SGR funding: Hope as Monica Juma heads to US for talks

After failing to secure Chinese funding for the third phase of the standard gauge railway (SGR), Nairobi returns to Washington next week in America’s renewed efforts to grow its financial and investment portfolio amid intense rivalry from China.

A Kenyan delegation which includes Foreign Affairs Cabinet Secretary Monica Juma will be in Washington, DC on May 7 and 8 for the Bilateral Strategic Dialogue. The US delegation will be led by Assistant Secretary for African Affairs Tibor Nagy.

The Donald Trump-led administration has been keen to promote American investment, and especially participation in infrastructure projects currently dominated by China and Japan.

The US is also on a speedy implementation of its Connect Africa initiative that is viewed by many analysts as a counter-strategy to China’s Belt and Road Initiative, which harbours massive geo-economic and political implications in Africa.

TRADE

Unveiled in 2013, the Belt and Road Initiative targets to establish an extensive network of land and sea links with Central Asia, Africa, Europe, South East Asia and the Middle East.

On Thursday, newly appointed US Ambassador Kyle McCarter said the meeting would largely focus on economic prosperity, trade and investments. Other areas to be discussed are defence, democracy, governance and regional issues.

Kenya already enjoys significant trade volumes, standing an average of Sh100 billion, with more than Sh40 billion worth of exports to the US under the African Growth and Opportunity (Agoa) Act in 2017.

“The meeting gives us a strong framework to establish commitments for free trade, transparent business environment and opening markets in the US and Kenya. It is not about the cheques and loans on the table, but furthering a relationship that will be in the interest of both Kenya and the US,” Mr McCarter said.

BIG FOUR AGENDA

Last week, Kenya had hoped to secure Sh368 billion from China — in loans and grants — to take the SGR line from Naivasha in Central Rift Valley to the lakeside town of Kisumu, and on to Malaba border crossing from where Uganda would take over its construction to Kampala and beyond.

Unlike the Chinese, the US is preferring to engage developing countries like Kenya on non-rigid loan terms. “Our deals focus on sustainable financing, not unmanageable debts,” the ambassador said.

During a historic visit to the US last year by President Uhuru Kenyatta, Kenya signed multibillion shilling partnership agreements with the US government and companies — the majority of them targeting growth pillars commonly known as the ‘Big Four’.

About 12 deals worth more than $100 million (Sh10 billion) were signed on the second day of the three-day official visit by 60 US business executives from the US Presidential Advisory Council on Doing Business in Africa. The Big Four is, however, threatened by corruption.

ACCOUNTABILITY

Mr Kenyatta, who witnessed the signing of the deals, pledged to create a transparent and accountable business operating environment for investors.

“We are going to continue taking a strong stand on this because the burden is across the country. We will do everything we can to encourage it or be part of it,” Ambassador McCarter said.

Kenya’s appetite for large infrastructure projects explains why a large part of the domestic debts accrued.

Next week’s visit will also discuss financing of the construction of a six-lane expressway to link Mombasa and Nairobi whose viability has been questioned in some quarters.

Treasury has been considering a Sh350 billion loan from the US to finance the construction of the expressway.

PUBLIC DEBT

The road is to be done by American construction giant Bechtel and comes almost two years after the SGR, on the same route, was completed at a cost of Sh327 billion, which is yet to be repaid.

A final financing deal may mean more debt for Kenya. “The Bechtel proposal is a clear example of the benefits of the US model of investment, focusing on sustainable financing, hiring Kenyans to lead and do the skilled work and providing international standards at lower costs.

“Doing business with the US can help end corruption at all levels. US companies are subject to the Foreign Corrupt Practices Act, which means Kenya has the US Department of Justice on its team to ensure graft-free business,” he said.