Artist’s impression of Nairobi to Mau Summit toll road once it is completed. It was poised to be one of the largest French infrastructure projects in Africa.
A High Court judge recently declared the Kenya Roads Board (KRB) unconstitutional. In the same judgment, the statutory provisions establishing the Kenya Rural Roads Authority (KeRRA) and the Kenya Urban Roads Authority (KURA) were also invalidated.
These declarations carry significant implications, particularly for the management of the Road Maintenance Levy and road infrastructure financing in general. Do these rulings imply that the KRB has now lost its mandate to oversee and monitor projects funded by the levy?
If KRB has been declared unconstitutional, what does this mean for the viability and long-term feasibility of the recently launched fuel levy securitisation programme involving a syndicate of international banks? Clearly, the judge did not take into account the risk of credit downgrades, nor did he consider that the sweeping declarations he was making from the comfort of a wood-panelled courtroom could jeopardise and even invalidate these complex securitisation arrangements.
I have made this point before in this column, and I dare repeat it: courts must consider the macroeconomic consequences of the far-reaching decisions they make. In one fell swoop, the courts have declared all three critical pillars of road maintenance financing in Kenya—KRB, KURA, and KeRRA—unconstitutional. The entire framework for coordinating and planning road financing across the country is now in jeopardy.
Increasingly, in the name of constitutionality and legality, our courts are making decisions that carry significant macroeconomic implications—especially in matters involving taxation, public finance management, procurement, privatisation and infrastructure finance. While we all agree that constitutionality must remain paramount, a troubling trend is emerging: judges issuing sweeping rulings without asking the most basic questions about fiscal and monetary consequences. In the process, courts are undermining the regulatory frameworks that underpin public finance management.
Economic management
It begs the question: how do we address this trend where judicial activism is causing disruptions and unintended consequences in economic management? From what I’ve read, judicial training in economics and public finance is recommended. In some jurisdictions, such as South Africa and India, economic impact analyses are occasionally appended to court rulings. In the United States, federal judges are offered training in economic reasoning. In high-stakes public finance litigation, amicus briefings by economists and investment bankers are increasingly becoming the norm.
So how did we reach a point where the entire road maintenance financing framework has been declared unconstitutional? The argument goes that after passing the 2010 Constitution, we ought to have dismantled institutions like KeRRA, and that the current framework for managing and financing roads does not align with the constitutional provisions and spirit of devolution.
This raises critical questions. Should we now pivot to a regime where county governments begin receiving a share of the money collected through the fuel levy? And if so, does this mean that counties should also be entitled to a share of all other special-purpose funds and levies not appropriated by Parliament?
We are headed for a period of major disruption and confusion in road maintenance financing. Article 206 of the Constitution requires that all monies raised or received by the national government be deposited into the Consolidated Fund, except for funds established by an Act of Parliament for a specific purpose. There are numerous such levies and funds in place today, including the Railway Development Levy Fund, Tourism Promotion Fund, Constituency Development Fund and the Universal Service Fund.
Are we now being told that we must overhaul this entire framework to allow county governments a share of each of these funds? Yet successive reports from the Auditor-General on county governments paint a grim picture—deteriorating standards in public financial management, widespread disregard for procurement laws and regulations, and dysfunctional internal audit systems.
Road levy
The structures and institutions envisioned in the Constitution’s public finance chapter have not been given the chance to take root. For all its imperfections, the current framework has served the country reasonably well. Why, then, should we fragment the roads levy across 47 counties without assessing their capacity to plan, procure and implement road projects? That path leads only to cash flow pile-ups, idle resources and underutilised funds.
Fuel levies are a very efficient way of financing the maintenance of roads because they are a predictable source of revenues. The fact that levies are dedicated to a specific purpose and have predictable flows is how the government recently managed to securitise part of the fuel levy to access Sh175 billion from the syndicate of banks.
In retrospect, we should have insulated the fuel level from the vagaries of general budget politics and the perennial haggling for resources between Nairobi-based oligarchs and the greedy elites running county governments from the very outset.
If it ain’t broke, don’t fix it.
