How SGR contract still haunts and weighs down our economy

Nairobi Expressway SGR toll station in Nairobi on June 28, 2022. [Boniface Okendo, Standard]

Next weekend the world will celebrate Anti-Corruption Day and International Human Rights Day, special occasions to reflect on gains and losses and to honour those who continue to inspire us by their courage and integrity.

One man deserving recognition but unlikely to be honoured is someone you may never have heard of. Bernard Muchere is a retired fraud and risk management consultant, who now devotes his energy and experience to unearth the scandal of the SGR that continues to haunt and impoverish the nation.

The quiet and unassuming gentleman has his own version of ‘mambo matatu’ to explain the SGR saga. He insists it was never a public contract, never a public project and as such should never be a debt to be repaid by Kenyan taxpayers. On the contrary, the project was not designed or intended to ever benefit Kenyans but to amass wealth for less than ten individuals. It meets none of the criteria required to classify it as a public contract and project, so why should the public be burdened to pay for the cost and debt!

Final details of the contract and loans have never been made public on grounds that it was a government-to-government contract. Yet, Muchere and others have revealed that not only was the project grossly overpriced but that billions more have been added to the cost and subsequent debt.

Let me try and explain. The original agreed contract was for Sh407 billion. The government gave a grant of Sh645 billion to Kenya Railways Corporation to fund the project between the years 2015 and 2019 when the project was completed.

That money came from the Consolidated Fund, which in case you have forgotten accumulates from your taxes. That figure is Sh238 billion higher than the contractual agreement.  

A further Sh50 billion Escrow grant made the final figure to be Sh695 billion. Kenya Railway Corporation claims it took a loan of $5 billion from Exim Bank in China to fund the project. However, that loan, equivalent to Sh539 billion, never left China and as such was never deposited in the Consolidated Fund. Although it was a fictitious loan and never arrived in the country, it added to the cost of the Mombasa to Naivasha line and brought the final bill to Sh1.184 trillion.

With additional interest and penalties for failure to meet repayments, that figure will continue to climb. Muchere has petitioned Parliament to debate the contract, costing and debt but so far, his petition of six months has not been attended to.

According to Jimmy Wanjigi, businessman and politician, in 2008 the government of the day did a feasibility study with Chinese banks on a proposal to build an electric train from Mombasa to Malaba. The estimated cost then was Sh55 billion. Now the SGR that runs just to Naivasha on dirty diesel engines costs twenty times more than that.

Incidentally, the thousands who travel on SGR each day are not informed about this daylight robbery nor do they seem to care. They enjoy the ride without a thought for the debt that has accumulated and they don’t get the connection between the graft of SGR, the punitive taxation and the stifling cost of living.

Yet, in July according to the Africa Defence Forum, Kenya’s semi-annual SGR debt payment to China reached $356 million, making up nearly 80 per cent of that month’s $451 million debt payout. Kenya’s ballooning debt to China now sits at $6 billion with some of the loans due over the next 12 months according to the same source.

In 2022, SGR made a combined profit of $84 million, which may look impressive but cannot even meet the debt repayments. Yet, the government wants to expand the project right up to Malaba, which they hope will somehow increase the capacity to meet the repayments.

The SGR will remain a constant, visible reminder of the endemic graft that characterised the Uhuru/Ruto government of 2013-22. Meanwhile, Okoa Mombasa and Bernard Muchere will continue to ask questions as to what the nation’s conscience has to say on the matter.