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Kenya on Thursday restarted a multibillion dollar railway extension after a six year hiatus, reviving a project that stalled when funding from China dried up and delayed plans to link the line to neighbouring Uganda.
The new phase will be financed through revenue securitisation and will be built by a Chinese contractor, marking a shift in how Kenya and Beijing are funding large infrastructure projects.
The railway's first section, linking the port of Mombasa to Nairobi, was completed in 2017. But after China slashed funding for large African infrastructure projects under its Belt and Road Initiative, the project stalled in the Rift Valley, more than 350 km short of the Ugandan border, holding up a planned cross-border link to boost regional connectivity and commerce.
"It was the naysayers who said it is a railway to nowhere. We are just confirming to them that we had a plan. It was never a road to nowhere," Kenya's President William Ruto told a crowd at a launch ceremony in the Rift Valley town of Narok, before fastening a bolt to fix a rail part to a sleeper to signify the start of construction.
Critics have said the stalled project had become a symbol of China's "debt trap diplomacy", with Beijing extending large, often opaque loans to poorer countries for infrastructure projects - a claim rejected by the Chinese government.
Last year, Kenya and China renegotiated terms of the loans for the first two phases to cut Nairobi's annual repayments.
"Chinese creditors are motivated by profit, so they don’t like to throw good money after bad if they can avoid it. Kenya is no exception," said Brad Parks, executive director at William & Mary's AidData research lab in the U.S.
NEW FINANCING MODEL
Kenya is now using a railway development levy charged on cargo carried on the existing line, estimated to raise about 35 billion shillings ($270 million) annually, as seed money for the construction of new phases. Neither the government nor state rail operator Kenya Railways disclosed the total cost of the extension or details of the financing structure.
China remains involved in the project. China Road and Bridge Corporation (CRBC) is the main contractor for the new phase.
"Beijing ... is experimenting with new ways of bankrolling big-ticket infrastructure projects that involve more risk-sharing between Chinese companies and African governments," Parks said.
The deal was enabled by a 2024 shift by China to focus on investments rather than debt, said Peter Kagwanja, a Nairobi-based international relations expert.
"Following the heavy propaganda in regard to the debt burden, particularly from the West, China and Africa discussed a new model based on investments to sustain the level of building infrastructure," Kagwanja said.
OUT OF ROOM TO BORROW
After pumping billions of dollars into African infrastructure projects, China began slashing lending to the continent in 2019 amid concerns over debt sustainability.
In 2024, Beijing sought to reposition itself by pledging $50 billion in credit and investments to Africa over three years. Kenya and two Chinese firms are already building a $1.5 billion highway expansion under the new financing model.
Ruto's administration has turned to securitisation of revenue streams to generate cash for infrastructure, since debt repayments consume a huge share of annual revenue. An attempt to raise taxes in 2024 sparked deadly protests.
With his Ugandan counterpart Yoweri Museveni, Ruto will on Saturday launch the construction of the final rail line leg, linking Kisumu with the border town of Malaba.
A car passes under a bridge as a train moves along the Standard Gauge Railway (SGR) line constructed by China Road and Bridge Corporation (CRBC) and financed by the Chinese government in Athi River, Kenya, June 3, 2022. REUTERS/Thomas Mukoya© Thomson Reuters
(Reporting by Duncan Miriri; Editing by David Gregorio and Ros Russell)
