Kenya has signed a deal worth US$2.6 billion (Sh220 billion) with a Chinese construction company to build a new standard gauge railway line between Mombasa and Nairobi.
The East African reported on Saturday that China Roads and Bridges Company had ‘secretly’ signed a commercial contract with the Kenya Railways Corporation, under an agreement that commits the state corporation to deal only with the Chinese company.
The new railway line, which will be completed in five years, will carry freight trains at speeds of up to 80km/hr and passenger trains at up to 120km/hr.
The viability of the railway line that will be built according to the Chinese railway designs is based on the assumption that it will be part of a seamless system linking Kenya and Uganda as well serving landlocked Burundi and Rwanda.
According to The East African, the new deal is likely to upset the current infrastructure agreements with Kenya’s neighbours, particularly the existing concession agreement with Rift Valley Railway (RVA) in both Kenya and Uganda.
“The new plan is that the Chinese built railway will be operated under an arrangement known as ‘open access,’ where multiple operators will be allowed to operate freight businesses on the standard gauge railway system in competition with RVR,” the newspaper reported.
Kenya and Uganda could find themselves in court battling it out with RVR over access to the new railway line because under the existing agreement the two countries cannot – during the tenure of the concession – introduce changes that jeopardise RVR’s profitability.
The new deal comes at a time when dozens of Chinese companies are aggressively chasing deals and pitching to negotiate concessional financing on behalf of Kenyan institutions implementing ambitious infrastructural projects.
China’s Anhui Construction, for example, was recently contracted by the Kenya Airports Authority (KAA) to build a new airport terminal in Nairobi after the firm negotiated a US$546 million (Sh46 billion) long-term export credit to be financed by the China Development Bank.
However, concerned Kenyans are fearing that the rate at which Kenya is building up Chinese export credit in its loan book could lead to an unsustainable build-up in the country’s external debt portfolio.