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Kenya-Uganda SGR line closer as Treasury allocates Sh16 billion
Workers lay tracks for the Standard Gauge Railway Phase 2A at Suswa on August 1, 2018. Uganda has signed a new contract for the construction of the Malaba-Kampala phase.
The Treasury has proposed an allocation of Sh16.5 billion to fund the extension of the standard gauge railway (SGR) from Naivasha to Kisumu and Malaba, bringing closer to fruition the dream of having a seamless rail transport from the Mombasa port to the border town.
Budget documents tabled in Parliament show that this is the first time that the Exchequer is allocating money for the construction of a 369-kilometre rail line, which is key to boosting the economic viability of the SGR.
The allocation, which will be complemented by funding from China, has finally set the stage for the plan to extend the SGR to neighbouring Uganda, ending years of uncertainty on whether the modern rail line would connect the two countries.
This will turn ease cargo movement between the two countries and onwards to South Sudan, the Democratic Republic of Congo and Rwanda.
Extension of the line has been plagued by uncertainties as Kenya struggled to get funds for the project as concerns mounted that failure to extend the line to the border town of Malaba has greatly hurt the economic viability of the trains given that Uganda heavily relies on the Mombasa port to import goods.
“The last 40 percent of the SGR line will be built by a consortium of Chinese companies. They will charge for the use of the railway line,” Treasury Cabinet Secretary John Mbadi recently told lawmakers.
The time it will take to complete the extension of the SGR remains undisclosed.
Kenya agreed on a deal with China where each of the two governments will provide 30 percent of the money needed for the project, with the remaining 40 percent being provided by a joint venture of Chinese and Kenyan banks.
The agreement on the funding for the Naivasha-Kisumu-Malaba SGR line was finalised during President William Ruto’s four-day visit to Beijing last month.
Extension of the SGR from Naivasha to the lakeside city of Kisumu is projected to cost Sh380 billion, while the last leg from Kisumu to Malaba bordering Uganda will gobble a further Sh122.9 billion.
China’s decision to reject Kenya’s request for a loan to fully cover the extension has saved taxpayers from a further increase in the debt that Kenya owes China. Loan repayments to China currently account for the biggest portion of the billions of shillings that Kenya is paying in foreign debt.
“We are trying to persuade our colleagues in China to consider the possibility of a different financial model that is outside the loan arrangement. That conversation has progressed a great deal,” Korir Sing’oei, the Principal Secretary for Foreign Affairs, recently said during the just concluded visit by Dr Ruto.
Construction of the SGR between Mombasa and Nairobi cost Sh320 billion. It started operations in 2017 and was later extended to Naivasha at Sh150 billion.
There have been concerns that the failure to link the SGR to Kampala has greatly hurt the economic viability of the modern trains, given that Uganda is a major user of the port of Mombasa for the importation of goods.
In December last year, Kenya Railways Corporation disclosed that it had tapped Apec Consortium Limited has to undertake the begun the Resettlement Action Plan study for Phase 2B of the SGR (Naivasha-Kisumu-Malava).
