SGR Extension to Kisumu Tops President Ruto’s Agenda in China

President William Ruto will be seeking funding to extend the Standard Gauge Railway (SGR) extension from Naivasha to Kisumu during his ongoing visit to China. 

Among the requests that he will be making to the Asian nation is a loan to complete the construction of phases 2B and 2C of the SGR, which are from Naivasha to Kisumu and Kisumu to Malaba respectively.

Other important projects that Kenya will seek to work on include the construction of rural roads, the Nairobi Intelligent Transport System (ITS) designed to tackle frequent traffic jams in the city, the establishment of a pharmaceutical park, and the completion of the third phase of upgrading equipment in Technical and Vocational Education and Training (TVET) centres.

Kenya is a crucial partner in China’s Belt and Road Initiative (BRI). Kenya's involvement in the BRI has resulted in major infrastructure projects, including the SGR, the Nairobi Expressway, the Kipevu Oil Terminal, and various bypasses in Nairobi.

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The SGR has been a major infrastructure project over the past decade. The initial phase of the SGR, stretching from Mombasa to Nairobi, cost approximately Ksh327 billion. 

The subsequent extension from Nairobi to Naivasha added another Ksh150 billion to the total project cost. These phases have been crucial in enhancing trade and transportation within the country.

China has played a pivotal role in financing these projects, positioning itself as Kenya's largest bilateral lender. The loans for the SGR, primarily sourced from the Export-Import Bank of China, form a significant portion of Kenya's external debt. 

Overall, Kenya has borrowed about Ksh477 billion from China for the SGR project alone. This has contributed to Kenya's total public debt, which now stands at over Ksh10.3 trillion, with China being one of the largest creditors.

Phase 2B of the SGR from Naivasha to Kisumu will cost Sh354 billion while the last leg, 2C, from Kisumu to Malaba bordering Uganda will take another Ksh114.5 billion.

Kenya's heavy reliance on Chinese loans has led to mounting debt service obligations, with recent repayments on the SGR loans becoming increasingly burdensome partly due to the depreciation of the Kenyan shilling in the past two years.

In 2023, Kenya's debt service costs related to Chinese loans were projected to exceed Ksh117 billion, underscoring the financial strain that these infrastructure investments have placed on the country's economy.

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Port Delays Cost Kenyans 2.78 Billion in Extra Fuel Prices

Kenyan drivers incurred an additional Ksh2.78 billion in fuel costs last year, according to a government-based report, as a result of delays in discharging imported fuels from ships at the Port of Mombasa.

The delays are caused by inefficiencies at the Mombasa port, which serves as Kenya’s primary entry point for imported goods.

“This is excessive compared to any efficiently run import facility. Even a busy port, such as those in Thames (United Kingdom), Rotterdam, Singapore, or New York, would not experience such high levels on a continuous basis,” said government consultants in the report.

Kurrent Technologies and Channoil Consulting Ltd, through a study, revealed that the charges incurred by cargo owners for delaying the pick-up of cargo increased to Ksh3.7 billion from Ksh914 million the previous year. Importers pass this cost on to consumers through higher fuel prices.

“For Mombasa, demurrage costs in 2023 have been especially high at $29.1 million. (The figures for 2022 and 2021 were $7.1 million and $19.1 million respectively),” says the report.

This comes days after a report showed that motorists have been overcharged an estimated Ksh16.4 billion, or Ksh2.70 per litre of fuel, since Kenya opted for a government-to-government oil supply deal.

Consultants hired by EPRA recommended that Kenya terminate this oil supply deal, suggesting that it is more expensive than acquiring fuel through the open tender process.

“The open tender system (OTS), through monthly competition and award of supply contracts, ensures price competition between suppliers which, in turn, ensures supply premiums remain competitive. The OTS mechanism is therefore preferred,” said the report by Channoil Consulting Ltd and Nairobi-based Kurrent Technologies Ltd.

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