Counties to receive Sh10.5bn Road Levy share under new

Kenya's Senate Standing Committee on Roads, Transportation and Housing is evaluating a new road funding mechanism that would allocate Sh10.5 billion to county governments while preserving Sh59.5 billion for national trunk road maintenance. The proposal represents a critical recalibration of Kenya's devolved infrastructure spending, signaling both fiscal constraints and a prioritization of inter-county connectivity over regional road networks.

### Understanding the 15-85 Revenue Split

The proposed allocation mechanism divides Road Levy Fund receipts on a 15:85 basis—counties receive 15 percent, the national government 85 percent. Assuming total annual road levy collections of approximately Sh70 billion (pre-inflation), this formula yields the Sh10.5 billion county share while the national government retains roughly Sh59.5 billion for trunk road repairs, rehabilitation, and major highway projects. This split reflects Treasury priorities: maintaining the national road backbone—critical for trade corridors, ports access, and economic competitiveness—takes precedence over localized road networks.

### Why This Matters for Investors

**## What are the fiscal implications for counties?**

The Sh10.5 billion annual allocation is modest relative to county infrastructure deficits. With 47 counties competing for funds, the average share drops to Sh223 million per county—insufficient for meaningful road rehabilitation at scale. Counties like Nairobi, Mombasa, and Kisumu will lobby for disproportionate shares based on population and economic output, likely triggering political tensions. Underfunded counties may delay development projects, constraining logistics efficiency and supply chain resilience.

**## How does this affect Kenya's transport corridor competitiveness?**

Kenya's position as East Africa's logistics hub depends on trunk road quality. By ring-fencing 85 percent for national highways, the Treasury safeguards the Nairobi-Mombasa corridor, Nairobi-Kisumu-Uganda route, and the Standard Gauge Railway feeder roads. This prioritization keeps regional trade flowing, supporting importers and exporters. However, the underfunding of county networks creates bottlenecks: goods destined for secondary markets face deteriorating feeder roads, increasing delivery times and transport costs by 10-20 percent in rural zones.

### Implementation Timeline and Risk Factors

The proposal must pass Senate approval before moving to the Budget and Appropriations Committee. Given Kenya's recurring road funding disputes between levels of government, legislative gridlock is possible. Counties may challenge the 15:85 split as inequitable, citing the 2010 Constitution's devolution clause requiring "fair and equitable" resource allocation. If challenged in court, implementation could delay 6-12 months, leaving road maintenance budgets uncertain.

### Market Implications

**Infrastructure contractors** (firms like Bids, Trident, Consolidated Contractors) face mixed signals: stable trunk road work, but county project delays. **Logistics operators** benefit from maintained highways but suffer congestion on degraded feeder roads. **Real estate developers** in secondary towns face rising development costs as transport infrastructure lags.

The proposal ultimately reflects fiscal scarcity: Kenya cannot fund all roads equally, so it has chosen national connectivity over county coverage. This is economically rational but politically fragile.

---

##