Regional ministers unveil funding plan for Sh1.16trn railway

PHOTO | DENISH OCHEING Transport Cabinet Secretary Michael Kamau (left) and his Ugandan counterpart, Mr John Byabagambi, during a press conference on July 24, 2013 at the end of a regional meeting on transport.

What you need to know:

  • Kenya has already established a railway development fund that draws money from a 1.5 per cent import levy introduced in this year’s Budget
  • The first phase of the project, which link Nairobi and Mombasa, will start in November and is expected to be completed by November 2017. The last link between Bihanga and Kigali will be completed in January 2018
  • The existing concession agreement with Rift Valley Railways will last until 2031 and stipulates that neither Kenya nor Uganda may introduce changes that can jeopardise profitability under the agreement

A new railway line to connect Kenya, Uganda and Rwanda will cost Sh1.16 trillion ($13.5 billion) and will be completed over the next five years.

At a joint press conference in Nairobi on Wednesday, ministers from the three countries outlined a timeline and funding plan for the project which is expected to ease cargo transport in the region.

The three countries will source the funds for the project jointly.

Kenya has already established a railway development fund that draws money from a 1.5 per cent import levy introduced in this year’s Budget. Rwanda and Uganda yesterday adopted a report in which they pledged to establish similar tax measures in their countries.

Jointly mobilise

“Member states have agreed to jointly mobilise funding for both the infrastructure and locomotives to increase viability and speed up the implementation of the project,” said Uganda’s minister for Works and Transport John Byabagambi.

To supplement the money raised through the 1.5 per cent railway development levy, Kenya said it was undertaking bilateral financing negotiations with China. Rwanda and Uganda have also indicated that they will pursue alternative funding to bridge financing gaps in constructing the railway.

Technocrats drawn from transport and infrastructure ministries in the three countries met in Nairobi on Wednesday to agree on a timetable and to iron out the finer details of the plan which was first proposed by Heads of State from the three countries last month.

The first phase of the project, which link Nairobi and Mombasa, will start in November and is expected to be completed by November 2017. The last link between Bihanga and Kigali will be completed in January 2018.

The railway line will have the capacity to transport cargo at speeds of up to 80 kilometres per hour and will fill a need that has been created by inadequate infrastructure in the region.

Currently, Rift Valley Railways operates the main line in East Africa, transporting about 900,000 tonnes of cargo annually.

However, cargo traffic is expected to grow dramatically in the coming decades with estimates from the ministry of transport indicating that 32 million tonnes of cargo could come through Kenya annually by 2017. Moving the cargo over the road network could be detrimental to infrastructure, raising the need for a more efficient means of transport.

The existing concession agreement with Rift Valley Railways will last until 2031 and stipulates that neither Kenya nor Uganda may introduce changes that can jeopardise profitability under the agreement.

However, the deal has come increasingly under fire. RVR’s performance has not been impressive. Last year, 1.135 million tonnes of cargo were transported over rail, a marginal increase from 1.060 million tonnes in 2009.