Kenya Plans $210 Million Rail Upgrade as SGR Phases Delayed

NAIROBI (Capital Markets in Africa) – Kenya will spend $210 million on linking and upgrading older tracks with its new standard-gauge railway as it abandons a plan to extend the Chinese-funded project to Uganda’s border that would have created a faster export route to the Indian Ocean for landlocked neighbors.

Of the sum, $60 million will fund a 43-kilometer (26.7 mile) meter-gauge line that will act to connect the old and new railways, according to Transport and Infrastructure Secretary James Macharia.

“We’re looking at options for the railway,” he told reporters Wednesday in the capital, Nairobi. “We prefer the private sector so there’s no impact on the country’s debt.” The link will take about a year to complete and trucks will be used to connect the two lines in the meantime, he said.

The move is a turnaround for Kenya, which initially planned for the standard-gauge railway to go all the way from East Africa’s largest port of Mombasa to Uganda, replacing an existing century-old meter-gauge link. The government recently abandoned those plans with only half the railway constructed, and hasn’t given an explanation.

Chinese contractors are about to complete the second phase of the track near Naivasha, and will terminate construction at that point, according to Macharia. Kenya will spend $150 million on revamping the existing meter-gauge railway between Naivasha and Malaba, he said.

‘Very Urgent’
“We shall quickly, very urgently, do a link between the SGR Naivasha and the MGR Naivasha to make sure there’s seamless transshipment when goods get to Mombasa,” Macharia said.

Kenya borrowed $4.68 billion from the Export-Import Bank of China for the first two phases of the new railway that falls under President Xi Jinping’s Belt and Road Initiative, and required about $3.6 billion more for the remaining portions. At the most recent forum in Beijing, the Chinese government agreed to financing for a data center and an expressway in Nairobi.

The railway is being built by China Road and Bridge Corp. and operated by China Communications Construction Co.

Landlocked Uganda, which intended to extend the SGR from Malaba to its capital, Kampala, will defer those plans until Kenya resumes construction, according to Monica Ntege, its transport minister.

“In order for Uganda to start the actual construction we have to wait until Kenya has got somewhere so that as we do the SGR on the Ugandan side we arrive in Malaba at the same time,” Ntege said at the same briefing.

Like Kenya, Uganda will upgrade its existing line from Malaba to Kampala at a cost of about 152 million euros ($170.3 million), she said.

“For the meter-gauge railway, we had started upgrading much earlier. We already have a grant from the EU,” Ntege said. It will spend $32 million to rehabilitate the line to Tororo and Gulu, she said.

Source: Bloomberg Business News