Kenya, Uganda source for funds to revive SGR project

 

By The East African

newspaper publisher

Summary

 

Kenya and Uganda will seek an alternative financier for Standard Gauge Railway (SGR) project to connect Naivasha and Kampala via Malaba, officials said this week.

“Sourcing for alternative financing from Europe is on-going,” Uganda’s Ministry of Works and Transport said on Thursday. He did not name which specific European funders Uganda was wooing.

But the new development means the 273-kilometre line whose construction has delayed is back on. It will head from Uganda’s capital Kampala to the border with Kenya where it is expected to link with Kenya’s own Standard Gauge Railway that connects to Mombasa.

Loan burden

A senior Kenyan government official told The EastAfrican that loan from China has remained high and Kenya is not willing to service any new loans from Beijing.

“We have been having talks with China, but it seems funds are not coming at the terms we were proposing. This cannot hold our project to ransom and,” we have to continue with our plan to build SGR to connect Naivasha and Kampala," said the senior official.

Kenya still has ambition to continue its line from Naivasha to Kisumu and on to Malaba. And Uganda said on Thursday construction of its much delayed $2.2 billion Standard Gauge Railway (SGR) will commence this year, a welcome development for importers and exporters in the landlocked country who had long endured sky-high transport costs.

“The Government of Uganda is in advanced stages of engaging Yapi Merkezi (Turkish firm) to undertake development of the SGR eastern route. Plan is to commence construction this calendar year,” the ministry of works and transport stated.

Uganda had 2015 entered into an agreement with Chinese firm China Harbour and Engineering Company Ltd to implement the project on condition the firm helps secure funds for the railway from the China government.

After years of fruitless talks with China on the funds, however, Uganda early this year terminated the agreement and instead commenced negotiations with Yapi Merkezi to undertake the project.

Uganda is banking on the railway to boost speed and lower the cost of transporting exports such as coffee and tobacco. It currently relies on costly and slow road links and a century-old narrow gauge rail line built by former colonial power Britain.

Northern Corridor Transit and Transport Coordination Authority (NCTTCA) Executive Secretary Justus Omae confirmed that East African states will be meeting in June this year to discuss intermodal transport and SGR funding is among the agenda.
“We have to improve our SGR line and connect it with other states and in our next month intermodal meeting with different states, agenda of joint funding of our projects is among what is lined up for discussion,” he said.

In 2019, then Kenyan President Uhuru Kenyatta while in China failed to secure $3.68 billion to fund the third phase of his signature SGR project a critical segment of the Northern Corridor project that is supposed to link the port of Mombasa with the Great Lakes Region’s landlocked states.

Instead, Kenya bagged some $400 million to be used to upgrade its 120-year-old metre gauge railway to Malaba on the border with Uganda.
President Kenyatta had hoped to secure the fund to take the SGR line from Naivasha in Central Rift Valley to Kisumu, and on to the Malaba border from where Uganda would take over construction to Kampala and beyond.

China withheld funding for the final segment of the SGR to the Uganda border. Beijing’s assessment indicated that without Uganda, whose participation is key to connecting South Sudan and Rwanda to Mombasa, the SGR’s viability is grossly undermined.

If the June meeting fails to reach agreement for joint SGR project funding, Nairobi will have to wait longer before the construction of the modern railway the Kenyan government failed to allocate funds in the next three years to transport ministry to extend the SGR beyond Naivasha to Kisumu and finally Malaba.

In the Kenya National Treasury plan, the government has no plans to build SGR line but instead improve on the Nairobi-Mombasa line.

The government has allocated $275.79 million from the Railway Development Levy Fund (RDLF) for the Nairobi-Mombasa SGR.

The bulk of the allocation, according to the breakdown, has been earmarked for the acquisition of additional locomotives and freight wagons at a cost of $87.1 million.

Kenya last bought its 1,620 locomotives and wagons from China in 2018.

The rest of the funds, which have been allocated under the “Mombasa to Nairobi SGR” vote will largely be used to build new feeder lines and rehabilitate the old metre gauge railway (MGR) lines.