Taxpayers were forced to shoulder a Sh7.3 billion compensation bill after the government cancelled a major highway contract awarded to French companies and later transferred the project to Chinese contractors, according to a new Auditor-General’s report.
The audit report for the Kenya National Highways Authority (KeNHA) for the financial year ending June 2025 shows that the money used to compensate the French consortium was drawn from the securitised Road Maintenance Levy Fund (RMLF), despite the programme being intended to settle verified pending bills owed to road contractors.
Auditors have now questioned the decision by the National Treasury and KeNHA to finance the compensation using money collected from motorists through the fuel levy, saying the payment did not meet the conditions for expenditure under the securitisation arrangement.
The Sh7.31 billion payout went to a consortium made up of Vinci Highways SAS, Meridian Infrastructure Africa Fund and Vinci Concessions SAS after the government terminated the Sh159.27 billion Nairobi-Nakuru-Mau Summit Highway contract.
The compensation was processed through an emergency allocation before Parliament later approved it in a supplementary budget.
“The amounts were paid through the securitisation of fuel levy, which was meant to reduce the pending bills and pave way for a return towork formula,” states the report.
“No explanation was given on why the amount was charged on the securitisation fund, while it did not constitute pending bills that were earmarked for discharge through the securitisation facility. In the circumstances, there was no value for money for the payment of Sh7.31 billion,” it adds.
The findings reveal the financial burden the State faced after cancelling the French-backed road project that had been negotiated during former President Uhuru Kenyatta’s administration.
The consortium had secured the contract on September 30, 2020 under a public-private partnership arrangement following discussions held during Kenyatta’s visit to Paris.
However, the deal was terminated by President William Ruto’s administration before construction works could begin, paving the way for Chinese firms to take over the project after the President’s visit to Beijing last year.
The securitisation programme had been introduced to help clear pending bills in the roads sector and support stalled infrastructure projects to resume operations.
KeNHA informed auditors that the pending bills reduced from Sh87.9 billion to Sh72.8 billion due to payments made through the securitised fuel levy arrangement.
Motorists contribute Sh25 to the Road Maintenance Levy Fund for every litre of petrol or diesel bought, with Sh12 from the levy reserved for securitisation.
After the collapse of the French agreement, the highway project was divided into two sections and awarded to a consortium of China Road and Bridge Corporation Kenya (CRBC) and the National Social Security Fund (NSSF), as well as Shandong HiSpeed Road & Bridge International Engineering Co. Ltd (SDRBI), at a combined cost of Sh192.6 billion.
The report says there were earlier discussions to have the Chinese contractors absorb the compensation costs and inherit studies and preparatory work already completed by the French firms.
That arrangement was later abandoned during President Ruto’s trip to China, leaving the compensation burden to Kenyan taxpayers.
The Treasury had previously defended the decision to settle the matter outside court, arguing that it wanted to avoid a lengthy and expensive dispute at the London Court of International Arbitration.
The government also feared that failure to settle the matter quickly could affect efforts to transfer the project to Chinese firms during the President’s Beijing engagements.
One of the concerns raised by the government in cancelling the original agreement was the high toll charges motorists would have paid under the French deal.
Drivers of small vehicles were expected to pay about $6 (Sh774.61) to use the 175-kilometre highway, while truck operators would have paid nearly $50 (Sh6,455).
The report also points to weaknesses in planning and due diligence, with auditors saying the compensation costs could have been avoided had proper feasibility studies been conducted before the contract was awarded.
The findings raise new questions over the management of one of Kenya’s largest road infrastructure projects.
The Nairobi-Nakuru-Mau Summit Highway is considered a major transport route linking Nairobi with western Kenya and neighbouring countries within the East African region.
Although KeNHA provided auditors with several documents, including compensation reports, termination agreements and payment vouchers, the authority did not submit the main contract agreement for review.
Auditors say the missing contract limited their ability to fully examine the obligations and terms agreed upon between the government and the French consortium.
Under the revised arrangement, the CRBC-NSSF consortium will construct the Rironi-Naivasha-Gilgil and Rironi-Mai Mahiu-Naivasha sections covering 139 kilometres, while SDRBI will handle the Gilgil-Nakuru-Mau Summit section covering 94 kilometres.
According to the report, SDRBI had initially lost the contract to the CRBC-NSSF consortium but was later brought back into the project to avoid delays linked to approval requirements by Chinese authorities.
Chinese regulations require overseas projects worth more than $1 billion, about Sh129 billion, involving State-owned firms to receive approval from Beijing, a process that can delay implementation for more than a year.
To avoid such delays, the government opted to split the road project into separate sections.
President Ruto is keen to have the highway completed before the 2027 General Election and views it as a key development project for residents in Rift Valley, Western Kenya and Nyanza regions, where traffic congestion remains a major problem, especially during festive periods.
The project was officially launched on November 28, 2025.
The highway forms part of the Northern Corridor and the Trans-African Highway network and serves as a major route connecting East and Central African countries to the Port of Mombasa while supporting movement of goods and heavy commercial traffic across the region