Kenya-China to start negotiations on financing final phase of SGR to Kisumu

Madaraka Express Inter-County Service train leave after its flagged off by Transport CS James Macharia at SGR Nairobi Terminus on Wednesday [Photo: Boniface Okendo,Standard]

Kenya and China are set to start negotiations on the financing of the last phase of the Standard Gauge Railway (Project) that will see the new railway extended to Kisumu.

During a Chinese infrastructure summit in China in May this year, which was attended by President Uhuru Kenyatta, China committed to finance the third phase of the SGR project that has been estimated to cost Sh350 billion. The Naivasha-Kisumu leg is expected to increase cost of the whole SGR project to over Sh800 billion.

Transport Cabinet Secretary James Macharia told Weekend Business that Kenyan and Chinese officials will start talks on the modalities of financing the last leg of the SGR project. The financing agreement that will be arrived at will include details such as the terms of the loan to be advanced to Kenya and the proportion of the project cost that the Kenyan Government will be expected to foot.

The Export-Import (EXIM) Bank of China, which has financed the first two phases through concessional and commercial loans to Government, is also expected to finance the final phase.

“We have just signed a commercial agreement with the contractor and expect to start negotiations with the prospective financier,” Macharia said.

China Road and Bridge Corporation (CRBC), which is the contractor for the Mombasa-Nairobi-Naivasha phases – is also the contractor for the last phase of the railway line.

At Sh350 billion, the cost of Phase 2B will push up the cost of the entire project from Mombasa to Kisumu to Sh827 billion. The Mombasa-Nairobi phase cost Sh327 billion while the extension to Naivasha will cost Sh150 billion. In the first two phases, China has financed 90 per cent of the project.

Multilateral debt

If China finances 90 per cent of the Naivasha-Kisumu, as has been the case with the previous phases, it will mean that when the whole Mombasa-Nairobi-Kisumu railway line is complete, Kenya will have gobbled up about Sh750 billion of Chinese debt.

This is a substantial amount and will make significant proportion of Kenya’s public debt that stood at Sh4.4 trillion as of June this year. China is the largest multilateral lender to Kenya, accounting for about half of Kenya multilateral debt.

Phase 2B of the SGR project will start at the planned Naivasha Industrial Park where Phase 2A terminates and pass through Narok, Bomet, Kericho counties and terminate in Kisumu, where a Sh14.3 billion inland port will be put up. The railway line will have 25 stations including a county station in Kisumu, six intermediate stations and 18 crossing stations.

Macharia, who spoke this week when Kenya Railways launched the Inter County SGR commuter service, said the Government and CRBC have agreed to speed up the Nairobi-Naivasha leg of the railway such that construction will take three years (36 months) as opposed to four and a half years (54 months) that it was initially expected to take.

The contractor, CRBC, is currently nearing completion of a six kilometre tunnel at Em Bulbul in Ngong, which has been described as a regional first and the second one of such in terms of length, with the other being in South Africa.