Kenya’s Chinese-built railway turns out to be expensive
Kenyan lawmakers want the operating costs of a Chinese-built railway almost halved and have called for renegotiating the Chinese loan to finance the construction of the line. The Parliament’s Transport Committee says huge operating losses and debt to Chinese banks are straining taxpayers already affected by the economic fallout from the COVID-19 pandemic.
Members of the National Assembly’s transport committee released a report on Wednesday asking lawmakers to push for cost cuts on the railway line, known as the Standard Gauge Railway, or SGR.
Committee leader David Pkosing said lawmakers also wanted the government to seek new terms for the $ 4.5 billion in loans used to build the railroad.
“We also recommended that the entire loan framework be renegotiated as well, the original loan framework now with COVID-19 and of course Kenya and the world will never be the same again with this effect of COVID. -19. This loan should be renegotiated downwards or agreed to even extend the length of time we should have paid the loan, ”Pkosing said.
The railway carries goods from the port of Mombasa to Nairobi. In 2019, it transported 9 million tonnes of goods.
Kenya currently pays $ 1 million per month to China’s China Star Railway Operation Company to operate the railway. Since 2017, Kenya has not honored the monthly payment for 21 months.
Parliament wants the monthly cost to be raised to $ 600,000 and wants to engage China on how to repay the loan.
Tony Watima, a Kenya-based economist, says China may be reluctant to negotiate a deal with Kenya.
“The latest update showed us that China has renegotiated its debt with Angola, but the circumstances are different. Angola’s debt is commodity-backed – they export commodities, especially oil … So for Kenya these debts weren’t backed by commodities, they just received debt for investment projects, so the risks are high on the side of China, and they will watch [at] Kenya as a country, not like Angola, and renegotiating these terms will be a big deal, it means China has to take a lot of risks. This is one of the things we haven’t seen China engage in in any African country on this, ”Watima said.
Between 2010 and 2018, China lent more than $ 150 billion to African countries for projects mainly related to its Belt and Road infrastructure initiatives.
In June, the Kenya Court of Appeal ruled that the Kenya Railways Corporation, as the contracting entity of the Standard Gauge Railway, had failed to meet the constitutional threshold of fairness and transparency.
Okiya Omtata, an activist who has pushed the government to release details of its deal with China since 2013, questions the legitimacy of the entire deal.
“I think what parliament should say is that we are not going to pay China for [that] illegal contract, and it’s the end of the day. They have crooks in Kenya and crooks in China who are in power and negotiated this thing, and the Kenyan people cannot be blamed for what they do not profit, ”Omtata said.
The railway carried more than 19,000 passengers and 421,000 tonnes of freight between Nairobi and Mombasa in July, following a disruption caused by the COVID-19 pandemic.