Earlier this month, President Uhuru Kenyatta failed to secure additional loans from China to complete the Naivasha-Kisumu Phase 2 of the Standard Gauge Railway (SGR) in what was seen as a slap in the face for the government’s flagship project.
In a bid to save face, the President’s Chief of Staff Nzioka Waita sought to dismiss arguments from critics that the SGR was a drain on the country’s resources, terming it “economically naïve and in a large sense anti-development.”
“The SGR today does not require any input from the State to run its operations,” he said during an Interview on KTN.
“It is paying for itself and providing surplus resources that we can use to service our debt and form collateral for the next phase of development.”
While Mr Waita gave no figures to support his claim, data from the Government suggests his claims are untrue.
According to the Kenya Economic Survey 2019 published last month by the Kenya National Bureau of Statistics (KNBS), the cargo and passenger services on SGR netted a combined Sh11.5 billion in revenues in the first year of operation.
This is against the Sh12 billion that the railway reportedly needs for operations and maintenance annually as revealed by the National Treasury and confirmed by deputy president William Ruto in a previous interview.
The Sh12 billion operations and maintenance fee, or Sh1 billion per month, which is paid to the operator China Road and Brick Corporation, exclude variable costs incurred over the year. This is no surprise to economists given a 2013 World Bank report warned that the SGR might not be economically viable at the initial Sh327 billion price tag for the Mombasa-Nairobi Phase 1.
“There is no economic or financial case for a standard gauge in the East African Community area at this time,” said the report in part.
“A refurbished metre gauge network would appear to be the most appropriate option in economic and financial terms and could easily accommodate forecast traffic up to 2030 with lower investment requirements.”
The World Bank noted that investment in standard gauge appears only to be justified if the new infrastructure could attract additional freight to the tune of 20–55 million tonnes per year. “Based on the traffic forecasts undertake for EAC railway masterplan… these volumes would appear to be unattainable in the medium to longer term.”
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