Early this month, The Standard published an exclusive story revealing taxpayers are spending more than Sh30 million daily to subsidise operations at the Standard Gauge Railway (SGR).
“It costs a billion a month to run the SGR,” explained Deputy President William Ruto during an interview with a local television station. “The SGR is a huge operation…we have seven cargo trains every day on the SGR. By December, we will have 12 cargo trains every day on the SGR,” he said adding that by the end of this year, the SGR “will have broken even less than a year since we began operations”.
This claim is however not true. In fact, several studies and economists suggest that taxpayers will continue heavily subsidising the SGR for several more years.
A working paper titled Deal or No Deal Strictly Business for China in Kenya? published by the World Bank says Kenya’s benefits from the SGR are directly linked to the country’s ability to grow its stagnant manufacturing sector.
“China’s share of Kenya’s total imports has increased from 12 per cent of Kenya’s imports in 2012 to 23 per cent in 2014, just two years later,” reads the paper.
“Kenyan consumers benefit, thanks to a larger quantity of cheap Chinese products in the market,” states the study.
“From 2012 to 2014, consumers enjoyed a 10 per cent lower unit price on manufactured goods and a seven per cent lower unit price on chemicals.” This means local manufacturers are unable to compete for both with the influx of cheaper Chinese exports leading to an overall drop in production and exports.
Data from the Kenya National Bureau of Statistics indicates the contribution of the country’s manufacturing sector to GDP contracted from 10.7 per cent in 2013 down to 8.4 per cent last year.
The World Bank further warned that without a stable pipeline of cargo traffic, the SGR would only serve to build up Kenya’s debt to China. “Chinese financing of infrastructure has also enabled Chinese construction companies to assert their presence on the continent with evidence suggesting that Chinese companies have become highly competitive, crowding out African construction companies,” says the global lender.
This means that Kenya also loses out on the promise of talent and knowledge transfer; a factor made evident by recent reports of harassment of Kenyan employees under Chinese managers over the past two years.