Business

China hints at extending SGR to Kisumu, neighbouring states

China hints at extending SGR to Kisumu, neighbouring states
By Dominic Omondi | January 8th 2022

China has hinted at extending the Standard Gauge Railway (SGR) from Naivasha to neighbouring countries including Uganda and Rwanda.

Foreign Minister Wang Yi said Beijing will soon be extending the Mombasa-Nairobi and Ethiopia-Djibouti railways to the neighbouring countries “in due course”.

“It is important to strengthen the trunk lines of the Mombasa-Nairobi railway and Addis Ababa-Djibouti railway. And to expand these railways to neighbouring countries in due course,” he said.

As part of his African tour, Mr Wang also visited Eritrea and the Comoros.

The planned expansion will see the SGR reach Kisumu and Malaba as was initially set out in the rail’s feasibility study, which is part of China’s Belt and Road Initiative (BRI).

While this might be a major boost for the lakeside county of Kisumu and the Western region, whose residents will get to ride in modern trains, the extension will also increase Kenya’s debt.

Constructing the SGR from Mombasa to Naivasha cost the country $5.08 billion (Sh574.7 billion using the current exchange rate of 113.1).

The SGR was initially meant to extend to Uganda from Malaba.

To be profitable, the SGR had to be a regional line retracing not only the route of the ‘Lunatic Express’ built earlier by the British but also the Silk Road – a network of trade routes that linked the regions of the ancient world in commerce.

Put on hold

However, China had put funding the extension on hold, with Beijing reportedly requesting Kenya to redo the feasibility study to ascertain the commercial viability of the railroad.

The loan to complete the railway was a much-talked-about topic in the days leading to President Uhuru Kenyatta’s visit to China in April 2019 for the Belt and Road Initiative conference.

Financing the railway, which had been projected to cost Sh368 billion, however, did not feature much when the Kenyan delegation returned from Beijing.

Critics have described the SGR as unprofitable, with the expensive rail still competing against trucks for cargo to and from Mombasa.

In the first 10 months of last year, 4,453,111 tonnes of cargo valued at Sh11 billion were moved on the SGR. This was more than the 4,418,443 tonnes transported on the railway in the whole of 2020.

In 2018, a Kenyan delegation led by Transport Cabinet Secretary James Macharia was told to return to Kenya and undertake a feasibility study for the entire railway line from Mombasa through Nairobi and Naivasha to Kisumu and Malaba.

Never mind that such studies had already been done, and by a Chinese firm.

Instead of extending the SGR, the government opted to upgrade the old metre-gauge railway.

“Our most important and urgent investment right now is to connect the SGR in Naivasha to the metre-gauge railway (MGR) so that come August, there will be seamless connection between SGR and MGR in Naivasha,” Mr Macharia said in 2019.

“When that is done, we will ensure that the economic rate of return is assured, which will help us as we plan future investment in SGR.”

This has since been completed and a passenger train from Nairobi to Kisumu launched.

It is in China’s interest that the railway project is completed as it would give it unfettered access to the regional market for its products, while at the same time enabling it to source the vast raw materials from the region easily and cheaply.

China is Kenya’s largest bilateral lender, with an outstanding debt of Sh692 billion or 66.5 per cent of all the bilateral loans, as at September 2021.