China back to funding SGR connecting Kenya and Uganda

Workers laying tracks for the Standard Gauge Railway Phase 2A at Suswa section in Narok, Kenya

By The East African

Kenya has secured a commitment from China’s Exim Bank for the funding of the standard gauge railway line from Naivasha to the Uganda border.

Kipchumba Murkomen, Kenya’s Cabinet Secretary of Roads and Transport, said that Pan-African lender African Development Bank and Kenya’s own Railway Development Fund would complement the Chinese as Nairobi and Kampala continue to woo more financiers for the cross-border project.

Mr Murkomen spoke to The EastAfrican as President William Ruto hosted his Ugandan counterpart Yoweri Museveni on Thursday at State House, Nairobi, where the two leaders threw their weight behind the joint project, which is meant to go all the way to the Democratic Republic of Congo.

The line will provide the required regional competitive advantage to improve regional connectivity with links to Uganda, South Sudan, Rwanda and DRC.

There is pressure on Kenya and Uganda to extend it to the Great Lakes region, especially the resource-rich DRC, as Tanzania pushes on with its electrified line headed in the same direction on the Central Corridor.

Tanzania’s $7.6 billion project runs over 1,600km from Dar es Salaam to Mwanza on the shores of Lake Victoria and Kigoma along Lake Tanganyika. It is being built in five phases by contractors from Turkey and China. The phases are at various stages of construction.

Completion rates are 98 percent for the 300km Dar-Morogoro stretch, and 96 percent for the 442km Morogoro to Makutopora line.

Makutopora-Tabora is at 14 percent, Tabora-Isaka at five percent and the Mwanza to Isaka is at 54 percent completion. The entire project is expected to be completed by 2025.

In April, Dodoma received the first batch of electric locomotives that will run on the SGR, and the government said operations are set to begin in July. The locomotives, acquired from Hyundai Rotem in South Korea, can carry up to 589 passengers and travel at average speeds of 160km per hour.

The announcement that Beijing had committed to put the project back on track came a week after Rwanda, Burundi, DRC and South Sudan joined the SGR Cluster Joint Ministerial Committee and committed to engage development partners in seeking funding for the railway.

“The financing of the proposed project will be done under a government-to-government arrangement between the Republic of Kenya and the People’s Republic of China through the Exim Bank of China and syndicated loans from Commercial Banks,” Mr Murkomen said.

“The Government of Kenya shall fund the project through the Railway Development Levy Fund.”

On Thursday, in a joint communique read by President Ruto, Uganda and Kenya emphasised the importance of extending the SGR not only from Naivasha to Malaba but to Kampala and DRC as an efficient and sustainable Infrastructural artery for the transportation of goods.

“We have obliged our respective Ministers to take joint urgent measures to mobilise resources for the implementation of this regional shared infrastructure and report on progress by the end of 2024,” Dr Ruto said.

Uganda is expected to start the construction of Malaba-Kampala segment in September.

President Museveni said he was happy with the progress made.

“My only resolution is to put it in a historical perspective as to why it is happening now and not long ago. Uganda is part of Kenya, Tanzania and DRC,” Mr Museveni said.

Each partner is seeking around $6 billion from multiple lenders to jumpstart the project, which stalled after the pullout of China, the initial financier.

The announcement of the return of Beijing has given fresh impetus to the two partners’ search for commercial lenders.

Minister Murkomen said the financing discussions were ongoing after all the Transport ministers of the EAC committed to the project.

He said the DR Congo, Kenya, Rwanda, South Sudan, and Uganda signed a joint agreement this month on the development of a cross-border line.

“Kenya is committed to the development of cross-border transport infrastructure in line with the EAC Treaty on transport infrastructure development for seamless cross-border transportation of goods and persons,” the minister added.

The entire SGR line will be integrated with the development of commercial and logistics hubs as well as industrial parks to support various socio-economic activities along the SGR corridor.

Kenya completed construction of the 472km SGR from Mombasa to Nairobi under Phase 1 and 120km line from Nairobi to Naivasha under Phase 2A and the lines are operational carrying both freight and passengers.

Two sections of 262.3km from Naivasha to Kisumu (Phase 2B) and 102km from Kisumu to Malaba (Phase 2C) are pending to connect to Uganda at the Malaba border.

Murkomen said the proposed SGR project is a key enabler in spurring economic growth following the Northern Corridor Integration Projects (NCIP) partner states meeting in Mombasa, comprising Kenya, Uganda, Rwanda, and the DRC, who agreed to jointly mobilise funds to fast-track the SGR project.

The third May meeting of the Joint Ministerial Committee on SGR brought together transport ministers from the EAC during which Kenya reaffirmed its commitment to expediting the completion of the remaining SGR sections from Naivasha in Kenya to Uganda, Rwanda, South Sudan, and DRC.

The remaining stretch from Naivasha-Kisumu-Malaba line is estimated to cost around $5.3 billion.

“The dream of SGR is on. As Kenya, we will leverage the private sector now, and I know that the project we have from Naivasha to Malaba, including the improvements around Kisumu Port, will cost the country around $5.3 billion,” the minister said.

“We are in discussion with the private sector to see if we can structure an arrangement for them to take the large burden at very reasonable and concessional terms so that we can continue with the project.”

Kenya hopes to resume the construction of the Naivasha-Kisumu-Malaba and Kisumu-Malaba sections starting in July and September, respectively.

Fred Byamukama, Uganda’s State Minister for Transport, who represented Works and Transport Minister Katumba Wamala, who is chairperson of the Joint Ministerial Committee on SGR, said they had agreed to source funds jointly “because this railway line doesn’t stop in one country.”

Once we source funds jointly and also use the same contractors, work will move smoothly,” he said.