Following recent meetings between Treasury Cabinet Secretary John Mbadi and Chinese Ambassador to Kenya Guo Haiyan—along with Mbadi’s subsequent trip to China—it has emerged that the government will proceed with the stalled extension of the Standard Gauge Railway (SGR), with funding secured from the Asian country.
According to official sources, following the engagements that began in January, a consortium of Chinese companies will provide 40 per cent of the funding for the 475km (295-mile) railway line from Naivasha to the border town of Malaba.
China will provide funding to the tune of Ksh706.9 billion (US$5.3 billion) to finance the project, with the government expected to seek the rest of the funding through other means.
Meanwhile, the government will provide 30 per cent funding for the project from the railways development levy or securitisation of the levy, according to Mbadi.
Further, it has emerged that the Chinese will adopt a model similar to the one used on the Expressway—operating the railway and charging toll fees for several years to recover their investment, according to the Treasury.
For the Nairobi Expressway, China's Belt and Road Initiative (CRBC) will operate it for 30 years to recover its investment before transferring ownership to the Kenyan government.
However, the government is yet to reach an agreement with the unnamed consortium on the duration they will operate the railway.
In January, the Chinese ambassador to Kenya, Haiyan, revealed that China would support Kenya's development agenda, particularly the SGR extension.
Kenya's financial relations with China have, in the past few years, experienced a shift from China's Belt and Road Initiative towards public-private partnerships (PPP). This was after the Asian country reduced bilateral lending for overseas projects as Chinese lenders took a more cautious approach to infrastructure projects.
The Export-Import Bank of China (China Exim Bank) funded the 590km (367-mile) first phase, but the construction ended abruptly in Naivasha after it pulled the plug on financing the extension to Malaba after calling for a new commercial viability study in 2019.
Under the new funding strategy, the government has secured a grace period until after 2029, giving it an additional four years to repay over 80 per cent of the initial loans.
The extension of the SGR to the border town of Malaba is expected to boost regional cooperation among the East African member states, as other countries had expressed similar interests in extending the railway to reach Uganda, Rwanda, South Sudan, and the resource-rich Democratic Republic of Congo.
