Economy

Kenya fails to ink Sh16bn JKIA rail contract in Paris

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President Uhuru Kenyatta is received by his French host Emmanuel Macron at Elysee Palace at the start of his official visit to France on Wednesday evening. PHOTO | PSCU

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Summary

  • Nairobi had been expected to close the Sh16.8 billion financing deal in Paris when the President made the two-day visit to the French capital.
  • Earlier agreements had provided for the signing of the loan pact by June 30 when President Kenyatta was in France.

Kenya failed to ink a financial deal for the construction of a railway line linking Jomo Kenyatta International Airport to Nairobi’s city centre during President Uhuru Kenyatta’s visit to France last week, delaying the €128 million (Sh16.3 billion) infrastructure plan.

Nairobi had been expected to close the Sh16.8 billion financing deal in Paris when the President made the two-day visit to the French capital.

Transport Cabinet Secretary James Macharia told the Business Daily that the French trip did not lead to the signing of the deal, which will fund the construction of the five kilometre metre-gauge line linking the airport to standard-gauge rail (SGR) terminus in Syokimau.

Earlier agreements had provided for the signing of the loan pact by June 30 when President Kenyatta was in France.

“No agreements were signed, we just reviewed progress towards the launch of the project,” said Mr Macharia, without giving details.

This means that the rail project, whose construction was initially set for August following a deal agreed between French President Emanuel Macron and his Kenyan counterpart in March 2019, faces further delays.

The loan will also aid the revamp of the old 17-kilometre railway track that links to the SGR line at Syokimau, construction of two airport stations, a terminal at Donholm and an automatic fare collection system.

Kenya Railways referred the Business Daily to the Treasury when asked about the reasons behind delays in inking the Sh16.3 billion loan deal.

“As per the financial protocol, signing of the loan agreement was expected by June 30, 2021. This is being handled by the Treasury. The Treasury are best placed to provide an indicative timeline,” said Kenya Railways chairman Pastor Awitta.

The JKIA-Nairobi city centre railway line was planned to decongest the capital city and reduce the time taken between the central business district and the region’s largest international airport—which handled 11.7 million domestic and international fliers last year.

The distance between JKIA and Nairobi city centre is 20km, and travel should take between 30 minutes to less than an hour.

However, it takes up to two hours due to traffic on the usually busy Mombasa Road.

Turf wars and tendering fights had derailed the construction of the JKIA railway line in what threatened the deal inked by presidents Macron and Kenyatta.

The Treasury had raised the red flag over the secret procurement of a consortium of French firms to build the new railway line and declined to commit funds following a request from the Ministry of Transport.

The Transport ministry informed the Treasury that the consortium of five French companies led by Egis Group had been tapped for the railway project on the back of a financing deal agreed with Paris and commercial lender BPI France Assurance Export.

This followed a decision by the State to drop the bid to have the JKIA rail built using private backers who were to recover their money from toll charges and instead opted for a French loan.

The turf wars also hinged on revelations that the Cabinet had yet to approve the JKIA rail project despite the deal being part of a multi-billion shilling trade agreement that Mr Macron signed with Mr Kenyatta during his March 2019 Kenya visit.

The public private partnership (PPP) deal fronted by French firm, Egis, was also faulted for not having complied with the law.

The consortium of French companies included Egis, Sogea-Satom, Alstom, Thales and Transdev—who are major players in the rail transport business.

Construction of the rail link to JKIA was expected to be completed in 2021. Mr Macron viewed it as one of the key projects to cement bilateral ties between Nairobi and Paris, promising to provide sustainable financing in what was seen as a dig at China.

China has provided nearly Sh500 billion in loans for the construction of the SGR line from Mombasa to Nairobi, but some critics have expressed concerns over Kenya’s growing debt burden and Chinese loans.

China had earlier expressed interest in expanding the SGR line to JKIA and the city centre via Syokimau. But the plan was termed costly and shelved.

Sources familiar with the rail deal see the hand of the Chinese in attempts to block it.

Mr Macron’s joint press briefing with Mr Kenyatta was symbolic given its venue at the CBD railway terminus where the French leader repeatedly mentioned ‘sustainable financing’ and ‘respect for sovereignty’ in what was understood to be his way of saying that Paris funding was better than Chinese.

A number of French firms signed deals worth over Sh300 billion during Mr Macron’s two-day visit.

The French-Chinese rivalry over the railway deal played out immediately Mr Macron left Kenya.

The Chinese Embassy in Nairobi organised a tour of the SGR project the following week, inviting Kenyan officials, MPs, journalists and scholars.