Infrastructure

Kenya to Spend Sh2.4trn on Addis, Juba SGR Project

The 2,377-km railway project remains without a confirmed start date.

Updated on

January 24, 2024

Kenya will require at least Sh2.6 trillion ($16 billion) to build a standard gauge railway (SGR) from Lamu to Addis Ababa, Ethiopia and Juba in South Sudan.

According to the Kenya Railways Corporation, building a 544.4-km railway from Lamu to Isiolo will cost Sh565.38 billion ($3.49 billion), and an additional Sh514.84 billion ($3.178 billion) for a 475.9-km extension from Isiolo to Moyale.

Approximately Sh717.82 billion will be spent on building the SGR line from Isiolo to Nakodok town on the Kenya-South Sudan border, a distance of 753.2 km.

Construction of the 2,377-km railway, a part of the Lamu-South Sudan-Ethiopia Transport (Lapsset) Corridor, was to start in 2025, but this remains uncertain.

The master plan for the project indicates that the high-speed railway is set to start from Lamu port, and then proceed to Isiolo town before splitting into three lines to the cities of Nairobi, Addis Ababa, and Juba.

An additional Sh387.50 billion ($2.392 billion) will be spent to connect Isiolo and Nairobi through the railway, covering a distance of 278.6km.

A third leg from Lamu to Mariakani will cost Sh416.83 billion ($2.573 billion) for a distance of 325.35 km.

A 2015 feasibility study of a Lapsset corridor railway by China Civil Engineering Construction Company estimated the cost of the project at Sh1.68 trillion ($10.4 billion) with a financial rate of return of between nine percent and 12%.

“With a projected Internal Rate of Return greater than 12%, the project is deemed viable,” the Lapsset Corridor Development Authority said in a recent interview with Bloomberg.

Detailed feasibility study

Nevertheless, Kenya is seeking Sh1.46 billion ($9 million) from the African Union Infrastructure Fund to finance detailed feasibility studies to assess the technical, economic, and environmental feasibility of the project.

The SGR to Addis Ababa is expected to boost trade by lowering transport costs, while the Juba line is anticipated to enhance accessibility and, therefore, improve the level of trade facilitation.

In August 2023, Transport Cabinet Secretary Kipchumba Murkomen revealed that Kenya had signed an agreement with Ethiopia to jointly seek funding for the project.

“Having signed the [deal], we are currently working on the development of the railway line from Lamu to Mayale through Isiolo with a link to Nairobi to connect with the Mombasa-Nairobi-Malaba SGR,” Mr Murkomen said.

The deal came into effect barely a month after Kenya and Uganda signed a similar agreement to jointly raise Sh850 billion from European and Gulf lenders to fund the construction of the Naivasha-Kampala SGR starting in January 2024.

Under the deal, Kenya will extend its SGR from Naivasha to Malaba – a distance of 368 km, while Uganda will build a 272 km railway from Malaba to Kampala.

(Exchange rate: 1 USD=Sh162)