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Delays expected on SGR after Sh44b cut in funding

By Moses Michira | Updated Thu, December 8th 2016 at 07:48 GMT +3

The Jubilee administration’s biggest project, the Standard Gauge Railway (SGR), will not be completed on time. This became apparent after funding was slashed by Sh43.5 billion in the current budget.

Initial plans were to construct 270 kilometres of the project by June next year, but the new projections reduce the distance by a quarter.

As such, only 200 kilometres of the project will be laid in the current financial year, meaning the revised completion dates would be beyond January 2018 – flying in the face of prior assurances that the project would be completed ahead of schedule.

President Uhuru Kenyatta had projected to ride on the inaugural passenger train on July 1, 2017 but the revised funding means the project might actually be delayed.

Details contained in the supplementary budget published by the National Treasury and secretly tabled in Parliament last week reveal the massive reduction in funding for phase 1 of the railway line expected to link Mombasa and Nairobi.

Transport Permanent Secretary Irungu Nyakera has already hinted at the delays in a session with MPs on Tuesday but did not link it with the reduced spending.

He let slip that commercial operation of the SGR will not happen until after January 2018, only telling the members of the National Assembly Transport Committee that the delay will be used to set pricing – before commercial operations begin.

“We will be setting tariffs in the six-month period,” Nyakera told the MPs on Tuesday, but steered clear of the more credible explanation of reduced funding.

exchequer accounts

State-owned China Exim Bank was to provide 90 per cent of the total financing estimated at about Sh400 billion, while the remaining 10 per cent would come from the Government.

China is paying for all the civil works, laying of the line and acquisition of the locomotives, while the Kenyan government would pay for the acquisition and compensation for the land.

Even though it is the Chinese who are settling the project bill directly without the funds entering the exchequer accounts, the Government accounting captures foreign-funded projects as if the money was actually received and paid out.

Reduction in the anticipated works means it is the funding from China that has not been forthcoming as anticipated, since there are hardly any issues outstanding on the acquisition of land.

Kenya Railways Corporation (KRC) has previously said it has procured the rolling stock - locomotives and wagons, which are already in production in China with deliveries expected early next year.

Whether the trains arrive on time or not now seems inconsequential following the budget cuts, which specifically target the construction and laying of the track. National Treasury Cabinet Secretary Henry Rotich attributed the reduction in spending plans by a total of Sh181 billion to the slow disbursement of funds from development partners.

He, however, did specify what the implications of the delayed disbursement of funds would be on the completion of projects, primarily the railway line and power generation plants.

SGR is the biggest casualty of the changes in the Government spending plans midway through the financial year which ends on June 30 next year.

The 472 kilometre-line is funded almost entirely by China – the World second largest economy after the United States, whose economy has been hit by external shocks. The slowdown has hit investments both at home and abroad.



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