SGR is largest such project for Kenya, riskiest for loan default

SGR is largest such project for Kenya, riskiest for loan default

President Uhuru Kenyatta (left) with President of the People’s Republic of China Xi Jinping at the opening session of the The Forum for Africa-China Cooperation, 2018 FOCAC Summit in Beijing, China. PHOTO | BAYO OMOBORIOWO We are at a point where we cannot afford to take more loans from China.

China is also encouraging its companies to bid for outright purchase of strategic ports.

The negotiated lumpsum contract price for the project is a whopping $4.9 billion.

By all indications, the highlight of President Uhuru Kenyatta’s visit to China this week will be the signing of the Naivasha-Malaba section of the standard gauge railway (SGR).

I thought is an opportune time to revisit this massive project by placing it in the context of one of the most popular subjects in contemporary development literature — namely, China’s debt diplomacy.

The Naivasha-Nairobi section is also significant in terms of the sheer size of the project and its likely impact on the country’s external indebtedness.

But first, some background and facts on the Naivasha-Malaba section. This project has been on the cards for several years. As a matter of fact, the related financial contract has been under negotiation since 2014.

A key aspect of this project is that the route it will follow was decided at a Cabinet meeting on September 15, 2015. The Cabinet decided that the line will run from Naivasha to Narok, then Bomet, Kisumu, Yala, Bumala and eventually Malaba.


In addition, a new terminal for the railway is to be built in Kisumu consisting of a new fully equipped, high-capacity port, a passenger station and a freight exchange centre. The facility in Kisumu will cost the country $140 million.

The Naivasha-Malaba section of the SGR will provide a reliable railway link to the entire region through Kampala in neighbouring Uganda and on to Kigali in Rwanda and Juba in South Sudan.The negotiated lumpsum contract price for the project is a whopping $4.9 billion.This is inclusive of civil works, 29 locomotives for the main line, four locomotives for passenger services and two others for shunting.Clearly, this is going to be the single-largest capital expenditure project in the history of Kenya. PUBLIC DEBT With public debt now at a level where we are now spending 29 per cent of revenues on debt servicing, this project is bound to push the country deeper into indebtedness.Today, as you look at trends in […]

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