
5.
6.
7.
8.
Mbagathi Way
Nairobi – Ruiru
Nairobi Road
Sagana State Lodge
Muranga – Sagana
Ruiru – Kiambu
Othaya-Township
Thika Gitanga – Gatura/GatangaNdakaini
Thika – Gacharage-Githumu
Ruiru – Thika
Machakos Turn Off-Masii
Masii-Kitui
Makutano-Embu
Embu –Thuchi
Thuchi-Nkubu
Nkubu-Meru-Lewa
Sultan –Hamud-Machakos Turn Off
Machalos Turn Off-Emabkasi
Kisian –Bondo
Katitu Kendu Bay
Kisii-Kilgoris
Mai-Mahiu-Naivasha-Lanet
Mai-Mahiu-Narok
Maji Ya Chumvi-Miritini
Lanet-Njoro Turn Off
Njoro Turn Off-Timboroa
Athiriver-Namanga
Lewa –Isiolo
Makutano- Kikima-Tewa
Lailkipia Airforce Base-Army BarracksMt Kenya Safari Lodge
Bomet-Liten
Kabuito
Kabuito
China Shegli
Kirinyaga
Kirinyaga
S.S.Mehta
S.S.Mehat
Kabuito
445,363,927.20
1,095,768,700.40
RMB 205.61
416,752,920.00
1,613,267,471.00,
795,985,620.00,
239,620,200.00
1,245,216,036.00
5.8
64
53.85
47
55
40
13
76
12
12
18
27.5
48
23
24
18
19th August 2005
21st May 2007
24th June 2007
14th August 2003
13th September 2005
10th August 2005
14th November 2004
3rd October 2005
18th August 2006
21st May 2008
24th December 2008
11th September 2005
1st August 2006
10th July 2007
14th April 2005
2nd October 2007
S.Smehta
Kabuito
H.Young
Crescent
G. Issaias
G. Issaias
S.S.Mehta
Intex
Sbi
Sbi
Hayer Bishan
H.Youg
H.Young
Sogea Satom
Maltauro
China Road
China Road
China Road
Intex
Victory
Victory
868,111,891.00,
672,314,830.00
1,140,829,260.00
722,141,899.20
968,125,560.00
898,913,232.00
1,360,061,256.00
898,351,882.82
3,040,616,512.54
4,258,041,088.15
730,972,295.47
684,333,646.00
1,873,743,671,.81
6,145,629,636.39
3,780,519,355.05
2,304,598,494.51
2,971,818,573.21
4,383,603,852.42
6,208,705,229.80
1,586,023,782.82
1,895,094,559.84
711,362,648.50
40
51
78
73
46
32
64
40
55
45
48
42.2
74
94
90
35
32
84
136
29.5
47
25
18
12
24
18
18
24
24
24
24
30
18
30.4
30
31
30
18
24
30
36
18
24
18
14th September 2005
21st May 2007
13th September 2005
17th August 2005
th
13 September 2005
25th August 2005
25th August 2005
17th August 2005
11th October 2008
11th October 2006
21st April 2004
th
14 September 2005
24th December 2006
14th March 2005
2nd September 2006
10th January 2006
9th October 2006
9th October 2006
th
5 November 2007
11th April 2008
12th September 2007
14th December 2007
13th March 2007
21st Amy 2008
12th September 2007
12th September 2007
17th February 2007
24th September 2007
16th August 2007
16th August 2007
10th October 2008
10th April 2009
30th September 2005
28th March 2008
24th June 2009
13th October 2007
1st March 2009
9th July 2007
8th October 2008
8th April 2009
TH
5 November 2010
11th October 2009
12th August 2009
14th June 2009
Spencon
1,498,321,052.30
42
24
6th December 2007
7th April 2008
Rongo-Homabay
Total
Gogni Rajope
1,109,958,232.20
55,666,254,084.63
39.5
24
6th December 2007
9.
10.
11.
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
Contract Sum
Length
In Km
Contract Period
(Months)
Begin Date
End Date
Source: Road Sector Investment Plan 2008-2012, GoK
100
Annex: 7 Reports of Parliamentary Committees on Implementation of Road
Projects
Accordingly, the Report of the Public Accounts Committee on the Government of
Kenya Accounts for the Year 2004/200528 identifies anomalies in the Statement of
Assets and Liabilities for (KRB) Deposits. For example, the statement reflects KRB
Deposit balance of Kshs. 115,152,815.45 as of 30th June 2005 which differs from
the ledger balance of Kshs. 123,312,989.75 by 8,160,173.30. In addition, an
examination of the Vote Book showed KRB Deposits balance of Kshs. 200,167,764
thereby occasioning a further difference of Kshs. 85,014,948.55. The Public
Accounts Committee Report notes that the difference has not been explained or
reconciled.
Also, the Report of the Public Accounts Committee on the Government of Kenya
Accounts for the Year 2005/200629 raises a red flag regarded under expenditure and
under collection of Appropriations-in-Aid (AIA) Vote R13 of the Ministry of Roads
and Public Works. It is noted that the Recurrent Appropriation Account for Vote
R13 for the year ended 30 June 2006 reflects gross under expenditure of Kshs.
5,134,928,289 or approximately 37 percent of the gross estimates of Kshs
13,891,312,987. The Report further notes that the account also reflects deficiency
in AIA of Kshs. 1,917,898,831.60 or about 16% of the estimated receipts of Kshs
12,099,670,967. The under collection of AIA was mainly under Sub-Vote 136 –
Roads, where Kshs. 10,126,773,187.90 was collected against the estimated amount
of Kshs. 12,052,845,811 resulting in a shortfall of Kshs. 1,926,072,623.10
(parag.528).
According to the Report, the reasons given for the under expenditure include early
voluntary retirement and non-recruitment of drivers which reduced expenditure
on personal emoluments and allowances and non-release of Exchequer issues to
Districts against the AIEs issued. Information available indicates that during the
year, the MOR inherited pending bills totaling Kshs. 325,485,250.65 from Roads
Maintenance Levy Fund for Recurrent Vote due to non remittance of funds to
District treasuries by the Ministry of Finance. Authority to Incur Expenditures
(AIEs) issued on Road Maintenance Funds were accompanied by cheques payable
to Permanent Secretary, Treasury. The Paymaster General processed the AIEs but
did not remit the funds to various Districts concerned. It is therefore not known
how the Treasury accounted for these cheques.
The Public Accounts Committee (PAC) heard evidence given by the Accounting
Officer in the MOR that the under expenditure of Kshs. 5,134,928,289 occurred
mainly under head 384, Fuel Levy Funds where an under expenditure of Kshs.
5,005,701,534 was realized. The under expenditure was occasioned by:
28
29
Downloaded from the National Assembly website: http://www.bunge.go.ke
ibid
101
a) Non disbursement of all the budgeted fuel levy funds by Kenya Roads Board
to the MoR;
b) Delayed release of some funds by KRB to the MoR resulting in limited time to
spend the before the closure of the financial year; and
c) Delayed and non remittance of Fuel Levy Funds to the districts by the
Treasury through the District reimbursement system.
The under collection of Kshs. 1,926,072,624 was attributed to the mode of
disbursement to the road agencies by the Kenya Roads Board since the entire fuel
levy amount is captured as a one line expenditure item under the MoR. Amounts
payable to Kenya Wild Life Service, Ministry of Local Government, and KRB are
disbursed directly by Kenya Roads Board and do not pass through the Ministry,
resulting in under collection of the same amounts in the ministry accounts.
According to the Report, “measures are being taken to address this anomaly”.
The Committee also heard that Road Maintenance Levy Funds and AIEs are now
disbursed directly by the MOR hence improving efficiency. However, the Committee
was gravely concerned over poor planning in utilization of resources by the MOR
either due to inefficiency, incompetence or lack of good management. Therefore,
the Committee recommended that the Accounting Officer should always ensure that
only projects whose formalities are certain to be finalized are included in the
budget so that other projects are not denied services due to non use of funds. The
Committee further recommends that the Accounting Officer should liaise with
Treasury to regularly review disbursement mechanisms for the Roads Maintenance
Levy Funds to eliminate any delaying bottlenecks.
Another Vote – Development Appropriation Account (Vote D13) for the year ended
30 June 2006 reflects gross under-expenditure of Kshs. 5,849,336,46837 or
approximately 33.8 percent of the gross estimated amount of Kshs.17,321,049,804.
The account also reflects deficiency in AIA of Kshs. 3,558,042,722.45 which is
approximately 34.9 percent of the gross estimates of Kshs. 10,188,580.204
(parag.530)
Explanations given for the under expenditure are slow rate of procurement and
documentation process and implementation of projects. For the under collection of
Appropriations-in-Aid, explanations include non receipt of expenditure details from
donors to reflect donor counterpart funding and slow tendering procurement
process and documentation. However, information available indicates that some
pending District Bills totaling Kshs. 26,691,479.70 were processed through
Paymaster General (PMG) Section but Treasury failed to release the equivalent
amount to cover Development Expenditure. Provincial/District Officers incurred
expenditure against AIEs but could not effect payments because funds were not
released before the end of the financial year (parag.531)
Similarly AIEs totaling Kshs. 50,250,000 to cover Road 2000 Programme were
processed through the Ministry of Finance (Treasury) in May 2006 to various
102
District Work Officers in Nyanza Province in respect of Swedish International
Development Agency (SIDA) portion funds. These AIEs were funded through
Exchequer Issues of Kshs. 48,500,000 leaving a balance of Kshs. 1,750,000
unutilized balance in the Donor’s account. The Ministry had not indicated what
action it would to take to avoid recurrence of similar under utilization of resources
voted and made available for development of roads (parag.532).
The PAC heard evidence given by the Accounting Officer that under-expenditures
were caused by “structural problems” as AIEs were released by the MoR while the
related funds were supposed to be released by the Treasury directly to the Districts.
Sometimes, Treasury failed to release the equivalent funds to cover the AIEs. This
problem has been “solved” and since the beginning of 2006/2007 financial year, all
AIEs are released to the Districts with accompanying cheques directly from the
MoR. The Ministry has further taken the following measures to avoid under
utilization of voted resources made available for development:
1. Proper and realistic budgeting is done to reflect only funds that will be
spent within the financial year;
2. Involvement of the Contractors in preparation of work plans.
3. Proper liaison with the Development Partners to ensure that only funds to
be utilized are included in the Budget.
The Public Accounts Committee was concerned at the lack of proper planning
leading to non utilization of allocated funds when the country is in dire need of
development initiatives. It recommended that the Accounting Officer should always
liaise with his counterparts and other stakeholders with a view to thrashing out
issues and problems that might hinder fast implementation of projects, a
coordination function expected of all government officials especially at the level of
Permanent Secretary!
The Committee further recommended that only projects whose formalities are
certain to be finalized should be included in the budget. It noted that poor planning,
haphazard execution and management of projects, coupled with laxity and
negligence by both the MOR and Treasury led to inadequate budgeting and the
perennial accumulation of bills.
Regarding pending bills, examination of the MOR records by the PAC showed that
bills amounting to Kshs. 1,739,628,701.95 which should have been settled during
the year under review (2005/2006) were outstanding as at 30 June 2006. Out of
this amount, bills totaling Kshs. 1,038,214,278.89 were chargeable to the Recurrent
Vote R.13 and Kshs. 701,414,423.06 to the Development Vote D.13 (parag.533).
Included in the pending bills of Kshs. 1,739,628,701.95 for both the Recurrent Vote
R13 and the Development D13 are bills adding up to Kshs. 426,407,952.30 for
which the MOR had issued AIEs to the Provincial/District Works Officers, with
copies to the Ministry of Finance. Copies of the AIEs sent to the Ministry of Finance
103
were accompanied by cheques for the equivalent amount and were processed
through the Treasury’s PMG Section.
However, for unexplained reasons, the Ministry of Finance did not release the
equivalent Exchequer Issues to cover the expenditure. The Provincial and District
Works Officers concerned had incurred expenditure against these AIEs but could
not effect payments due to lack of Exchequer Issues which were not released
(parag.534). Such “failure” to settle bills during the year to which they relate
distorts the financial statements for that year and adversely affects the following
year’s provision to which they have to be charged. Had these outstanding bills been
paid and expenditure charged to the accounts for the year, the Recurrent
Appropriation Account for Vote R13 would have reflected a net surplus of Kshs.
2,178,815,178.51 instead of the net surplus of Kshs. 3,217,029,457.40 shown while
the Development Appropriation Account for Vote D13 for the same period would
have reflected a net surplus of Kshs. 1,568,060,775.66 instead of the net surplus of
Kshs. 2,269,475,198.72 recorded.
The Committee heard evidence by the Accounting Officer that the MOR has put in
place several measures to reduce the pending bills, including:

Ensuring that huge portfolio of new projects are not taken on board so that
funds allocated to the MoR are not too thinly spread out to too many projects
and that ongoing projects are adequately funded, and
The MOR now sends AIEs with accompanying cheques hence no expenditure in the
District can be incurred without the requisite funds.
104
Annex: 8 Roads Project Implementation Issues
Ruiri – Isiolo (D490)/Isiolo – Muriri (D485)/Amos Loop Roads Project
This project was awarded to the second lowest bidder at a contract sum of Kshs.
1,449,831,592.65 instead of the lowest bidder at Kshs. 1,225,580,172.25, which
would have saved the MoR Kshs. 224,251,420.40, an amount almost equal to RMLF
allocation to Kilifi District in Coast Province for the year 2007-2008. Work on the
project commenced on 25 September 2005 and was to run for 30 months ending 25
March 2008. The contract had no provision for advance payments. The contractor
was asked to provide a bank guarantee to support any down payment. Three
months into the contract, the contractor on application was given 10% Advance
Payment against a guarantee obtained from a bank which had also guaranteed the
company performance. When the Bank was placed under the statutory
management by the Central Bank for irregular dealings (not related to the project),
the MoR was left without a guarantee against the advance payment or performance
(parag.551-2 ibid).
The Audit carried out by the PAC in August 2006 revealed that the contract was
running behind schedule. Ten months into the project (or 33.3 percent of contract
period), physical progress was at 17 percent, the mobilization strength was at 62
percent and the percentage of the contract sum certified stood at 16.05 percent.
Reasons attributed to this unsatisfactory performance were low equipment/plant
mobilization, shortage of fuel, cement, material and frequent equipment
breakdowns. Moreover, the project was operating without a valid resourced
programme of works and cash flow projections and although this had been brought
to the attention of the contractor severally by the MoR Resident Engineer, there
very little corrective measures seems to have been taken. Thus, the project risked
extension of time and possible cost overruns, putting into doubt timely delivery of
the project and realization of value for money (parag. 553).
In his testimony to the PAC, the Accounting Officer confirmed that the tender was
awarded to the second lowest bidder M/s. Crescent Construction Ltd at a cost of
Kshs 1,449,831,592.65 after the Evaluation Committee gave a detailed explanation
recommending the second lowest evaluated bidder. The lowest evaluated bidder,
Victory Construction Company had just been awarded the Kitui – Kangonde (B7)
Road and Kangare-Ndunyu-Gitugi Factory–Kairuthi-Othaya-Mumbuini-Kairo Road.
It is therefore unclear why Victory Construction Compant would bid for the Ruiri –
Isiolo (D490)/Isiolo – Muriri (D485)/Amos Loop Roads Project when, according to
the evidence presented, the contractor’s capacity in terms of finances, personnel
and equipment was clearly overstretched? The PAC also heard that although the
original contract did not have provision for advance payment, an addendum was
procured after following due process. When Charterhouse Bank, the guarantor for
the advance payment was later placed under statutory management, the MoR
sought clarification from the Governor of the Central Bank and the Attorney
105
General on the status of the guarantee. Interestingly, both gave the assurance that
the order for statutory management had no effect on the validity of the guarantee.
Despite the explanations and assurances, progress of works was observed as having
been very slow and the contractor had been notified of his poor performance and
given a termination notice. While noting that the Accounting Officer had taken
precautionary measures to protect public interests, the PAC deplored the speed at
which the Contractor had been working, risking the project not being completed
within the 30 months stipulated period. To control for likely damages, PAC
recommended that the Accounting Officer closely monitor progress of work and
ensure that unavoidable delays and cost overruns are minimized.
SIDA Roads 2000 Programme – Nyanza Province
The SIDA Roads 2000 Programme in Nyanza Province covers 11 districts, namely
Kuria, Migori, Gucha, Kisii, Nyando, Suba, Homabay, Rachuonyo, Kisumu, Bondo and
Siaya. The total budget for the programme was Kshs. 1.829 billion of which SIDA
contributed Kshs. 1.233 billion while the balance of Kshs.596 million was funding
from the Government of Kenya. Audit inspection and examination of the project
found that, contrary to laid down procedures the District Works Office did not
maintain cash books to record transactions of payments made against cheques
drawn. As a result, monthly bank reconciliation statements for the whole year were
not prepared and it was therefore not possible for the PAC to confirm bank
transaction and balances for the year. An examination of the bank statement as at
31 May 2006 revealed a credit balance of Kshs. 678,383.60. However, examination
of the vote books for payments made against AIEs received indicated a bank
balance of Kshs. 1,054,207.70. The discrepancy between the two sets of records
could not be explained since no monthly bank reconciliations had been prepared
(parag. 554-5 ibid)
Further evidence of weaknesses in management of road finance emerged at the PAC
Hearing. For example, the cash book for the project was maintained at the Kisumu
District Treasury by the District Accountant who also did monthly bank
reconciliations. At the time of audit, bank reconciliation was not yet ready and
therefore could not be inspected. The PAC further heard that the District Works
Officer maintained the vote book recording AIEs only and related transactions. The
cash book, which records exchequer transactions, was maintained by the District
Accountant, a manifestly flawed arrangement creating opportunity for rent
extraction.
However, the audit also identified flaws in disbursement from the Treasury. The
actual AIEs received for the SIDA Roads 2000 Programme was Kshs. 10,700,000,
but the money credited to the account was Kshs. 9,585,000 meaning AIEs of Kshs.
1,115,000 were never financed by the Treasury. The difference between the Cash
Book Balance and the Vote Book Balance was mainly attributable to unfunded AIEs.
Consequently, the PAC recommended that the Accounting Officer should enforce
106
financial discipline at the District level and emphasize through circulars the need
for maintaining proper and accurate accounting records. Additional measures are
reported to have also been taken to open memorandum cash books by the
Ministry’s District AIE holder as a control measure to the main cash book
maintained by the District Accountant.
Repair of Kamandura Bridge on Road A 104 (Nairobi - Nakuru - Road)
In the case of Kamandura Bridge Project, the contractor was awarded a tender sum
of Kshs. 8,641,560 for repair works on the bridge following approval of the
Ministerial Tender Board. The works commenced on 14 December 2002 and were
due for completion on 14 June 2003 after a six month contract period. The primary
task in this contract was to repair the damaged main beams of the bridge. However,
the contractor proceeded to repair the beams before the installation of the gates
which would protect the beams from further damage contrary to the approved
programme of works that had been submitted. This irregularity on performance
was noted and pointed out to the contractor before the work began but no action
was taken. Audit findings further revealed that two of the repaired beams have had
been damaged by high trucks due to lack of protection rendering the repair
ineffective (parag. 556-7 ibid).
The PAC report goes on to note that in spite of these glaring flaws, the contractor
was paid a total of Kshs. 5,719,331 against Certificate No.1 of Kshs.1, 435,071,
Certificate No.2 of Kshs.2, 663,014, and Certificate No. 3 of Kshs. 1,621,246. Even
more surprising is the finding that Certificate number 3 of Kshs. 1,621,246, which
brought the total payments to Kshs. 5,719,331 or 66 percent of the tender sum, was
paid five months after the contractor had deserted the site. The contractor was
unable to complete the remaining works even after being granted an additional
four months in order to do so. He simply abandoned the site when the extension
time lapsed without completing the project (parag. 558-9).
Although the contract had been terminated due to the contractor’s non
performance, the audit noted that the incomplete works was still outstanding.
Further, there was no evidence of measures being taken to prevent the damage on
works already done and there was a risk that the Ministry would have to incur
extra expenditure for the completion of the bridge repairs.
The Committee heard evidence given by the Accounting Officer that the Contractor
failed to install warning gates and physical barriers in accordance with Cap. 403 of
the Traffic Act in order to safeguard bridge beam soffits whose clearance is 4.5m.
The contractor proceeded to repair the bridge before installation of the gates since
the bridge was at the risk of imminent collapse. Later when the gates and barriers
were installed, motorists and especially trailers hauling high containers ignored the
gates and barriers leading to further damage to the beams under repair. After an
interlude of no activity, the contractor briefly resumed work after warnings issued
by the Engineer in letters written on 12 January and 15 April 2004 respectively.
107
Upon resumption of work, the contractor installed the steel gates and brought to
site the steel work to construct beam casings to hold the special cement used to
repair the damaged parts of the beams. Payment certificate no. 3 amounting to
Kshs. 1,621,246 was for supply of the materials on site.
Eventually, the contract was terminated due to non-performance. The Ministry
decided not to proceed with the bridge repairs under existing design since it has
proved difficult to control the height of trucks by merely erecting physical barriers.
Attempts to invoke Traffic Act Cap 403 and arrest motorists hauling excessively
high loads failed. This being only one out of many similar cases, the PAC registered
its concern with the trend where contractors abandon work after being paid over
50 percent of the contract sum leading to loss of time, public funds and expected
service. The PAC, therefore, recommended that the Accounting Officer should
always ensure that contract documents are tailored towards protecting public
interest. It further recommended that any contractor who abandoned work after
getting 50 percent of the contract sum should be precluded from future awards of
government contracts and should also be prosecuted (parag. 560).
Construction of Processional Way - Contract No. RD 0423
In the Processional Way case, the procurement procedures that led to the award of
the contract (No. RD 0423) for the works involving construction of 1.82km on
Processional Way Road from Nyerere Road to State House, and 420 m on Cathedral
Road were found to be unclear. The advertisement for the tender was placed in only
one local daily, the East African Standard of 23 October, 2003 instead of at least
three dailies as stipulated in the Exchequer and Audit (Public Procurement)
Regulations 2001 Clause 22.1. No explanation has been given for this course of
action (parag. 561).
Subsequently, the Ministry repackaged the project to separate roads within State
House from the actual Processional Way, leading to cancellation of Notification of
Award to the first contractor. The works were retendered afresh after being
repackaged through an advertisement in only one local daily, in contravention of
the Exchequer and Audit (Public Procurement) Regulations (2001) Clause 22.1
without any explanation being given for such an anomaly. Further the contract was
awarded to the second lowest bidder at a contract sum of Kshs. 128,957,803.20
instead of the lowest at Kshs. 120,767,651.04. Had the contract been awarded to
the lowest bidder, the Ministry would have saved Kshs. 8,190,152.16. No
justification was given for this action (parag. 562-3).
The above contract was to run for 6 months effective from 11 May 2005 and be
completed by 11 November 2005. The contractor was given an advance payment of
Kshs. 12,895,780 prior to the award. As at May 2006, the project was only 20.3
percent complete while the total amount paid as at 30 June 2006 was Kshs.
48,528,306.80 or about 37.6 percent of the contract amount. In addition to delay in
completion, the audit unearthed a number of irregularities. These include failure by
108
the contractor to engage a Site Agent contrary to the contract document clearly
stipulating that the contractor employs a qualified and competent Site Agent as per
item 6 of the qualification criteria. This led to apparent general disorganization and
lack of co-ordination of site activities, which negatively affected the project’s
completion progress.30 Further, there was no evidence in site of the Engineer’s
Representatives office and furniture costing Kshs. 550,000 billed under item 1.02
and 1.03 of the Bills of Quantity.
The PAC further heard evidence given by the Accounting Officer that procurement
of construction was initiated through advertisement sent to three local dailies, but
that two of them did not carry the advertisement due to outstanding payments. The
initial scope of works included re-carpeting of all roads within State House,
perimeter fencing, repair and gravelling of a road around the State House and
Processional Way. Victory Construction Co. Ltd was initially awarded this contract
(including the roads within State House) at a cost of Kshs. 184,019,080 and notified
of the award. The award was later annulled vide letter ref. MPW/A/35.08 vol. x
(109) of 22 July 2004. The scope of works was reduced to separate roads within
State House from the Processional Way because the Office of the President
undertook to do some of the works. The works were re-tendered afresh after being
repackaged and re-advertised in two local dailies. One newspaper declined to carry
the advertisement due to outstanding payments.
Also, the Chief Engineer appointed a Technical Evaluation Committee which
recommended award to the second lowest at a tender sum of Kshs. 128,957,803.20.
The PAC found that the lowest evaluated bidder, Victory Construction Company,
had just been awarded other jobs including Kitui - Kangonde and also had other
ongoing projects, including Chilemba - Mwakinyungu (which was already behind
schedule). After considering the capacity and previous experience of Victory
Construction Company, the Committee recommended that this contractor should
not be awarded more projects. The Ministerial Tender Committee concurred with
the recommendation and awarded the contract to the second lowest bidder, Nyoro
Construction Company.
Evidence presented before the PAC showed that advance payment of Kshs.
12,895,780 was paid vide certificate No.1 which was submitted on 5 August 2005
while the award of the contract was done on 14 December 2004, vide letter
MPW/A.35.08 Vol.11/21 against a bank guarantee from the National Bank of Kenya.
The payments made as at 30 June 2006 included advance payment of Kshs.
12,895,780 and therefore, the actual work paid for was Kshs. 35,632,514 which is
27.6 percent of the contract sum. This compared favorably with the physical
progress of work done at that time. However, the contractor first requested for
extension of time of 529 days and was awarded 127 days bringing the new
30
The Contractor appointed a Site Agent in mid 2005 and was approved by the Engineer vide letter
R.5512/RD.0423. He left at the end of August 2005 and the contractor was unable to replace him resulting
in inadequate site management
109
completion date to 18 March 2006. He later applied for a second extension of 200
days and was granted 194 days, further pushing the new completion date to 28
September 2006. He could not complete the project and requested for further two
extensions which were not granted. The project was eventually completed in early
December 2007 and was inspected by a taking over committee on 27 March 2008.
In its Report, the PAC noted that the reasons given by the Accounting Officer for
awarding the tender to the second lowest bidder were valid as over-loading
contractors with too many projects greatly contributed to the delays in completion
and substandard work. However, the Committee noted with grave concern the slow
pace at which the project was progressing resulting in a 1.82 kilometer stretch of
road taking more than two years to complete. Thus, the Committee recommended
that the Accounting Officer should ensure that contractors who delay projects and
those hi do unsatisfactory work are not awarded any more government contracts
(parag. 564-5 ibid).
Nairobi Eastern By-Pass
The Nairobi Eastern by-pass is approximately 40km long, with a 7km loop that
starts from Mombasa Road (A104) and ends on the Ruiru-Kiambu Road (C63).
Although the Nairobi Eastern By-Pass was conceptualized in 1972 and reserved in
1974, funding for the project was only initiated three decades later in 2003/2004
with an initial budgetary allocation of Kshs. 9,091,518 provided for in the
Supplementary Estimates for 2003/2004 FY. Apart from the massive and costly
traffic jams in Nairobi that the long delay in implementing this project is partly
responsible for, many developments happened during the almost 30 year delay that
made implementing the project difficult and more expensive.31
By 30 June 2006 the project had been allocated Kshs. 199,091,518 as additional
Kshs. 130,000,000 and Kshs. 60,000,000 was allocated in the years 2004/2005 and
2005/2006 respectively. However, out of the total allocation at the time of the audit
of Kshs. 199,091,518, only Kshs. 155,489,991.80 has been spent resulting in a gross
under-expenditure of Kshs. 43,601,526.20 or approximately 22 percent of the
amount allocated.
The implementation of the project was slow and uncoordinated. By 30 June 2006,
the following activities which should have been completed were still incomplete: Construction of 2kms between Embakasi Garrison and North Airport road. The
survey works had been completed but the buildings standing on the way of the
2kms section had not been demolished.
 Construction of the by pass road to gravel standard.
 Construction of three major bridges crossing Nairobi, Gatharaini and Kamiti
rivers.
31
By the time of implementation in 2003, there was massive encroachment on the road reserves
characterized by permanent multi-storied buildings and public utilities.
110



Completion of a fence to separate the road and Embakasi Garrison so as to open
the section between Embakasi Garrison and Kangundo roads.
Second layer of crusher run was required to make the road motorable to
Kangundo road.
Acquisition of land between Kangundo road and Mombasa road.
Records indicated that an AIE for Kshs. 18,711,300.00 was issued on 10
November 2004 for roads construction out of which Kshs. 10,403,800 was for
construction of bridges and Kshs. 8,307,500 for culverting. But, culverts at Ruiru
yard were over procured in 2004/2005 resulting in huge stock balances in the yard
as at
30 June 2006. There was no proper stock control procedures in place as stores
ledgers kept in Thika District Works Office were mixed up with the normal stores
stock. The Ministry has not provided justification for the Kshs. 8,307,500
expenditure on culverting (parag. 566-8).
According to the Accounting Officer, the under-expenditure of Kshs. 43,601,526.20
was due to:
 Late release of the AIEs occasioned by delayed approval of the Revised Estimates
in 2003/2004 and only Kshs 4,129,501 was spent.
 Slow progress of works, which had not been envisaged.
The implementation was slow because it involved other players such as:
 Office of the President for security
 Director of Survey for survey data
 Director of Physical Planning for guidance
 Commissioner of Lands for records
 Department of Defense for authority to open the road corridor which passes
through their land.
 Hostility, resistance and threats from the communities occupying the road
corridor.
Overall, the PAC noted that the project was implemented as a stage by stage
operation depending on the availability of funds and no specific dates were set for
completion of the various activities. The Eastern By-Pass was awarded for
construction to Bitumen Standards to China Road and Bridge Corporation on 29th
January 2008. Since the first budgetary allocation for this project in the 2003/2004
financial year, nothing much happened in terms of actual project commencement
although funds were allocated annually for over three years.
The Committee further noted that project implementation had been faced with
many challenges and at the time of inspection in 2008, the Accounting Officer had
indicated that commencement would be in September 2008. Accordingly, the
Committee recommends that the Accounting Officer ensures actual commencement
of this project immediately, and all supporting documents on the funds utilized out
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of the voted provisions in respect to preliminary project preparation be availed to
the Committee for audit review (parag. 569).
Construction of Keroka – Nyangusu Road (C16) and Kiamokama Loop (C16/D208
Junction – D207/B3 Junction)
The construction of Keroka – Masimba – Gesusu – Nyangusu and Kiamokama Loop
Roads located in Kisii and Gucha districts was awarded to a construction company
at a tender sum of Kshs. 997,796,878.08. The works involved construction of 57 km
of roads to bitumen standard, including improvement of access roads to 12 existing
markets and was to commence on 16 April 2004 scheduled for completion on 15
October 2006 under the supervision of the MoR. Examination of project records and
an audit site inspection carried out by the PAC in June 2006 revealed the following
unsatisfactory matters:
1. The project was put to tender based on preliminary designs. The proper
engineering designs, which were completed in April 2006, six months to the
scheduled completion date, were carried out as the works progressed. This
had the weakness of giving room to numerous variation orders which were
being encountered.
2. Following the finalization of the project design, a detailed estimate of the
final quantities and financial cost appraisal was carried out that revised the
contract sum by Kshs. 591,572,295.92 or 59.3 percent from the original
contract figure of Kshs. 997,796,878.08 including Kshs. 35,319,314.80 for
contingencies and Kshs. 141,277,259.20 for variation of prices (VOP), to a
final estimated cost of Kshs. 1,589,369,174. Actual billed items increased by
Kshs. 581,502,494, including additional work items amounting to Kshs.
240,745,000.
3. The increase of Kshs. 581,502,494 excluding provisional sums and day works
amounting to Kshs. 56,640,000 is about 56.2 percent of the effective contract
price (Contract price excluding provisional sums and day works) of Kshs.
933,565,670, which was way above the 15 percent variation allowed under
clause 53.2 of the conditions of the contract. Such outrageous variation is
primarily attributable to the Ministry’s failure to complete Engineering
Designs before putting the project to tender.
4. The proposed new rates for additional work items as recommended by the
Resident Engineer had not been approved by the employer while the
variation order for the revised cost estimate had not been procured.
5. The progress report of July 2006 indicated that the project was 20.3 months
behind schedule, 94.9 percent of the programmed completion period having
expired. The production for July for example was reported to be 1.23 percent
compared to a programmed production of 2.5 percent. It was also observed
that bitumen works had not commenced although they were programmed to
start in September 2005.
6. There were frequent breakdown of equipment on site as was evidenced by
the Resident Engineer’s supervision. Vehicles were in poor conditions and
112
required comprehensive repairs. There was inadequate supply of automotive
diesel fuel. While 120,000 liters of automotive diesel was required, only
58,000 liters were reported to have been supplied in July 2006. There was
also understaffing of staff at all levels of production.
7. A total of Kshs. 414,920,015.54 had been certified and paid on the project for
valuation up to 27 June 2006. The expenditure represented 41.58 percent of
the contract provisions and did not favorably compare with the progress of
work of 27.14 percent, thus far achieved.
The Committee heard evidence given by the Accounting Officer that the Contract
was awarded to Kay Construction Company at a tender sum of Kshs.
997,796,878.08. Due to public concern over the condition of the road, it was found
necessary to commence the works immediately based on preliminary designs.
Detailed designs were carried out on site ahead of the works and the contractor
issued with instructions as works progressed and no variations were issued on the
project.
The Committee further heard that:




A project appraisal proposing an increase by Kshs. 591,572,295.92 was declined
as it could not be accommodated within the contract sum. The sum of Kshs.
997,796,878.08 therefore still remained and no variation order was procured.
The Resident Engineer submitted a revised Bill of Quantities which included all
the details the Controller and Auditor General had analyzed but this did not
amount to revising the contract sum.
After receiving the Resident Engineer’s submittals, a committee was formed to
review the quantities and cost estimates. The committee finalized its work and
recommended that the Resident Engineer prepares new Bills of Quantities and
prioritizes the road as follows: (1) Keroka – Nyangusu Road (C16) 27.3kms; (2)
Gesusu – Nyabisabo Road (D208) 16.7 kms; (3) Keumbu – Igare Road (D207)
10.3 kms; and (4) Igare – Keumbu 5 kms.
The contract sum was not to be exceeded and only Keroka – Nyangusu Road and
the township roads, all totaling 30kms, could be covered.
It was also noted that the Keroka – Nyangusu Road (C16) was substantially
complete. The rate of progress of works by the contractor was slow due to change
of design, excess earthwork quantities and adverse weather conditions, among
others. The request for extension of time was evaluated and granted at no extra
cost to the employer pushing the new completion date to 15 January 2008. The
road has since been completed and a copy of the evaluation report availed to the
Auditors.
However, the PAC expressed grave concern over the manner in which this project
was executed, starting from the tendering process which was done using
preliminary designs, to the revision of the Contract sum, to the many variations and
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extensions of time requested and granted by the employer. It recommended that
the Accounting Officer commence investigations with a view to establishing
whether government officers involved in the implementation of this project acted
in the best public interest and whether government got value for money. The
Committee further recommended that officers found to have aided in the
mismanagement of this project be severely disciplined. Finally, the PAC
recommended that the contractor should be investigated for possible collusion with
the officers, and if established, the contractor should be precluded from future
award of government contracts (parag. 576-82).
Improvement and Gravelling of Kiburu-Kiandangae-Mururiinikarima/KiandangaeGacharo-Githuguya-Access to Kiine Girls Secondary School (E612, E1642 and E1643)
In this case, notification of award of the contract was issued and unconditional
acceptance of offer was given by the contractor on 13 May 2005. The actual works
commenced on 13 September 2005 with a contract period of 12 months envisaged
for completion in September 2006. The road works were in Ndia Constituency,
Kirinyaga District of Central Province. The road measured approximately 30 km and
the contract was awarded in May 2005 to the contractors at their bid/tender sum of
Kshs. 122,810,940 being the lowest evaluated bidder among other five tenderers.
The PAC audit made the following observations:
1. The project was behind schedule and even after the expiry of contract period,
only 22 percent of the permanent works were completed and Kshs. 18,870,847.50
or about 15.37 percent of the contract price had been paid against Certificate No. 1
of Kshs. 9,116,719.99, Certificate No. 2 of Kshs. 5,678.24, and Certificate No. 3 of
Kshs. 4,075,329.35.
2. No extension of time had been applied for, evaluated or granted and therefore it
was apparent the contract was being executed outside the contract period. No
action appears to have been taken to either recover the liquidated damages from the
contractor or terminate the contract.
3. The Bill of Quantities had budgetary items that were to run for 12 months of the
project cycle. However, with the expiry of this period, there would be cost overruns
on the supervisory and other construction activities. It was therefore evident that
the planning, management and implementation of the road contract No.RG220-01
project was not properly worked out.
The Public Accounts Committee heard evidence by the Accounting Officer that the
tender was awarded to the lowest evaluated bidder, Triple Eight Construction
Company. The Project was behind schedule because of poor performance by the
contractor and adverse weather conditions. The Contractor had applied for
extension of time in September 2006 and was awarded 16 weeks, hence revising the
completion date to 8th January, 2007 at no extra cost to the client. He applied for a
second extension which was evaluated and awarded bringing the new completion
date to 30th April, 2007.
114
The Committee also heard that neither liquidated damages nor termination action
was effected at the time as the evaluation process was not complete. Liquidated
damages were to be effected in the subsequent interim certificates. However, the
contractor did not complete the works by the due date hence liquidated damages
were levied on account for Certificate No. 13. The BQ and budgetary items were to
run for twelve months of the project cycle. However, pursuant to the provisions of
Clause 55 of the Conditions of Contract, various items had been reviewed and all
budgetary items had been revised to accommodate the new prevailing
circumstances on the ground, whose contract implications would not have been
foreseen at the initial preparation of the estimates. Due process was applied to
ensure the client gets value for money by putting in place a comprehensive review
of the works to reflect the condition on the ground while ensuring the contract sum
was not exceeded. The road was substantially complete awaiting handover.
However, the PAC noted with concern the perennial problems of delay in
completion of projects occasioned by numerous applications for extension of time
by contractors, thereby denying beneficiaries use of services. The Committee
therefore recommended that the Accounting Officer ensures that the contractor
pays liquidated damages before he gets his final payment and officers who were
responsible for the mismanagement and poor supervision of this project be
disciplined.
Despite such warning, the quality of work carried out on many roads is of concern.
For example, a private Engineering Consultant confided to the study team that the
Katito-Kendu Bay road, which was recently rehabilitated (project completed in
2008), has almost failed. “Audit of contracted works on this road revealed that the
thickness of the overlay was reduced by almost 150mm. Mutilation of design
specifications is common in Kenya due to runaway corruption. And, the cost of road
projects in Kenya tends to be inflated without necessarily delivering good quality.
By comparison, in countries like Rwanda where corruption is controlled, roads are
built and maintained to high standards and users therefore get value for money.”
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Annex 9: Container Throughput 1980-2006
Year
No. of TEUs
Year
No. of TEUs
1980
30,353
1994
160,293
1981
42,666
1995
200,537
1982
57,645
1996
217,028
1983
83,849
1997
230,698
1984
92,460
1998
248,451
1985
103,362
1999
232,417
1986
119,855
2000
236,928
1987
115,367
2001
290,500
1988
115,445
2002
305,427
1989
129,666
2003
380,353
1990
136,406
2004
438,597
1991
135,541
2005
436,671
1992
135,324
2006
479,355
1993
144,137
Source: KPA
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Acknowledgements
This report is the joint work of Gerrishon Ikiara, Sylvester Kasuku and Kenneth Odero.
First, a word about the team: Ikiara is an economist and lectures at the University of
Nairobi. He is a leading analyst of reforms in Kenya. He has also served as the Permanent
Secretary in the Ministry of Transport. Kasuku is a spatial planner and a infrastructure
specialist. He has been involved in formulating infrastructure policy at the national level.
He also lectures at the University of Nairobi and is currently Infrastructure Advisor to
Prime Minister Raila Odinga. Odero is a regional scientist with a background in
infrastructure and institutional analysis. He served as the coordinator of the infrastructure
team.
We are grateful to Sahr Kpundeh, the Task Manager for this assignment, for bringing us
together in this project and for helping us stay focused right through. We would also like
to acknowledge the invaluable support of the Country (Infrastructure) Team led by
Josephat Sasia and his colleagues for their initial as well as subsequent insights and
critique that helped clarify the nature of our assignment. Equally, we would like to
recognize Prof. John W Harbeson for reading our drafts and providing very helpful
comments. Similar gratitude goes to Nyaguthii Chege, Betty Maina, and all the staff at
the World Bank Country Office in Nairobi and in Washington D.C who provided all
logistical support without complaining.
Mention must be made of our comrades – Paul Syagga, Albert Mwenda,Gem ArgwingsKodhek and Paul Mbatia – who were involved in similar projects working on the land
sector and maize and fertilizer sub-sectors. Their commitment and effort helped inspire
us and thankful. We were all better off working side by side.
Finally, we wish to thank all individuals and institutions, too numerous to call, who
volunteered information, material and invaluable knowledge on the two sub-sectors that
we reviewed, namely roads and ports. Our anonymous reviewers also deserve
recognition. To everyone we say thank you for your support and encouragement. We take
full responsibility for all errors of omission or commission.
a
KANU was in power when the road policy reforms were introduced under the Road Management
Initiative. Having been in power since independence, KANU grew complacent and had gotten used to
doing things its way. It is not surprising that it found the comprehensive roads sub-sector reforms with its
far reaching implications on ownership, responsibility, financing and management disconcerting at the very
least. Ideas such as “bringing roads into the market place, charging for their use on a fee-for-service basis
and managing them like any other business”, or “involving all stakeholders in policy making and in
management of roads” threatened to disrupt entrenched interests in the sector. This would explain the slow
progress in implementing reforms under Moi.
b
In order to strengthen the voice of the private sector in the KRB, the Board of Directors has more private
sector representatives than government officials. Thus the Board consists of the Chairman, one of the
private sector representatives, the Executive Director, five Permanent Secretaries from relevant Ministries
(Roads, Transport, Local Government, Office of the President and Finance), and seven members who are
nominated by private sector professional organizations, namely the National Chamber of Commerce and
Industry, the Institution of Engineers of Kenya, the Institute of Certified Public Accountants of Kenya, the
117
Institute of Surveyors of Kenya, the Kenya National Farmers Union, the Kenya Association of Tour
Operators and the Kenya Transport Association.
118