China Opts Out of Sh380bn Kisumu Railway Deal

China’s last-minute refusal to approve a Sh380 billion loan for the Naivasha-Kisumu standard gauge railway, despite all the formalities having been completed, has reignited concerns about the future of Kenya’s single largest infrastructure project.

Kenya and China Communications Construction Company (CCCC) had last month agreed on construction of the 267-km railway, with only the finer details of the deal set to be finalised on September 4 during President Uhuru Kenyatta’s visit to China. That did not happen.

“When we engaged the Chinese government, it was agreed that they do support it, but we need to complete the feasibility study, not just for Naivasha to Kisumu but also all the way from Mombasa to Kisumu so that we can establish its commercial viability,” Transport Cabinet Secretary James Macharia told a press briefing in Beijing on September 4.

However, sources familiar with the matter said China declined to sign onto the deal after President Kenyatta asked the Asian nation to give half of the Sh380 billion needed for the project as a grant, as opposed to a loan, as a means to tame Kenya’s rising debt.

The request prompted Chinese Premier Xi Jinping to defer making that decision until Kenya conducts a commercial viability study on the entire Mombasa-Kisumu railway.

China, which funded the Sh327 billion Mombasa-Nairobi SGR, is currently financing the Nairobi-Naivasha railway whose construction cost is estimated at Sh150 billion.

The 120-km Nairobi-Naivasha line is the first of the three segments that make up the second phase of the standard gauge railway project that ends in Malaba town located at the Kenya-Uganda border.

The contractor, CCCC, is currently laying tracks and rail sleepers from Narok towards Nairobi, with the facility expected to be operation by end of the year.

Steve Zhao, the CCCC spokesman last month said the erection of the T-beams and subsequent laying of the rail sleepers will be done from both ends of the railway line from Naivasha towards Nairobi.

Mr Zhao said 389 spans of T-beams have been pre-fabricated, with each span made of two symmetrical sections and 80,000 rail sleepers to cover 39 kilometres.

“We are also on course to complete the 4.5km Ngong tunnel in August, the first and longest railway tunnel in the country,” he said.

READ: How Chinese are building Kenya’s most challenging railway

In 2016, CCCC signed a deal for construction of a standard gauge railway from Naivasha to Malaba. The deal involves construction of four phases of the project including Naivasha-Kisumu, Kisumu-Malaba, Kisumu Port Development, train stations and modernization and expansion of the inland Container Depot at Embakasi in Nairobi.

According to the government’s plan, the Naivasha-Kisumu SGR will start at the proposed Naivasha Industrial Park where the Nairobi-Naivasha line ends.

It will pass through Narok, Bomet, Kericho counties and end in Kisumu where the State will put up a modern inland port.

The Naivasha-Kisumu SGR will have 25 stations including a county station in Kisumu, six intermediate stations, and 18 crossing stations.

Join 15,000+ pros getting our weekly digest of news and insights.