The Government has put into law guidelines that will govern the operations of the newly unveiled plan to tarmac 10,000 kilometres of roads across the country.
Treasury gazetted regulations that will operationalize a special fund that will finance the tarmacking of the roads in the next five years.
The guidelines on the establishment of the Public Finance Management (Roads Annuity Fund) 2015, details the objectives and purposes, source of funds, management of the fund, payments of the fund as well as winding up of the fund.
Deputy President William Ruto, who chaired a meeting of financial institutions that will fund the project, at the Kenyatta International Convention Centre, said the regulations will ensure the Government’s new model for road construction through public-private partnership works seamlessly.
“The regulations will make sure the road annuity programme operates smoothly by guaranteeing timely payment of contractors and services,” he said.
He spoke as two banks - Kenya Commercial Bank and Cooperative Bank-agreed to allocate Sh40 billion and Sh8 billion respectively for the project.
KCB Chief Executive Officer Joshua Oigara said his bank has agreed to finance contractors under the programme.
Mr Oigara pledged support from the banking sector to ensure the programme succeeds.
“We as the banking sector are committed to support this initiative to expand the road network in the country,” he said.
He praised the Government for the new structure that will allow the private sector play a key role in road construction.
The Gazette Notice follows the approval by the Cabinet on Tuesday for the establishment of the fund that will finance the paving of the roads. Already Sh500 million has been paid to the fund to kick-start the project.
The proposed Road Annuity Programme creates a framework to facilitate a partnership between the Government and the Private Sector under a Public Private Partnership (PPP) arrangement.
The Roads Annuity Fund will ensure a seamless financing of the roads sector from the design, development to maintenance.
The objectives and purposes of the fund will be to provide finances to meet the National Government’s annuity payment obligations for the development and maintenance of roads.
Under the programme road contractors approach financial institutions for financing while the government pays the banks after the roads have been constructed. The contractors will be responsible for the maintenance of the roads for 12 years after which the Government takes up the responsibility.
Money for the newly established fund shall include that appropriated by Parliament for the purpose and allocated from fuel taxes as assigned by an Act of Parliament.
Other sources of the funds include income from investments of any balances of the fund, grants, donations or other bequests made to the fund and monies paid to the fund from any other source as may from time to time be approved by Cabinet Secretary.
The Fund shall be administered by the Ministry of Infrastructure and will have an oversight committee with members from the National Treasury, the Office of the Attorney General and representatives of engineers and accounting professionals.
An independent engineer will only pay contractors upon a thorough scrutiny and approval of the project.
Infrastructure Principal Secretary John Mosonik said phase one of the programme will be held on March 20 where tarmacking 650 kilometres will be unveiled.
“In the course of the month, a programme to tarmac 650km out of the targeted 2000km will be rolled out in phase one,” he said.
Treasury Principal Secretary Kamau Thugge said Sh500 million shillings will be released towards the fund.
He said disbursement will be on a monthly basis.