Home Business Stalled projects in Uhuru, Kibaki eras cross Sh9trn

Stalled projects in Uhuru, Kibaki eras cross Sh9trn


Economy

Stalled projects in Uhuru, Kibaki eras cross Sh9trn


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A road under construction. FILE PHOTO | NMG

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Summary

  • The World Bank and IMF call for the cancellation of a majority of incomplete infrastructure jobs.
  • The value of stalled projects is equivalent to the size of Kenya’s entire economy, reflecting the magnitude of the incomplete and abandoned infrastructure upgrades.
  • Two decades of debt-funded infrastructure growth policy have seen officials rush to initiate hundreds of projects beyond what the country can afford, egged on by connected tenderpreneurs.

Hundreds of development projects worth Sh9 trillion started during the Mwai Kibaki and Uhuru Kenyatta regimes have stalled, disclosures in Parliament show.

The National Assembly Budget Committee disclosed the projects, including roads, office blocks, dams and irrigation projects were started in breach of guidelines that require secure funding, raising concerns about the country’s planning and public spending decisions.

The huge number of stalled projects, which comes with delayed payments to contractors, is a major contributor to the cash crunch in the private sector that has ultimately precipitated job losses and closure of businesses.

The projects are also accumulating pending bills, increasing completion costs and could expose Kenya to legal compensation claims by slighted contractors if cancelled.

The value of stalled projects is equivalent to the size of Kenya’s entire economy, reflecting the magnitude of the incomplete and abandoned infrastructure upgrades.

The World Bank and the International Monetary Fund (IMF) have called for the cancellation of a majority of incomplete infrastructure projects.

A significant number of the stalled projects were initiated during the Kibaki era that started in December 2002 and became white elephants during the transition to Devolution in 2013, when President Kenyatta romped into power.

County governments failed to allocate funds for projects started or were ongoing in the second term of President Kibaki.

“The total cost of stalled projects is Sh9 trillion. This is a worrying trend as it indicates there is no adherence to the project guidelines issued by the National Treasury,” the Budget committee chaired by Kanini Kega said in the supplementary budget 2 report to Parliament.

Two decades of debt-funded infrastructure growth policy have seen officials rush to initiate hundreds of projects beyond what the country can afford, egged on by connected tenderpreneurs seeking to secure multibillion-shilling deals with the State.

Kenya has borrowed a cumulative Sh6.8 trillion over the past 20 twenty years with 84 percent of the loans tapped under the Jubilee government since 2013, promising ambitious infrastructure projects.

The World Bank and the IMF have asked the government to cancel some of the stalled projects in the wake of a cash crunch in the wake of the Covid-19 pandemic.

Kenya Public Expenditure Review published by the World Bank showed Kenya had 4,000 ongoing projects, many of which are significantly delayed, incomplete or stalled.

The Bretton Woods institution says that 522 projects worth Sh1 trillion ($10 billion) that are completely dormant should be considered for cancellation to save on costs.

The WB said that 40 percent of the projects became white elephants during the transition to devolved system of governance.

About 53 projects are dormant because of diverse factors, including litigation, wayleave challenges, acquisition of land, and funding suspension by the donor.

Other reasons for stalling projects have been the imposition of budget ceilings by the Treasury keen on taming expenditure.

The period leading up to the 2017 General Election, in particular, saw a significant increase in project launches — particularly roads — by the Jubilee and county governments as they tried to win votes.

Many of these were not budgeted for, and the shift by the government after the elections in development spending focus to the Big Four Agenda-aligned projects has left many of them incomplete.

The pending bills issue has now become one of the major sticking points in the economy at both national and county levels.

Kenya promised the IMF it will complete stocktaking of projects by March this year, appoint a Public Investment Management (PIM) director by July and ensure new projects have sufficient funds to complete them.

“By July 2021, officials will ensure that all new projects are based on clearly defined criteria and predetermined costing methodologies in line with the PIM regulations and guidelines,” the IMF revealed in the agreements it has reached with the government for the recent Sh257 billion loan.

In the 2021 Budget Policy statement, Treasury secretary Ukur Yatani said the government was considering cancelling about a third of the stalled public projects which could yield 1.5 percent of the GDP in savings equivalent to Sh152.35 billion of Kenya’s Sh10.157 trillion economy.



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