Kenya’s Chinese-built railway proves costly

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KENYAN lawmakers want the operating costs of a Chinese-built railway nearly cut in half and have called for renegotiating the Chinese loan to finance the line’s construction. Parliament’s Transport Committee says huge operating losses and debt to Chinese banks are straining taxpayers already hit by the economic fallout from the Covid-19 pandemic.

Members of the National Assembly’s Transport Committee unveiled a report Wednesday asking lawmakers to push for reduced costs on the railway line, known as the Standard Gauge Railway, or SGR.

The head of the committee, David Pkosing, says legislators also want the government to seek new terms for the $4.5bn in loans used to build the railway.

‘We also recommended that the entire loan framework should also be renegotiated, 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.  That loan should be renegotiated downwards or agreed on even extending the time upon which 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 tons of goods.

Kenya currently pays $1 million every month to China’s Africa Star Railway Operation Company to run the railway. Since 2017, Kenya failed to meet the monthly payment for 21 months.

Parliament wants the monthly cost to be brought to $600,000 and wants to engage China on how to pay the loan.

Tony Watima, an economist based in Kenya, says China may be reluctant to negotiate a deal with Kenya.

‘The latest update we have seen that China has renegotiated debt with Angola, but circumstances are different. Angola debt is commodity-backed – they export commodity, especially oil…. So, for Kenya, those debts were not commodity-backed, they were just given debt for investment projects, so the risks are high on the China side, and they will look [at] Kenya as a country, not like Angola, and renegotiating those terms will be a big problem, it means China has to take a lot of risks. That’s one of the things we have not seen China engage in any African country on that,’ Watima said.

Between 2010 and 2018, China lent over $150bn to African nations for projects mainly related to its ‘Belt and Road’ infrastructure initiatives.

In June, Kenya’s court of appeal ruled that the Kenya Railways Corporation, as the procuring entity of the Standard Gauge Railway, failed to meet the constitutional threshold of fairness and transparency.

Okiya Omtata, an activist who has pushed the government to make the details of its deal with China public since 2013, questions the legitimacy of the whole agreement.

‘I think what the parliament should be saying is that we are not going to pay China for [that] illegal contract, and that’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 people of Kenya cannot be burdened with what they are not benefiting from,’ Omtata said.

The railway carried more than 19,000 passengers and 421,000 tons of cargo between Nairobi and Mombasa in July, following a hiatus caused by the Covid-19 pandemic.
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