Identifier
Created
Classification
Origin
06NAIROBI135
2006-01-12 06:31:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Nairobi
Cable title:  

KENYA'S ROADS -- TURNING THE CORNER ON A NATIONAL

Tags:  ECON EAID EINV ELTN EFIN KCOR PGOV KE 
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FM AMEMBASSY NAIROBI
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INFO RUEATRS/DEPT OF TREASURY WASHDC
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RUEHLO/AMEMBASSY LONDON 1827
RUEHFR/AMEMBASSY PARIS 1815
RUEHKM/AMEMBASSY KAMPALA 1059
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UNCLAS NAIROBI 000135 

SIPDIS

SENSITIVE

SIPDIS

DEPT FOR AF/E
USAID FOR AFR/EA
TREASURY FOR ANN ALIKONIS
LONDON AND PARIS FOR AFRICA WATCHERS

E.O. 12958: N/A
TAGS: ECON EAID EINV ELTN EFIN KCOR PGOV KE
SUBJECT: KENYA'S ROADS -- TURNING THE CORNER ON A NATIONAL
DISGRACE?

Ref: A. Nairobi 5102, B. Nairobi 2435

Sensitive-but-unclassified. Not for release outside USG
channels.

UNCLAS NAIROBI 000135

SIPDIS

SENSITIVE

SIPDIS

DEPT FOR AF/E
USAID FOR AFR/EA
TREASURY FOR ANN ALIKONIS
LONDON AND PARIS FOR AFRICA WATCHERS

E.O. 12958: N/A
TAGS: ECON EAID EINV ELTN EFIN KCOR PGOV KE
SUBJECT: KENYA'S ROADS -- TURNING THE CORNER ON A NATIONAL
DISGRACE?

Ref: A. Nairobi 5102, B. Nairobi 2435

Sensitive-but-unclassified. Not for release outside USG
channels.


1. (SBU) Summary: Kenya's road system is a national disgrace
and a major drag on the economies of both Kenya and the
broader region. Three years after coming to power, the
Kenyan government of Mwai Kibaki has little to show in terms
of meeting its promises to rebuild the country's long-
neglected infrastructure and improve governance in the graft-
ridden roads sector. This may finally change in 2006,
however, as several major road projects commence
construction. Of greatest importance are a series of
related contracts under World Bank auspices to rehabilitate
220 miles of the Northern Corridor road network, which
connects the port of Mombasa with all points north and west.
End summary

--------------
Kenya's Road System: A National Disgrace
--------------


2. (SBU) The appalling condition of Kenya's roads is widely
seen as a national disgrace, and for visitors and natives
alike, it is perhaps the most glaring and bone-jarring
reminder of the more general failure of the Government of
Kenya (GOK),past and present, to provide even basic public
goods and services to its citizens. Forty-seven percent of
Kenya's 39,000 mile "classified" (i.e. national-level) road
system is currently in a "failed condition" according to a
joint GOK/donor statement in April, 2005. How "failed" is
defined is unclear, but anecdotal evidence suggests a far
greater proportion of all roads are in bad shape. Bad roads
constitute perhaps the greatest physical barrier to economic
growth and development in Kenya.


3. (SBU) Most mind-boggling is the utter neglect of even
the most critical roads and highways - those that form the
very lifeblood of the national and regional economy. The
"Northern Corridor" is the road and rail network linking the

port of Mombasa to Nairobi, and from there to the major
cities of western Kenya and Uganda. As such, it is the
economic lynchpin for the entire region. As noted ref B,
the final 25 mile stretch of the Nairobi-Mombasa Highway
closest to Mombasa and its vital port is a bone-jarring
nightmare, "a safety disaster and a civil engineering
disgrace."


4. (SBU) Further inland and to the north of Nairobi, a
section of the same northern corridor connecting Naivasha
and Nakuru, two of the country's most popular tourist
destinations, is in tatters. Speeds are reduced to a crawl,
and heavy trucks seek to avoid potholes and crumbling pieces
of tar by driving on the dirt shoulders (also potholed),
thereby kicking up a continuous cloud of dust that can be
seen for miles around. Nearby, a lengthy section of the
secondary road connecting Naivasha town to the tourist sites
around Lake Naivasha is a gray moonscape of crater-sized
potholes. The area has also become the center of the
dynamic floriculture industry in Kenya, nQhe country's
3rd largest export earner. For this industry, transit times
to the airport, from where the flowers are flown directly to
markets for sale in European cities the next day, are
critical. Companies in the area have offered to rebuild the
road, but the GOK in its wisdom has spurned all such
generosity. The list of maddening examples of neglect and
inaction on fixing the roads goes on and on.

--------------
The Very High Cost of Bad Roads
--------------


5. (SBU) The horrific state of Kenya's roads is a near-
lethal drag on the country's economic development. First,
poor roads generate an implicit, dead-weight direct tax on
businesses in every sector of the economy. A survey
conducted in late 2004 found that delivery delays result in
product refusals and returns worth 2.5% of sales for Kenyan

companies. The same study showed a quarter of firms
surveyed in Kenya pay to build and/or repair local roads.
In Nairobi, which generates 52% of the country's GDP, a
transport survey conducted in 2004 found that
"inefficiencies" at 16 key intersections subtracted an
astonishing 1.8% from the country's GDP - a sum equal to 20%
of Kenya's total development expenditures. The country
loses an estimate $80 million annually, or around 0.7% of
GDP, due to costs resulting from traffic accidents.


6. (U) Bad roads are equally if not more devastating to
agriculture and the rural economy. A World Bank study found
that 20% of the price of agrochemicals, a key input for
agricultural production, consisted of transport costs, vs. a
worldwide average of 8-10%. Transport costs also account
for nearly 70% of total costs in floriculture, and 35% in
coffee. Even more ominous in terms of Kenya's increasingly
tenuous food security is the inability to deliver life-
saving food and water to the currently drought-stricken
Northeastern and Coast provinces because of the horrendous
condition of roads there. Virtually none of the road in
these less developed provinces have ever been tarmacked.


7. (SBU) The indirect, macro-costs of bad roads are
probably just as great. Bad roads and the high costs they
generate are a key factor (among many others) behind the
country's poor record in attracting more foreign investment,
in the infrastructure sector itself (where the GOK is not
yet seen as serious),but also in all other sectors, as
well. In short, bad roads make Kenya less competitive
globally, hobble private sector-led growth, and contribute a
great deal to the country's poor investment climate. And
bad roads don't just hurt Kenya. Because of the strategic
location of Mombasa port, the economic fate of Kenya's
neighbors, including Uganda, Rwanda, and southern Sudan, are
in many ways tied to the quality and efficiency of Kenya's
road network.

--------------
Roads Go Downhill in the 1990s
--------------


8. (SBU) Many Kenyans and long-term foreign residents claim
very little has been done to expand and maintain the
country's road network since independence in 1963. While
that may be true, it appears the most serious slide in road
quality began in the 1990s, a decade of runaway
mismanagement and corruption under the regime of former
President Daniel arap Moi. A series of negative political
and economic trends conspired to cause a steep drop in
public investment during the decade, exacerbated by sharply
lower levels of donor assistance. The reduction in public
investment was especially acute in infrastructure, including
roads. Added to this were heavy El Nino-related rains that
caused widespread damage to roads in the late 1990s.

--------------
The Straight Line Between Graft and Potholes
--------------


9. (SBU) Throughout Kenya's history, corruption in the
procurement process for road construction has also been a
major factor behind poor roads. "Cowboy contractors," in
cahoots with officials from the Ministry of Roads and Public
Works (MRPW),have long taken advantage of non-transparent
procurement procedures and non-existent institutional
oversight to fleece the taxpayer by rigging bids and/or
failing to build roads to the quality standards called for.
In 2005, the Ministry reportedly dismissed six engineers
when it was discovered they were also running construction
companies with contracts with their own ministry. As one EU
official put it: "They were signing the contracts on the
12th floor in the morning, and picking up their checks on
the 3rd floor on their way home." This kind of pervasive
graft, plus the lack of a "maintenance culture," has meant
that even roads built or rehabilitated relatively recently
are often already in deplorable shape.

--------------

New Government, New Roads? Not So Fast
--------------


10. (SBU) The election in 2002 of a coalition government
whose platform rested on the twin pillars of improved
governance and economic reform brought high hopes that
Kenya's road system would at long last be overhauled.
Indeed, the new GOK's Economic Recovery Strategy (ERS)
emphasizes the importance of infrastructure and the
rehabilitation and extension of the road system to foster
economic development and reduce poverty. Unfortunately,
tangible progress on improving roads has been frustratingly
slow.


11. (SBU) In fact, three years after the current government
came to power, there has been very little actual work done
on the country's key roads, and the private sector continues
to routinely put poor infrastructure at or near the top of
its list of barriers to lower costs, higher growth, and
increased investment. While the GOK claims it has reduced
the percentage of roads in poor condition from 45% to 25%
since it took office, it is unclear what this means in
practice. The GOK's own ERS annual progress report for 2003-
04 states that only 117 miles of paved roads have been
rehabilitated, while 50 and 815 miles of dirt roads have
been re-graveled and graded respectively.

--------------
Funding A Constraint, But So Is Governance
--------------


12. (SBU) Money is certainly one constraint. The neglect
of the 1990s left Kenya with a massive backlog of urgently
needed road rehabilitation projects that the GOK has
estimated will cost $1.3 billion. This is set against an
annual development budget for road rehabilitation that is a
around a tenth this amount, or $160 million. Already, the
GOK only covers a sixth of this budget itself, with the
balance being funded by donors, principally the World Bank,
the EU, and the African Development Bank.


13. (SBU) Since donors have returned to help, the delays
now being experienced in road rehabilitation cannot be
explained solely by the lack of financial resources,
however. Long-standing institutional and capacity
constraints and poor governance are also major factors. In
road maintenance, for example, the GOK has long collected a
Roads Maintenance Fuel Levy, equal to about 10% of the price
of gas at the pump. The fuel levy generates revenues of
around $125 million each year - a substantial sum - that is
divvied up by the Kenya Roads Board among the MRPW for
maintenance of the classified road network, and also among
scores of district and local authorities for roads under
their jurisdictions. In the end, little money appears to
trickle down in and take the form of actual road
maintenance. Money is also misspent because of an emphasis
on reconstructing roads that are already beyond repair. No
priority is given to routine, periodic maintenance of roads
still in decent shape. Thus, even the country's few good
roads eventually deteriorate to the point of requiring far
more costly capital investments for rehabilitation.

-------------- --------------
2006: Turning the Corner on the Road to Better Roads?
-------------- --------------


14. (SBU) In his Jamhuri Day address on December 12,
President Kibaki touted 35 major road construction projects
that are underway in Kenya. Again, there is little visible
evidence of such progress yet, but by many accounts 2006 may
be the year Kenya at last begins to actually lay down
substantial quantities of bitumen to rehabilitate its most
vital roads.


15. (SBU) At the top of the list are a series of planned
projects on various segments of the crucial Northern
Corridor road system. Under the World Bank-managed $275
million Northern Corridor Transport Improvement Project, co-
funded by the Bank, bilateral donors, and the GOK itself,

223 miles of the Northern Corridor road system will be
rehabilitated, including a key 25 mile chokepoint outside
Mombasa (see para 3 above). Also slated for major
rehabilitation are 55 miles of the same narrow, battered,
dangerous highway further north linking Sultan Hamud to
Machakos and Jomo Kenyatta International Airport on the
outskirts of Nairobi. The project also includes 62 miles of
the corridor north and west of Nairobi in the region around
Nakuru, Kericho, and Kisumu. According to a recent internal
World Bank aide-memoire, contracts for each of these
segments have been awarded and construction is expected to
commence early in 2006.


16. (U) The GOK is also resuscitating 20 year-old plans for
the rehabilitation of that section of the Northern Corridor
that runs through Nairobi proper. The plan involves
expanding the current road running through downtown Nairobi,
and more crucially, building a new bypass highway to Limuru.
This would decongest the city and speed travel times for
shippers and motorists destined for points further north
(e.g. Uganda) or south (e.g. Mombasa) of Nairobi.
Recognizing that traditional GOK and donor funding is not
adequate for such a large project, the GOK is planning to
concession the bypass road to the private sector. While
this will require amending existing legislation, the GOK has
already pre-qualified potential investors and has initiated
the hiring process for a transaction advisor for the
project.

--------------
Next Priority: Rural Roads
--------------


17. (U) The GOK is also looking at secondary roads that
feed into the Northern Corridor, including an African
Development Bank-assisted project to rehabilitate 84 miles
of the dirt track road running between Isiolo and Merille,
and to study the feasibility of extending this road further,
all the way to Moyale, on the Ethiopian border, which, in
theory is an extension of one of the continent's main land
arteries, connecting East Africa to Cairo. Also in rural
areas, the GOK with donor support is moving ahead with its
Roads 2000 maintenance strategy, which aims to kill two
birds (improving rural roads and reducing rural poverty)
with one stone by doing selective rehabilitation and spot
improvements on country roads using largely labor-based
methods.

--------------
Comment
--------------


18. (SBU) The good news is that at very long last, some
major road rehabilitation projects look set to begin in

2006. The initial steps in rehabilitating the Northern
Corridor, once finished in the next 12-24 months, have the
real potential to lower costs and make both the national and
regional economies more competitive, particularly in tandem
with the recent privatization of the Kenya-Uganda railway
system (ref A). Longer term, to make sure the roads are
maintained, that others are rehabilitated, and that new ones
are constructed, Kenya will need to restructure and reform
the institutional framework for the way it manages and
finances its road system. Already, reform plans are in
motion and donor support in place. The key to maintaining
the reform momentum in the roads sector, as in so many
others, will be the provision of focused leadership and
political will from the top of the government. In light of
the current unstable state of leadership politics in Kenya,
we should not expect any faster progress than we have seen
over the past three years under the current Kibaki
administration. In other words, there will be more
progress, but it will continue to be painfully slow in
coming.
Bellamy