VZCZCXYZ0001
RR RUEHWEB

DE RUEHNR #0135/01 0120631
ZNR UUUUU ZZH
R 120631Z JAN 06
FM AMEMBASSY NAIROBI
TO RUEHC/SECSTATE WASHDC 8908
INFO RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHLO/AMEMBASSY LONDON 1827
RUEHFR/AMEMBASSY PARIS 1815
RUEHKM/AMEMBASSY KAMPALA 1059
RUEHDR/AMEMBASSY DAR ES SALAAM 4389

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