SGR pumped ‘Sh130 billion into Kenyan economy’

The Chinese firm which built the high capacity railway track between Mombasa and Nairobi says it pumped billions of shillings in Kenya’s economy even as debate rages over the viability of the mega project.

The China Communications Construction Company Ltd (CCCC) said 40 per cent of the Sh327 billion contract (Sh130 billion) trickled to different segments of the economy.

At a Monday media briefing in Nairobi, the company said it hired 2,946 local security personnel and contracted 1,234 suppliers during its two and half years of construction work. It also hired 46,000 local workers and invested Sh27.6 billion directly in various community projects, among them three schools.

“Lots of job opportunities have been created for locals and local talents have been trained,” the CCCC said. “The SGR will make Kenya more open to local businesses and foreign investment, which is not only good for Kenya but also for the entire East African Community.”

Kenya becomes the first East African State to replace its meter-gauge track with a high-capacity line after President Uhuru Kenyatta launches Mombasa-Nairobi track today.

With ready financial and technical support of the Chinese, the Sh327 billion project took just two and half years to complete.

“Through local procurement and subcontracting, we have facilitated the development of local cement companies, oil companies, SMEs and transport companies in Kenya,” the Chinese firm says.

According to CCCC, the more than 300,000 tonnes of cement that it bought from Bamburi by February last year propelled the Kenyan firm to greater profitability and jolted it to raise annual production capacity by 10 per cent to two million tonnes.

The firm said it also bought simple machinery, chemicals and services in Kenya, adding that only the advanced equipment such as locomotives, operating equipment, SCE (signal, communication and electricity) were imported.

“The SGR project has brought a profit of billions of shillings to local oil companies, and a profit of about Sh5-25 million to SMEs,” the firm said.

In East Africa, Kenya’s mega project is set to rekindle debate on China’s ‘no-string-attached’ policy that critics say risks dotting Africa with underperforming projects.

Whether under the late chairman Mao Tse-tung, President Hu Jintao or his successor Xi Jinping, the consistency of China’s so called ‘non-intrusive” policy is unmistakable as new mega projects come up.

It began in 1960s when Tanzania and Zambia decided to build a bi-national rail network to bypass South Africa’s apartheid regime on their way to world markets.

Just like in Kenya’s case, it was Mao’s Beijing which came to the rescue of the two States when every other financier wouldn’t.

Analysts, World Bank and Western governments questioned the economic viability of the mega infrastructure, says the Tanzania Zambia Railway Authority (Tazara) on its website.

“The Chinese leadership saw the wider necessity of the line and thus offered to finance it as a turnkey project,” the authority says.

And so, on September 5, 1967, Beijing inked a deal with Tanzania and Zambia for the construction of the latter-day financially troubled Tazara network.

Fast forward to 2012, and Beijing under Mr Hu and Mwai Kibaki (President of Kenya until 2013) would oversee the signing of an MoU between KR and China Road and Bridge Corporation.

President Uhuru Kenyatta would later pick up the pieces with Mr Xi on August 19, 2013 when financing deal for the Mombasa-Nairobi SGR project was signed.

Just like in the Tazara case, analysts, including World Bank questioned the viability of huge capital outlay.

In January 2014, officials abruptly revised the SGR cost from Sh220 billion initially applied for to Sh327 billion, raising probity questions.

But China stuck with its partner, supplying Kenya with feasibility studies, loans, designs, engineers and rail material up to the completion of the project.

China which is also financing the Nairobi-Naivasha section of the SGR at a cost of Sh150 billion, has also been approached for additional Sh370 billion for the Naivasha-Kisumu section.