Rail tender probe will not stop: MPs

MPs will continue investigating the standard gauge railway tender even after a senior official said construction would start in July.

Mr Adan Keynan, the chairman of the Public Investments Committee, said his team would go ahead with its investigations despite President Kenyatta saying on Tuesday that the project was above board.

“There is no better place to determine how above board this project is,” Mr Keynan said yesterday. “When you say this project is above board, who else other than the elected representatives of the people of Kenya (can determine this)?”

But speaking separately, Mr Nduva Muli, the principal secretary for Transport and Infrastructure, said that China Bridges and Road Company—the project’s contractor—is already undertaking excavation works at Embakasi and Mtito Andei railway stations.

“The contractor is at 11 sites along the line. Embakasi and Mtito Andei are major operation zones,” said Mr Muli in an SMS response to questions from the Nation. “These sites are for mobilisation. Construction will take place once funds are approved and disbursed,” added the PS.

Phase 1 will cover Mombasa to Nairobi and phase two, Nairobi to Malaba and a branch line to Kisumu. Construction is expected to take five years beginning this July through June 2018, with the railway running through Mombasa, Kilifi, Kwale, Taita-Taveta, Makueni, Kajiado, Machakos and Nairobi counties.

Must and will go ahead

With the President asserting that construction of the standard gauge railway “must and will go ahead,” he created the possibility that the Executive could ignore PIC’s report even if it recommends that work be stopped.

Committee member Mithika Linturi seemed to send a coded message to the project’s proponents by quoting the Constitution’s provisions on the use of public financing— openness and accountability.

“Those people doing these things must do whatever it is within provisions of the Constitution and in the event that they do not, then they will be personally held responsible,” said Mr Linturi.
He added that Parliament had power to sanction contractors.

PIC has not taken a position on the matter but their questions and body language have suggested they are uncomfortable with the project.

Mr Keynan stated that in one week of their hearings, the cost of the project rose from Sh220 billion to Sh327 billion and then to Sh347 billion and Sh447 billion.

The official government position is that the cost of the project is Sh327 billion but there is Sh120 billion more to be paid as interest on the loan from the Exim Bank of China and costs such as insurance and the acquisition of land.

That is the cost for Mombasa to Nairobi.

Mr Keynan suggested that PIC had not been in any way rattled by the assertion from State House.

But he was contradicted by committee member Chris Wamalwa (Kiminini, Ford-Kenya), who said Mr Keynan had not stated what was agreed to by the rest, who had wanted the project stopped pending the investigations.

“The President should have been advised to have the project stopped until it is cleared by this committee. We have leading evidence here,” said Mr Wamalwa, who is also the Deputy Minority Whip.
Before the session began formally, Mr Wamalwa was saying that the National Assembly will impeach the President.

PIC is scheduled to meet the representatives of the China Road and Bridge Corporation as well as former Transport ministers Amos Kimunya and Chirau Mwakwere and the Permanent Secretaries they worked with- Nduva Muli and Dr Cyrus Njiru.

Separately, MPs Edwin Kipruto (Soy, URP), Emmanuel Wangwe (Navakholo, UDF) and Stephen Kirwa (Mosop, URP) expressed support for the project and asked the government to speedily approve pending documents for it to start.

“I come from a place where in 1905 our ancestors were very critical of the building of the railway, and that is Nandi. Of late, people have been thinking that the same story is being repeated, that we are anti-development of the railway. The community of the Nandi supports the railway,” said Mr Kirwa.

President Kenyatta presided over the groundbreaking of the 500km standard-gauge railway linking the port of Mombasa and Nairobi on November 28 last year. The total investment of this project includes civil works and acquisition of train engines and wagons at a cost of Sh327 billion.

The Kenya-China Government-to-Government bilateral financing structure for the project is supplemented by yearly budget allocations and proceeds from the Railway Development Levy .

Chinese Exim which is providing two loans for the project to the tune of $3.23 billion is currently going through its current internal credit approval process following which it will submit to the Treasury, the financing agreements . The Bank will fund the project under concessional and commercial loan .

The concessional loan of $1.6 billion to fund civil works and must be repaid within 13 years , and after 20 years of disbursement at the rate of two per cent a year.

Under the commercial loan, the Government will receive $1.63 billion to fund civil works and buy equipment. Interest will be on the market rate over and above the Libor benchmark market rate and repayment after five years of disbursement.

A bulk of the funds

A bulk of the funds of the project relate to the civil works. A separate contract is for the facilities, train engines and wagons .

The Government’s contribution of Sh49 billion from the RDF which is being collected as a charge on all imports at the rate of 1.5 per cent of Sh20 billion each year. RDF funds will also cater for acquisition of land, supervision and management fees , and insurance for the loan.

Interest on the loans from Chinese Exim, management and commitment fees plus insurance equals Sh97.8 billion and the costs that are being funded directly by the Government for supervision, land acquisition and development of the Embakasi Internal Container Depot of Sh22.7 billion, the total cost is Sh447.5 billion.

Conditions for accessing Chinese loans requires evidence of a signed commercial contract between the Government implementing agency and a designated chinese contractor be submitted to the Exim Bank before appraisal of the loan request.

Already, the Government has guaranteed a minimum of 35 per cent freight volumes to the Embakasi ICD top be transported on the standard gauge under the Take or Pay agreement between KRC and KPA.

The RDF levy will act as insurance in case revenues under the Take or Pay Agreement fall short of the amount required to service the loan. It will also be sued to finance the Government’s share of the cost of the railway.

Funding of the loan requires Treasury to set up a special / escrow account into which revenues from rail operations will be kept and from which loan repayments are made.