Infrastructure

State Reveals Loan Talks for Naivasha-Kisumu Railway

The SGR will connect Kisumu with the Naivasha container depot.

Updated on

March 7, 2020

Business finance — The government was earlier seeking Sh380bn from China. PHOTO | CK

Kenya is holding talks with undisclosed lenders to unlock funds for Phase 2B of the standard gauge railway involving the construction of a new line from Naivasha to Kisumu.

A policy statement tabled in Parliament last month indicates that the country has commenced strategic discussions concerning the future of the project whose fortunes have been dimmed by a lack of funding.

“The government has embarked on financing negotiations and detailed designs for the construction of Phase 2B. The completion of Phase 2B will connect Kisumu city with the newly established Naivasha Inland Container Depot to ease cargo freight through to Mombasa,” Treasury Secretary Ukur Yatani said in the 2020 Budget Policy Statement.

This comes nearly two years after China declined to approve a Sh380 billion loan for the Naivasha-Kisumu standard gauge railway, despite all the formalities having been completed, in a last-minute snub that ignited loud concerns about the viability of the project.

Kenya and China Communications Construction Company had in August 2018 agreed on the 267-km railway project, with only the finer details of the deal set to be finalised on September 4, 2018, during President Uhuru Kenyatta’s visit to China. That did not happen.

Transport Secretary James Macharia told a press briefing in Beijing on September 4, 2018, that China had promised to support the project subject to favourable findings of a recommended feasibility study.

“When we engaged the Chinese government, it was agreed that they do support it, but we need to complete the feasibility study to determine its commercial viability,” he said.

However, China reportedly backed out of the deal after President Kenyatta asked the Asian nation to give half of the Sh380 billion needed for the project as a grant, as opposed to a loan, as a means to tame Kenya’s ballooning public debt that hit Sh5.8 trillion last year.

The request provoked Chinese Prime Minister Xi Jinping to defer making that decision until Kenya conducts a commercial viability study on the entire Mombasa-Kisumu railway.

It was not clear why China would demand a new viability study on the project considering that the country funded both the Sh327bn Mombasa-Nairobi SGR and the Sh150bn Nairobi-Naivasha SGR on the understanding that the railway would ultimately extend to Kisumu.