Kenya is seeking an additional Sh370 billion ($3.59 billion) loan from China to extend the standard gauge railway (SGR) from Naivasha to Kisumu, pushing the total cost of President Uhuru Kenyatta’s pet project to Sh847 billion.
The President today led the Kenyan delegation in making a formal request for additional funds from Exim Bank of China.
The money will finance the construction of the third phase of the SGR, a 270km-line between Naivasha and Kisumu.
“The funding request will undergo normal procedure of approval and Premier Li (Keqiang) has promised to give it the adequate consideration and urgency it deserves,” State House Spokesman Manoah Esipisu told reporters in Beijing, where the President has been attending a trade conference.
NATION IN DEBT
So far, Sh327 billion has been spent on the first phase of the railway between Mombasa and Nairobi and Sh150 billion on the Nairobi-Naivasha section.
With a national population of about 46 million, every Kenyan is set to owe China Sh18,413 in SGR debt once the deal is sealed.
The money does not include the interest charged.
The additional funding implies that each kilometre of the third phase of the SGR will cost Sh1.37 billion, almost twice the Sh693 million per kilometre rate for the Mombasa-Nairobi line.
The Nairobi-Naivasha line will cost more, at about Sh1.5 billion per kilometre.
The Chinese loan used on the SGR is expected to cross the Sh1 trillion mark by the time the Kisumu section is extended to Malaba, a distance of 107 kilometres, according to Kenya Railways.
By comparison, Uganda, which is also negotiating a Chinese loan for the Malaba-Kampala section, estimates its unit cost at Sh865.2 million per kilometre.
The Exim Bank of China has predicated the loan to Uganda on condition that it connects its line to the Kenyan SGR.
The port of Mombasa has handled an average of one million containers per year in the past three years, with most of its transit traffic heading to Uganda
Mr Esipisu appeared to play down the economic viability of the project, saying the completion of the Naivasha-Kisumu section would influence neighbours to take on the project.
The Transport ministry says the SGR train tariffs will adequately cover the cost of the loan, operating profit and public revenue without burdening the users.
The ministry says the trains will charge as low as half of the current bus fare for a third-class ticket.
In a series of agreements reached between President Kenyatta and Chinese Prime Minister Li, Kenya also allowed the Chinese to manage the security and operations of the completed version of the SGR line between Mombasa and Nairobi.
The meeting between Mr Kenyatta and Mr Li was on the sidelines of the Belt and Road Forum, a programme by the Chinese to expand influence through trade by building infrastructure in a network of more than 60 countries in Asia, Europe and Africa.
President Kenyatta, in another meeting, met with his Chinese counterpart Xi Jinping, who will be sending a “special envoy” for the launch of SGR.
On Monday, Kenya admitted it would be unable to handle the security operations of the SGR and asked China to stand in.
The two leaders agreed to elevate the railway to “a specialised security installation” to be managed by the Chinese “until our capacity to manage operations is enhanced”.
The idea, according to Mr Esipisu, is to ensure it runs smoothly and is without incidents.
Few details were provided concerning the exact role of China, but State House said the Chinese would handle scheduling systems, monitoring of the line, installation of security surveillance and training of local staff to take up these duties after several years.
The SGR has been President Kenyatta’s pet project since he came to power.
Though criticised by some economists for creating a huge debt, President Kenyatta argued before this trip that the railway line is the first step to open up Africa to integration and expand trade.
“I don’t think it is Kenya’s railway. It belongs to Africa,” he had argued last week.